May 29 2008
Fortescue
Here is a prime example of a company who’s share price is reacting to nothing but hype. For those unaware of what Fortescue is then here is a brief overview. Fortescue Metals Group Limited (FMG, formerly Allied Mining & Processing Limited) is a minerals exploration and development company with interests primarily in iron ore in Western Australia. The company is mainly focused on the development of the Pilbara Iron Ore Project.
Here are some facts about this company that is responsible for the ‘all of a sudden’ Australia’s richest man Andrew “Twiggy” Forrest.
Their share price has risen as high as $60.20 yet they have turned a profit only once in the past 10 years.
The company will ship its first ore load next week.
Long term debt is 2.6 billion dollars while shareholder equity is 497million dollars. That’s a fairly large loan these kids have to pay, especially with these increasing interest rates tsk tsk.
The current years forecast is for a loss of -836 million dollars.
The 2009 estimated forecast is for a profit of 1.03 billion dollars.
If these two years come together ‘as estimated’ we are set for a return of 194 million dollars for the two year period. Based on $10 share price you are looking a massive earnings yield of 0.7%. hmmmm that doesn’t sound that good from here but someone out there thinks this is awesome. I find it amazing that the market at any stage thought the company was worth 60 something dollars per share. Anyone who tries to tell you that the company is worth that is just plain stupid. Or on crack, as I suspect a large percentage of the financial investment corporate world (or helpers) is.
Even at $10 it seems risky given the possible events that can occur between now and an ‘estimated’ return.
Cool your heels lads, a more stable buy opportunity will arise down the track. In the mean time Twiggy is either going to sell all he can and secure his billions or hope he can live on the few million dollars worth of shares he has already sold.
In other news Bondy is BACK!!!
It seems none of your ordinary audience is intelligent enough to respond so here goes. This share is worth what it is worth because the market dictates the price based on its knowledge about the company at any one time. This is how it works with all shares. There is know magical secret other than that.
We are not worthy Rob B! You are like a slinky…….not much fun until you push them down the stairs. You are a complete and utter NIFF!………Checkmate!
Rob B i just sold a polo shirt on ebay that is 10 years old and heavily worn for $51. By your logic thats what this shirt is worth. It isn’t….thats the overinflated price some stupid fool was prepared to pay for it.
Same applies to shares.
Did you buy my polo shirt by any chance??
You morons ever heard of the Efficient Market Theory? It is taught in all the big buildings in the cities. I will dumb it down a bit, they are called youna vers aties.
Well well well I have tried to stay away from this racist site …but I can resist no longer.
Rob B, your remarks are totally factual. You have surprised me with your intelligence. Have you been just acting stupid up until this point to fit in with the rest of the bevans?
Reeegitz, you are a dumb bevan but I enjoyed your response as usual. I shall use the slinky line on other sites.
Velcrap, you are an uneducated IDIOT!!!
SJ, stay away from finance!! Your post highlights that you lack a basic understanding of the fundamentals of the market.
Welcome back IASM, glad to see all you can do to contribute to this site is slag people off. Must be hard living in an ivory tower?
I’ll agree with you that the efficient market theory is what they teach in youna vers aties……they also taught me how to use WordPerfect because ‘Microsoft Word would never take off’
Do you believe everything you are spoon fed or do you seek a little more information from other sources and make your own mind up?
The richest people on the earth didn’t get there because of the efficient market theory….by your logic they’re uneducated also.
…..can’t believe showbag came back. no backbone to stick to her convictions
Velcro, please enlighten me on how the richest people in the world ‘got there’. And don’t leave out the end bit about why you are not one of them.
Would also love to here your thoughts on value based pricing?………………TWAT!
Bill Gates didn’t get rich via the market, he got rich via his invention and the fact that Microsoft Word took off. Your argument makes no sense to me.
Oh Velcrap, you have just been humiliated by Rob B (for Boring) & the Tigress!!!! How enjoyable. By the way, the 2 day driving course for Black & White cabs is technically not a university.
Krusty, if you paid a little more attention you would recognise my contributions as either expressing curiosity, stating my valued opinion, providing compliments (when they are rarely deserved) & constructive advice.
Velcro???? You there mate? Is the wireless hotspot down in centrelink today?
What are your thoughts on valued based pricing Tiger? I am actually interested in this topic and your thoughts about it.
toothless tiger, unlike you i’m not naive enough to think that ticket price ie. current share price is ‘true value’…..do some reading on IRR and equity
Rob B – Gates is only one wealthy man, there are plenty of others….and yes his wealth goes up and down with the share market as the microsoft price fluctuates. do some reading on ‘the other guy’….warren buffett
Showbag….learn to read
“Learn to read” Velcrap?? Please elaborate oh great cryptic one???
Velcrap, the price is what anyone is prepared to pay for something based on the value they place on the benefits that that product or share will deliver to them at that point in time or in the future. Different people value things differently based on their perception and in the market place perception is reality.
Can I make that any simpler.
Jethro, Value Based Pricing is the future of pricing. With any other pricing methodology you are leaving money on the table. And it should be more than just a pricing methodology it should underpin all marketing strategy.
If you are keen on learning more then the book by Roger Best is the bible.