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By Chris Bailey | Thursday 4 October 2018
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Little of dramatic interest in the larger cap world for me in today's RNS disclosures, so a couple of comments on two names I have commented on recently: ITV (ITV) and Kingfisher (KGF), both of which were wrapped up in the world of press/broker speculation yesterday...
After well over twenty years in the professional investment game, it is no huge surprise to me that the market is not efficient - and for every valuation model lovingly drawn up via a thorough assessment of qualitative and quantitative factors, you need to periodically factor in sentiment, exogenous macro and speculative factors. As the old saying goes, in the short-term the market is a voting machine and in the longer-term a weighing machine.
I was happy to see ITV confirm that it was not going to bid for the media content business Endemol. It would have proved expensive, probably required a rights issue and there were better alternatives out there including a continuation of efforts outlined at the recent Capital Markets Day. In short, a smart decision by the board and I can confirm my love-up with CEO Carolyn McCall is back on. Correctly there was a bit of a bounce yesterday but I still see the potential for a run back to nearer 2 quid a share and I remain a buyer.
There has been no response yet by Kingfisher to a broker report which postulated that the company's current EV (market cap plus net debt) could be more than covered by spinning out the good performing Screwfix business and its associated freehold property even if B&Q and Castorama (in France) were valued at zero. Well I am not quite sure about that (freehold retail property is a tough bird to value) but the identification of relative value feels on the money. Again I would still be a buyer here too.
I guess what I am trying to say is that rumours and speculation is an important part of the market. Acknowledge it, take advantage of it...but don't fall in love with it. Remember the weighing machine investor wins ultimately.
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