The entire stock market value is based on hope
Yep, but tools help too. And natural intuision.
News Frontier Developments plc IPO announcement
- Thread starter Michael Brookes
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Yep, but tools help too. And natural intuision.
The entire stock market value is based on hope
A lot of stocks are that way. Not all, though. Read Benjamin Graham's "Intelligent Investor" if you want to quit gambling.
Stachel
Banned
I'm interested to know what someone who has read those kinds of books thinks about the usefulness of those kinds of books? I mean, at the end of the day, if you are aware of and conducting fundamental analysis on equities prior to selecting an investment position, what more is there?
I checked out the book on Amazon and it was summarized thusly: Basically his gospel is to ignore all the hype and blather around the stockmarket. Invest for the long-term in big, rock-steady, simple businesses, after analysing them with a few financial criteria. But only buy when the market is offering them at a bargain price.
TBH if you need to be told or didn't arrive at that conclusion yourself after about 10 mins of thought then you probably shouldn't be investing to begin with.
The main issues I see as an amateur is: you don't have a direct feed (everything is 10 mins out of date) and you don't have a gauge on trader sentiment (except all the misinformation and propoganda agencies peddle). That for me means the only real strategy a leyman can attempt is mid to long term swings and these IPO initial bounces. Anything else seems foolhardy in the extreme when you can just dump your savings in a decent fund or adopt the portfolio approach and maybe, just maybe, keep up with real inflation.
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Indeed. Yet so many invest based on MACD, EMA, Stochastic, Fibonacci, volume, stops etc., not realising that perhaps the only person really getting wealthy is the broker earning a commission.
If it wasn't for commissions, it would be possible to make a killing truly risk-free with options.
Perhaps the biggest downsides to value investment are: it requires a lot of patience, is boring, and needs more homework than the latest fad rear-view mirror.
Stachel
Banned
I totally agree re: value investing but it really is the only sensible option for amateurs. I also think its pretty logical to want to take ownership of your own savings/pension planning too. I look at friends and family who have gained below inflation returns or been taxed to death on any they did manage to make above inflation and I am not inspired to invest in funds or with banks etc.
A few are really struggling now and it breaks my heart as I think anyone on good money who didn't get filthy rich under Blair must have been asleep at the wheel. All you had to do was buy as much property as you could using easy credit. I don't know anyone who did BTL who is now worse off. Some had to trim their portfolios at a loss but all are set for huge pension pots from bricks and mortar - at a time when most people can't even dream of obtaining a mortgage now without 50k joint incomes etc.
On the subject of commissions: I actually found that my broker (Youinvest aka AJ Bell) are a total skankaroo. They charge £9.99 per trade unless you trade 10 or more times in the previous month etc.
I did some searching and iWeb only charge £5 per trade. There's a £25 one off fee to setup the account but assuming you are using an ISA envelope to protect your gains from the tax man its a no-brainer imho. I'm in the process of transferring my portfolio accross. A 100% reduction in commission makes finding that £50 profit in every trade a lot easier. I also really like the way their data feeds tell you stuff like if a trade was a buy or a sell instead of just .. not bothering. lol.
The best deal I linked earlier in the thread but that requires a £120 down payment (then £2.50 a trade) and wouldn't be useful for anyone who didn't transact daily or wasn't using a larger amount of capital than my piffling wad.
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I've read lots of the book and worked in investment for 15 years, and that is certainly the way I look at investing. Although the different approaches are legion. My best results in listed stocks have come from backing what you have described; value stocks. That is to say stocks that have a low price against the yield they are giving off.
That said you have to be aware of the value trap. Stocks that look cheap, high yielding etc on a low price, even if they are great companies. A good example would be IBM, it was a classic value trap throughout the 80’s. A rock solid company with household recognition that was high yielding and cheap, and every year got cheaper and cheaper. It might seem obvious what a value trap is after the event, but it can be very hard to see it at the time.
However, for the sake of this discussion its worth pointing out that fdev is no value stock. Its last year profits were £1.048m against a valuation as of today of £63m. That’s a yield of 1.6%, you could get that in a cash isa with virtually no risk. Even when fdev was valued at 96p its low, that was still only a 4.3% yield, hardly impressive.
All the value in fdev is really based on ED being a hit. Yes I know it has other revenue streams and projects, but really, the value is in ED. Here the question of valuation becomes very hard without full access to the company to understand how their revenue model and cost structures. So the best I can do is make big guesses.
So lets guess that the cost of games sold is about 40% (allowing for the mix of 3rd party channels and direct and other costs like VAT) and that they sell the game at £40 a go. Let’s also assume that the cost base remains at about £3m. If ED were to sell 3,000,000 copies then in a single year the profits would equal the current market cap, and effectively from then on you have a free company with multiple revenue streams and a great reputation going forward. i.e. the current price would turn out to be a total bargain.
I appreciate this is very back of the envelope stuff, but then again most sales will be in year 1 after launch.
So then the question becomes how likely is 3,000,000 sales, or any other number? Well if we knew the answer to that was 3,000,000 EA would have already made a space sim or bough fdev.
What we do know is that 3,000,000 sales is what was achieved by games like Crysis, Civ4, Age of Empires, Doom, Warcraft 3.
If on the other hand you think ED is going to sell like Half life (9m), Diablo 3 (12m) or Sims 2 (20m) then you going to want to buy as many fdev shares as you can at current price, and thank your broker for having sold them to you.
However, dream scenarios are easy. What is hard is what value you should place on fdev if it sells like Supreme Commander, Tropico, Bioshock or SimCity2000, all of which sold 1,000,000 copies. I suspect it is still a buy at current prices, but I’m less sure of where the proper cut off is. And let’s remember that selling 1m copies would still place it on the list of all time top selling PC games.
