So - what's the catch?
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Like buying any asset the skill is in the buying.
That's where the big money is made.
Those of us who brought into HGH between 60 cents and a $1, are enjoying our successful investment,and our dividend yield on purchase price is outstanding.
"Time is the friend of any good investment".In HGH's case ,time is proving a great friend.
While it is true that well timed buying is crucial - it is only half of the story.
Buy and hold might be a valid strategy for some shares for certain time periods ... but there are not too many shares I can think about where it would have been a great strategy for ever ... and even "ever" would be only limited to the current date. Who knows what the future brings for these companies.
It is always a good idea to know when to get out as well.
Just check how many of the companies listed 25 years ago on the NZX are still around ... for all the others there would have been a good time to leave instead of waiting for their demise ;);
Didn't you own at some stage EVO - are you still holding? And one could argue that with TRA there would have been an amazing opportunity to sell well north of $3 ...
Ah well, we all make mistakes - but this is probably for a different thread - and just for clarity: I don't think that now would be a good idea to get out of HGH (though ... last year there was, even if it had at that stage still a different ticker).
https://stocknessmonster.com/announc...gh.nzx-344296/
I can't criticise Jeff for hanging about. On Tuesday at the AGM he announced an expansion of the $A bond program, with a proposal approved by the board to add an extra $100m. Less than 48 hours later the deal is done! I would like to shake Jeff's hand! But if I did that, I'd be fairly sure I would be left holding nothing but a glove and Jeff would have already disappeared on to his next appointment.
How does raising this new mortgage backing money in one huge lump tie in with the AGM assertion of 'just in time' financing though? Is Jeff really writing $A100m of new reverse mortgage business in Australia this week?
SNOOPY
Just in time had a very different meaning when it was to meet The Reserve Bank of NZ requirements for Heartland Bank.Think months.
Just in time for Heartland Bank today can mean HGH top up the bank's requirements possibly overnight.........................Think hours.
Just in time for HGH to meet lenders capital requirements,may mean months or possibly years.Think plenty of time for a rights issue if needed.
ps.I thought you did shake Jeff's hand,I did not notice you losing any body parts.!
From Airedale on another thread. If this guy that his Aussie banks overvalued by 16% then maybe HGH is priced about ...or only slightly over valued
Quote:
Further thoughts: Colin Twiggs estimates that the major Australian banks are over on average over valued by 16.5%. Taking Friday's closing SP of Au $26.63 minus 16.5% =Au $ 26.19. That indicates that the SPP price of Au$ 25.32 is at $0.87 discount to fair value.
I'll just reiterate from my experience that in the last 5 years HGH has traded in a forward PE range of 11 - 17.5, average 14.25 and is presently 12.2. Funny how things usually revert to the mean isn't it which indicates 14.25 / 12.2 HGH is presently ~ 17% undervalued. $1.67 x 1.17 = $1.95 as a perfectly reasonable price target for late 2020.
1/ New car market slowing (the biggest cash cow for Heartland).
2/ Timing mismatch between duration of typical reverse mortgages (7-8 years) and capital borrowed to fund those mortgages (Seniors debt facility to expire in under two years).
3/ Reserve bank set to raise capital requirement for Heartland Group Holdings subsidiary 'Heartland Bank. Heartland may be less affected that other banks by this but it will still be affected.
4/ Prospect of the next recession ( how long can Adrian Orr hold it off?) hitting second tier finance companies hard.
These four observations strike me as significant negative factors that mean potential shareholders should think long and hard about increasing their exposure at Heartland at today's lofty market prices ( $1.67 ). I am not saying the share price won't go higher in the short or long term. I just think HGH (not a bank remember, because Heartland management don't want Reserve Bank scrutiny of Heartland's Australian operations) is trading a little above fair value right now.
After attending the AGM, I see no reason to revise my $1.63 fair valuation.
SNOOPY
Just as well you have that 17.2 in your calcs ...but you know full well that really is an outlier ...only got that high on the outrageous share price of 214 when you sold out. Well done on that
ASB Report has the PE at announcement dates for the last five years as 11.3 (in 2015), 10.3, 14.4, 12.3 and 11.3 (2019). Average last five years PE being 11.9 and that includes the impact of that period of outrageous exhuberance.
Those are trailing EPS but let’s assume that in 2020 EPS is your 13.6 cents then a share price of $1.63 seems about it ...isn’t it amazing how things seem to revert to Snoopy’s numbers
So current $1.67 is a bloody good price
Difficult to argue with that logic and I accept your numbers to a point. With interest rates at 100 year lows you could argue the risk free rate is 2% lower than normal so a 2 higher PE than normal is acceptable so I raise your average PE of 11.9 to 13.9 and on 13.6 cents you could make the case that $1.89 is fair and reasonable.
In support of my thesis is a peer group comparison at present showing Australian banks at an average of 13.6. and don't forget HGH is growing eps not shrinking or flatlining like most of its peers. Further, HGH faces none of the issues the Aussie banks do from the Royal commission of enquiry into Australian banking and appears through its DRIP to be in good shape to meet proposed RBNZ capital requirements, unless they come out with something truly radical.
Before you roll out the ol Aussie banks have always traded at higher PE's that's not the case either and neither is it presently the case for that old chestnut of PE's comparisons of QAN v AIR. I don't think HGH is a screaming buy, far from it, but accumulating on any weakness for those that don't already have their desired portfolio weighting looks logical.