gary17 Posted October 1, 2014 Share Posted October 1, 2014 I own shares in Company A... The shares of Company A is now trading at 1.1x Book and has historically done ROE of 20%. My cost basis is about 50% of book value from a few years ago. Would you hold or sell this company ? Thanks :) Link to comment Share on other sites More sharing options...
peter1234 Posted October 1, 2014 Share Posted October 1, 2014 If it keeps going up, I would hold on to it. ;D On a more serious note, it depends at which rate it will grow earnings. Link to comment Share on other sites More sharing options...
Uccmal Posted October 1, 2014 Share Posted October 1, 2014 Gary, Dont overwhelm us with information or anything.... If the story is mostly intact I would hold for sure. More mistakes are made in redeployment than standing pat. Link to comment Share on other sites More sharing options...
Packer16 Posted October 1, 2014 Share Posted October 1, 2014 Do you have a good alternative investment with as much upside after taxes are taken into consideration? If so make the change, if not don't. Packer Link to comment Share on other sites More sharing options...
boilermaker75 Posted October 1, 2014 Share Posted October 1, 2014 With apologies to The Clash, Darlin you got to let me know Should I hold or should I sell If your payout ratio is going up I’ll hold here till the end of time So you got to let me know Should I hold or should I sell It’s always tease tease tease You’re happy when I’m on my knees One day is red and the next is black So if you want me off your register Well come on an’ let me know Should I hold or should I sell Should I hold or should I sell Should I hold or should I sell If I sell there will be trouble An’ if I hold will be a double So come on and let me know Link to comment Share on other sites More sharing options...
Kraven Posted October 1, 2014 Share Posted October 1, 2014 With apologies to The Clash, Darlin you got to let me know Should I hold or should I sell If your payout ratio is going up I’ll hold here till the end of time So you got to let me know Should I hold or should I sell It’s always tease tease tease You’re happy when I’m on my knees One day is red and the next is black So if you want me off your register Well come on an’ let me know Should I hold or should I sell Should I hold or should I sell Should I hold or should I sell If I sell there will be trouble An’ if I hold will be a double So come on and let me know How are you going to work in "should I cool it or should I blow"? Seems like you left off right before that . . . . Link to comment Share on other sites More sharing options...
boilermaker75 Posted October 1, 2014 Share Posted October 1, 2014 With apologies to The Clash, Darlin you got to let me know Should I hold or should I sell If your payout ratio is going up I’ll hold here till the end of time So you got to let me know Should I hold or should I sell It’s always tease tease tease You’re happy when I’m on my knees One day is red and the next is black So if you want me off your register Well come on an’ let me know Should I hold or should I sell Should I hold or should I sell Should I hold or should I sell If I sell there will be trouble An’ if I hold will be a double So come on and let me know How are you going to work in "should I cool it or should I blow"? Seems like you left off right before that . . . . I had a friend who was really good at this sort of thing. This was my first attempt, so I stopped before I got through all the verses and made too much of a fool of myself! Here is one my friend did that is appropriate considering the current market, Guess who just got back today? That wild-eyed Bear that had been away Hadn't changed, hadn't much to say But man, I still think his fur looks great He was asking if Abby Joe was around How she was, where she could be found I told him she was still at Goldman Driving all the old bulls crazy The Bear is back in town (Spread the word around Guess who's back in town) Weekdays he'll be dressed to kill Down at the corner of Wall and Main The knives will fall and blood will spill If the Bear wants to fight, there'll be a world of pain The big screen in the corner turning green to red The lows are getting near, the bulls have fled It won't be long till equity's dead Now that the Bear is here again The Bear is back in town (Spread the word) Link to comment Share on other sites More sharing options...
gary17 Posted October 1, 2014 Author Share Posted October 1, 2014 Thx all! I am about 160% leveraged too so with this sale I would be now closer to earth... Link to comment Share on other sites More sharing options...
meiroy Posted October 2, 2014 Share Posted October 2, 2014 Is it a financial company? What do you mean by historically, since the 1820s or the past three years? Link to comment Share on other sites More sharing options...