To be very honest selling 500,000 copies would be a good result, and a very realistic result. But I would have no idea how to value the company at this level unless I had full access to the company and its finance director to work up a much more sophisticated financial model.
So after all that, I pretty much end up where you are cgavin, sticking my finger in the air and making a guess. So yeah, I’ll buy stock below £2 a share if I think the beta is really good. No real idea why I am picking £2 as opposed to any other number though.
Stachel
Banned
Mars: It seems my face is still moist with your bits as I can't rep you again. Awesome post though.
I just wish I hadn't bought Tesco now ..
Stuck in at 283 and its been shorted to death. Closed 289 today but bleh.
As was mentioned on the lse chat for FDEV: you really don't want to not be in this come release day. Hehe. Sales? Who knows. Anything more than 250k would be a triumph no doubt. If it goes viral? Skies the limit isn't it. 3m is a bit ambitious though .. !
I just wish I hadn't bought Tesco now ..
Stuck in at 283 and its been shorted to death. Closed 289 today but bleh.
As was mentioned on the lse chat for FDEV: you really don't want to not be in this come release day. Hehe. Sales? Who knows. Anything more than 250k would be a triumph no doubt. If it goes viral? Skies the limit isn't it. 3m is a bit ambitious though .. !
Robert Maynard
Volunteer Moderator
hmmm if that isn't personal agenda then i don't know what is
...or did i miss anthing obvious here?!
the ppa website is still in cache and only the front page has been edited pending the gm today. some real nuggets to be found there such as this under testimonials
"and some other things they say about us
"Mark Ryan is famous for his direct approach to dealing with issues from the customisation of practice management software to advising senior partners of large firms on their IT and business strategy"
Mark has been affectionately described as the "stroppy fat bloke" and "the only person that is prepared to tell the Managing Partner what he needs to hear""
quirky funky stuff all around
£8 million worth of shares sold this morning just before 10am - no reflection in share price - yet
that was the takever agreed as per the announcement, set at 2.50 i think
For those that want a look try here
The main entry point to the web site has been redirect to a new index page, but the rest of the backend stuff is still there and working.
Ahh I see:
"The assets to be acquired include the royalty rights in respect of the Elite video game franchise (the "Elite Royalty Rights"), the benefit of which are currently held by PPA. David Braben assigned these rights to the Company in June 2008 in return for a royalty based on Frontier's profits from the Elite video game franchise."
Buying back the rights to Elite before it goes nuclear post release .. smart move
The main entry point to the web site has been redirect to a new index page, but the rest of the backend stuff is still there and working.
that was the takever agreed as per the announcement, set at 2.50 i think
Ahh I see:
"The assets to be acquired include the royalty rights in respect of the Elite video game franchise (the "Elite Royalty Rights"), the benefit of which are currently held by PPA. David Braben assigned these rights to the Company in June 2008 in return for a royalty based on Frontier's profits from the Elite video game franchise."
Buying back the rights to Elite before it goes nuclear post release .. smart move
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hmmm if that isn't personal agenda then i don't know what is
...or did i miss anthing obvious here?!
the ppa website is still in cache and only the front page has been edited pending the gm today. some real nuggets to be found there such as this under testimonials
"and some other things they say about us
"Mark Ryan is famous for his direct approach to dealing with issues from the customisation of practice management software to advising senior partners of large firms on their IT and business strategy"
Mark has been affectionately described as the "stroppy fat bloke" and "the only person that is prepared to tell the Managing Partner what he needs to hear""
quirky funky stuff all around
double post
I am a bit confused by all this. In Frontiers accounts it states DB got a 10% revenue from all Elite sales, theoretically (without any tax benefits taken into account) there must be more value in the FD shares than this future revenue stream if you wanted to convert it into shares.
DB must have put up his Royalty assets as consideration for buying some of the PA LLP in early 2014? Why would he do this and not have his royalty assets in his own controlled company??
My only other thoughts are that maybe its a hindrance to the Shares in FD (future takeovers etc) if DB has 10% locked in on all revenue and he has been convinced to get rid of this obstacle?
Any other thoughts reasons for doing all this?
sales, theoretically (without any tax benefits taken into account) there must be more value in the FD shares than this future revenue stream if you wanted to convert it into shares.DB must have put up his Royalty assets as consideration for buying some of the PA LLP in early 2014? Why would he do this and not have his royalty assets in his own controlled company??
My only other thoughts are that maybe its a hindrance to the Shares in FD (future takeovers etc) if DB has 10% locked in on all revenue and he has been convinced to get rid of this obstacle?
Any other thoughts reasons for doing all this?
Sorry just read the WSJ announcement that says that DB sold some rights for Elite to PA back in 2008, I guess he needed some cash at the time for some new jumpers not knowing that he could create a new Elite via different methods in the future (crowd funding) and now FD need to simplify the earnings stream to FD Shareholders??
Stachel
Banned
A bit of buying activity this morning: http://halifaxiweb.digitallook.com/security.cgi?csi=11186911&action=summary&username=&ac=
I just picked up 1k worth (not showing yet). 264.6. Let's hope they sell 3m copies in 2014 or I'll be hawking a liver and kidneys (signs of wear).
The abolition of stamp duty is nice. Although the spread on AIM isn't. Thieving b****!
I just picked up 1k worth (not showing yet). 264.6. Let's hope they sell 3m copies in 2014 or I'll be hawking a liver and kidneys (signs of wear).
The abolition of stamp duty is nice. Although the spread on AIM isn't. Thieving b****!
I'm still waiting for sub £2 a share before dipping in ...
Don't think its going to happen now though ... Looks like its baselined at around £2.50.
Don't think its going to happen now though ... Looks like its baselined at around £2.50.
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