Sunday, June 12, 2005
Chaucer, time is running out
On Friday, Chaucer's share price slipped back to 69p. The masses that make the market are beginning to decide after deliberating over the price Amlin will pay. The consensus is suggesting it's less than they thought on Thursday, the bidder's identity was announced.
As Amlin is already listed on the London Stock Exchange, they might just propose an exchange of Amlin shares for Chaucer shares. That's always less appealing than an outright cash offer and only complicated the situation appraisal further. How many Amlin shares might we be offered? And how much are they worth anyway? Blimey, this just got more complicated, sod it I'll sell! That's pretty much the mentality evidenced in Thursday and Friday's price action.
So what should I do?
By my calculations, Chaucer is still not expensive in relation to it's peers. The sector has advanced handsomely since that start of 2005 but there is still no 'bid premium' in the Chaucer shareprice. However, I wouldn't be a buyer at these levels either.
So what to do?
If I can find a better opportunity elsewhere I'll take it. I've identified three oil companies all trading on attractive valuations: Soco, ROC Oil and Samson Energy. If the numbers persuade me any of these companies is worth buying, I'll be selling my entire Chaucer shareholding to fund some new purchases. It's time I got my calculator out again.
After earning over 30% on my investments thus far in 2005 this conundrum is a sobering reminder of just how much of a slavish slog this game is. The market is in charge and there is nothing I can do about it.
The Artful Dodger
(0) comments
As Amlin is already listed on the London Stock Exchange, they might just propose an exchange of Amlin shares for Chaucer shares. That's always less appealing than an outright cash offer and only complicated the situation appraisal further. How many Amlin shares might we be offered? And how much are they worth anyway? Blimey, this just got more complicated, sod it I'll sell! That's pretty much the mentality evidenced in Thursday and Friday's price action.
So what should I do?
By my calculations, Chaucer is still not expensive in relation to it's peers. The sector has advanced handsomely since that start of 2005 but there is still no 'bid premium' in the Chaucer shareprice. However, I wouldn't be a buyer at these levels either.
So what to do?
If I can find a better opportunity elsewhere I'll take it. I've identified three oil companies all trading on attractive valuations: Soco, ROC Oil and Samson Energy. If the numbers persuade me any of these companies is worth buying, I'll be selling my entire Chaucer shareholding to fund some new purchases. It's time I got my calculator out again.
After earning over 30% on my investments thus far in 2005 this conundrum is a sobering reminder of just how much of a slavish slog this game is. The market is in charge and there is nothing I can do about it.
The Artful Dodger
Thursday, June 09, 2005
Let Cox steer Chaucer valuation
At the end of April, the board of Cox Insurance received a takeover bid from a team put together by a former director, valuing the company at 94p (per share). Cox deemed this a fair price and recommended shareholders accept the offer.
This morning, Lloyd's insurer Amlin admitted they were the corporate stalker chasing Chaucer.
So what price would Chaucer directors accept? The companies operate in the same industry - it's only right they should be valued similarly.
At 94p, Cox shareholders were offered 1.8 times their company's asset value and 8.6 times diluted full year earnings per share. Using the assets metric that would value Chaucer at 69.6p, by earnings, 96.32. To most insurance analysts, assets is the key figure. At today's closing price of 69.5p, Chaucer is a sell if you believe most analysts (assuming the Cox measures can be applied).
Chaucer has risen substantially since the market picked up the smoke signals that someone was preparing a bid. If talks were called off Chaucer could go into freefall. What am I to do? I desperately need to fix a price at which I'd sell, otherwise how will I know what to do if a bid does materialise? But my two theoretical fair prices, 69.6p and 96.32p are further apart than Prince Philip and the Nation of Islam.
Two full trading days since the possibility of a takeover was raised I still don't know what to do.
Help.
The Artful Dodger
(0) comments
This morning, Lloyd's insurer Amlin admitted they were the corporate stalker chasing Chaucer.
So what price would Chaucer directors accept? The companies operate in the same industry - it's only right they should be valued similarly.
At 94p, Cox shareholders were offered 1.8 times their company's asset value and 8.6 times diluted full year earnings per share. Using the assets metric that would value Chaucer at 69.6p, by earnings, 96.32. To most insurance analysts, assets is the key figure. At today's closing price of 69.5p, Chaucer is a sell if you believe most analysts (assuming the Cox measures can be applied).