Palantir Posted October 2, 2014 Share Posted October 2, 2014 Over the long term, returns approach ROE....so hold? Link to comment Share on other sites More sharing options...
Ham Hockers Posted October 2, 2014 Share Posted October 2, 2014 Over the long term, returns approach ROE....so hold? Are there any studies on this? I get why this is conceptually true, but when I look at long term results (I did spot checks on WM, MSFT, and IBM) the stock total returns are not close to what chaining together the yearly ROEs would imply. Maybe there is an issue with using accounting-based ROEs? Link to comment Share on other sites More sharing options...
gary17 Posted October 2, 2014 Author Share Posted October 2, 2014 Yes, Company A is a financial company. Before the great recession, it had ROE of 19% - 24% range from 1995 - 2007 It then did very poorly during the recession; that's of course when it was cheap... it's now profitable again, but the share price has tripled from my cost. I recently (about a month or so ago) bought a lot of Company B with the following metrics 0.8Book value, ROE of about 10% and EPS growth of about 9% estimated for the next few years. I thought Company B was very attractive, so I added quite significantly to the starter position I had... Meanwhile I also had Company A, so I was quite heavily leveraged. I did eventually sell out of Company A yesterday morning.... I did so before I posted here... I felt like I wanted to confirm whether I made a good decision or not ;) I think in the end I'll find out a few years later... because these company's performance will not be known today or tomorrow; but over the next few years ! Gary Link to comment Share on other sites More sharing options...
meiroy Posted October 2, 2014 Share Posted October 2, 2014 Yes, Company A is a financial company. Before the great recession, it had ROE of 19% - 24% range from 1995 - 2007 It then did very poorly during the recession; that's of course when it was cheap... it's now profitable again, but the share price has tripled from my cost. I recently (about a month or so ago) bought a lot of Company B with the following metrics 0.8Book value, ROE of about 10% and EPS growth of about 9% estimated for the next few years. I thought Company B was very attractive, so I added quite significantly to the starter position I had... Meanwhile I also had Company A, so I was quite heavily leveraged. I did eventually sell out of Company A yesterday morning.... I did so before I posted here... I felt like I wanted to confirm whether I made a good decision or not ;) I think in the end I'll find out a few years later... because these company's performance will not be known today or tomorrow; but over the next few years ! Gary That's why I asked. We shouldn't expect the financials to have the same ROE/ROA as before 2007. At least that's the way I see it. Link to comment Share on other sites More sharing options...
gary17 Posted October 2, 2014 Author Share Posted October 2, 2014 I agree - I think the ROE will likely be more like 12 - 15% going forward - I guess what I was trying to understand is this.... if a company has a book value of $20. It's trading at $22... and I paid $6.7 and going forward I expect ROE of 12% or ($20x12% = $2.4 EPS... theoretically that's a nice $2.4 / $6.7 = 36% return each year... and i'm not factoring in the growth. However, as a shareholder..... I really need to be thinking about how much of that $is actually coming back into my pocket in the form of dividends... it's just an interesting thought process; and the comparing to other opportunities that I was looking at (Company B). Link to comment Share on other sites More sharing options...
leeway Posted October 2, 2014 Share Posted October 2, 2014 I am curious would you consider industry specific factors in such assessment? For example, it seems there are quite some companies in the insurance sector, trading well below book with decent ROE and expected growth. However, the very low bond yields (or bond bubble) would likely be a big drag for years, aside from the competition. Link to comment Share on other sites More sharing options...
Tim Eriksen Posted October 2, 2014 Share Posted October 2, 2014 I agree - I think the ROE will likely be more like 12 - 15% going forward - I guess what I was trying to understand is this.... if a company has a book value of $20. It's trading at $22... and I paid $6.7 and going forward I expect ROE of 12% or ($20x12% = $2.4 EPS... theoretically that's a nice $2.4 / $6.7 = 36% return each year... and i'm not factoring in the growth. However, as a shareholder..... I really need to be thinking about how much of that $is actually coming back into my pocket in the form of dividends... it's just an interesting thought process; and the comparing to other opportunities that I was looking at (Company B). I certainly wouldn't use my historical cost basis to figure my return each year. Link to comment Share on other sites More sharing options...
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