Chaucer has risen substantially since the market picked up the smoke signals that someone was preparing a bid. If talks were called off Chaucer could go into freefall. What am I to do? I desperately need to fix a price at which I'd sell, otherwise how will I know what to do if a bid does materialise? But my two theoretical fair prices, 69.6p and 96.32p are further apart than Prince Philip and the Nation of Islam.
Two full trading days since the possibility of a takeover was raised I still don't know what to do.
Help.
The Artful Dodger
Wednesday, June 08, 2005
Chaucer soars on bid talks
A red letter day today. Not only did Dana Petroleum (my second-largest holding) rise by more than 4% put Chaucer Holdings announced they had received an approach that could see shareholders be made an offer for the company.
This is the dream scenario for an investor. Normally, on announcement of talks shares take a huge step upwards in anticipation of a higher bid. This happened today before the market open, Chaucer marked up almost 12% to 67p to sell versus my purchases at 42.88p and 54.75p. This put me in a clear profit in both trades. The news has also made a huge contribution to returns for the year so far.
Yeee-haaaaa.
The only question remaining is what to do with my holding in the company. Though a bid could be around the corner, if takeover talks evaporate, the shares could fall sharply and I just don't know which is most likely to happen. All you can rely on in this situation is your valuation. My last valuation put Chaucer at 66p. This means I should take the price offered in the market and sell at the first opportunity. But how accurate is my valuation. It's time I did another.
The Artful Dodger
(0) comments
This is the dream scenario for an investor. Normally, on announcement of talks shares take a huge step upwards in anticipation of a higher bid. This happened today before the market open, Chaucer marked up almost 12% to 67p to sell versus my purchases at 42.88p and 54.75p. This put me in a clear profit in both trades. The news has also made a huge contribution to returns for the year so far.
Yeee-haaaaa.
The only question remaining is what to do with my holding in the company. Though a bid could be around the corner, if takeover talks evaporate, the shares could fall sharply and I just don't know which is most likely to happen. All you can rely on in this situation is your valuation. My last valuation put Chaucer at 66p. This means I should take the price offered in the market and sell at the first opportunity. But how accurate is my valuation. It's time I did another.
The Artful Dodger
Thursday, June 02, 2005
Doubling up with Fayrewood
Yesterday I took the bold decision to sell my entire holding in Mayborn Group to double my exposure to Fayrewood. Mayborn is a fantastic company and remains undervalued - but it's not as cheap as Fayrewood. By my reckoning, Mayborn was at around an 8% discount to fair value. I measure Fayrewood's worth around 43% higher than the price the shares were trading at yesterday when I bought more at 111.5p.
An old stock market adage: buy it right and hold tight. I've got Fayrewood at an excruciatingly cheap price. But there's plenty of reasons holders were scared into selling all the way down to 110p. A number of Fayrewood's peers and competitors have warned on profits in recent months, the market is clearly expecting bad news at some point from Fayrewood. If Fayrewood can maintain the solid trading it reported at the AGM stage, with time these fears will evaporate - the shares should grind their way higher towards fair value.
It seems sad to see Mayborn go. Since my purchase in March of last year, the shares have returned over 50% - just the kind of return I like to see from my investments. But the possibility of further advances had started to look limited. Don't fool yourself into thinking there can be such a thing as loyalty in investment. Funds should always be positioned for optimal returns.
Ben Bailey and Dana Petroleum have also perked up since my last update but are still a long way from being sold. June is shaping up to be another very profitable month.
Let's see how it unwinds.
The Artful Dodger
(0) comments
An old stock market adage: buy it right and hold tight. I've got Fayrewood at an excruciatingly cheap price. But there's plenty of reasons holders were scared into selling all the way down to 110p. A number of Fayrewood's peers and competitors have warned on profits in recent months, the market is clearly expecting bad news at some point from Fayrewood. If Fayrewood can maintain the solid trading it reported at the AGM stage, with time these fears will evaporate - the shares should grind their way higher towards fair value.
It seems sad to see Mayborn go. Since my purchase in March of last year, the shares have returned over 50% - just the kind of return I like to see from my investments. But the possibility of further advances had started to look limited. Don't fool yourself into thinking there can be such a thing as loyalty in investment. Funds should always be positioned for optimal returns.
Ben Bailey and Dana Petroleum have also perked up since my last update but are still a long way from being sold. June is shaping up to be another very profitable month.
Let's see how it unwinds.
The Artful Dodger
