First Norwegian Meetup N1

Its been a while since the last meetup and in that time I have moved countries. 

A club for mutual benefit to learn about wealth planning in Norway. This is not a sales pitch or for people to pitch. I setup a club similar in Australia (when I lived there).  https://fatcatsfinance.blogspot.com/

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HOW DOES  IT WORK

We meet once a month. In that meeting we do 2 things

1. Present our research findings to the group 

2. Agree on our research topic to complete before the next meeting

3. Do the research (This may take about 2-3 hours)

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Who is this for?

1. People that can commit to 2-3 hours of homework per month

2. You don't have to be a pro investor but you must be willing to learn and have an analytical mind and ambition to grow wealth

What is the scope?

It is not just limited to stocks and shares, topics can be anything related to wealth generation, Norwegian taxes, international companies, real estate and anything really. (Personally I am interested on Norwegian centric items as I already have a grounding in US and AU landscape).

Who am I ?

When I was running my club I read a lot of books about finance  and investments with a focus on value investing approaches , but especially at the beginning we covered many different topics such as banks, insurance and tax. I have had a small business and now work in IT.

AGENDA

• Say hello
• Decide on topic we would like to cover in future
• Decide on personal assignments 

Meeting 43 - Brevelle

ITS IN A FEW WEEKS TIME DATE MAY CHANGE PLEASE CHECK THE GOOGLE CALENDAR FOR DATE AND VENUE DETAILS AT THE WEBSITE HERE

After a Hiatus we are back with a club meeting

Stock for evaluation is Brevelle ASX BRG

Breville Group Limited is engaged in development, marketing and distribution of small electrical appliances. The Company operates in four geographical segments: Australia Distribution, North America Distribution, New Zealand Distribution and International Distributors. The Australia Distribution, North America Distribution and New Zealand Distribution operating segments distribute primarily small electrical appliances to retail customers in their geographical locations. The International Distributors operating segment distributes primarily small electrical appliances to distributors in international locations. In Australia and New Zealand, the Company trades under its company owned brands, Breville, Kambrook and Ronson and also distributes a range of Philips products in the personal care and garment care categories under a license agreement with Philips.

Annual Reports can be found at the coorporate website here



PRIOR TO MEETING
The stock has taken a bit of a tumble recently so what we need to do is come up with a valuation of the stock each prior to the meeting

1. Please visit the website and print a few annual reports to review and bring them along.
2. If you have worked out a valuation please put your workings for the valuation of the company in the google docs sheet here - just add a tab with your name on it.

AT THE MEETING

• Compare valuations discuss 
• Have a drink
• Dinner?

Meeting 42 - Thorn Group

http://www.thorn.com.au/  Ticker TGA

Thorn Group Limited is engaged in renting and sale of browngoods, whitegoods, personal computers (PC) and furniture products, the provision of unsecured cash loans, equipment finance and the provision of receivables management services. 

The Company operates in two divisions: Rental division and the Credit Management division. The Rental division includes the rental and sale of browngoods, whitegoods, PC and furniture products. The Credit Management division is consisted of the National Credit Management Limited (NCML) business, which includes receivables management, debt recovery, credit information services, debt purchasing and other financial services. 

Other operations consist of Thorn Equipment Finance and Cashfirst businesses. Thorn Equipment Finance provides equipment financing for small and medium enterprises and Cashfirst involves the provision of personal loans.

Please Place Valuation onto this spreadsheet It has public access to edit. Please add a new tab for your valuation notes with your name on

THE MEETUP

The time of the meetup may change please check the calender above for updates

Worldwide debt at unprecedented levels

We are in unprecedented times in case there's any doubt the amount of debt the world has right now has never been this much,  ever. Public debt is very high in the euro zone, Japan and the US and private debt is at record levels all around the world.  

Public Debt
Back in August 04 2011 Fox News published an article explaining that the US public debt  was then $14.58 trillion which is equal to the GDP of the entire US economy and approximately 1/3 of the global GDP.


How big is the debt per head?
14.58 trillion dollars (100% of US GDP )equates to approximately 47k per US citizen or 135k per US  taxpayer. source http://www.usdebtclock.org/ 


How does this compare Worldwide? 

Looking at the Public debt in comparison to other countries from  wikipedia. There is also another site with a view of some this information over time by country

How Does it compare over time?
Looking at the debt over time the graph below ends in 2009 but if you drew it out to 2012 with a GDP to debt percentage of 100% you would see that the US debt is the largest it has been since WW2. From wikipedia. 

How does the debt compare to other Countries?

UK
Current UK debt is running at about 70% of GDP which is the highest it has been since 1965. source http://www.ukpublicspending.co.uk/debt_brief.php

Australia
Currently the debt is running at $112 billion (16k per person). source http://www.debtclock.com.au/. 
2011 GDP is $925 US bn  which equals 27% of GDP

Others
Greece's debt is 143% of GDP
Ireland 's debt is 112% of GDP
EU (2010)  debt is 82.31% source wikipedia 
Japan 205%

What About Private Debt?
Private debt is otherwise known as consumer or personal debt and is very significant.

United States
US government debt is at its highest it has been since the second world war. Private debt has never been as large as it is today

source http://www.incrediblecharts.com/economy/keen_debt_gdp.php

The chart above shows that public debt in the US is 320% of GDP in 2011. According to wikipedia in 2011 US private debt was $50.2 trillion (The global GDP). This means that in total US debt is around 420% of US GDP. As far as other countries go private debt is not as high as the US but in most cases it is an all time high.

UK

100% of the GDP in 2011. source the Telegraph

This figure was around 400bn in 1993 it is now 150bn

Others

Below is a chart that gives personal debt to income by country

source from chartporn

Global Debt

So in conclusion debt levels have never been this large, ever. 

Meeting 41 Cochlear

COCHCLEAR Website

Google finance

Cochlear Limited (Cochlear) operates in the implantable hearing device industry. The Company operates in three geographic segments: 

• Americas, 
• Europe 
• Asia Pacific. 

Cochlear has established special purpose entities (SPEs) for trading and investment purposes. The Company’s Cochlear Nucleus 5 system includes a cochlear implant, a sound processor, including an automatic phone detection feature. 

Annual Reports

Our Analysis - Read Only (use link I emailed to edit)

Meeting #40 Valuation Invocare

INVOCARE WEBSITE

" InvoCare owns and operates funeral homes, cemeteries and crematoria around Australia, New Zealand and Singapore. InvoCare is well known for its commitment to family care, community engagement and investor value."


Valuations can be found here

For date of meeting see the calendar at the top

Meeting #39 IRI

Prognosis  IR is a leading global provider of high-definition performance monitoring, diagnostics and reporting software. IR is the the creator of award-winning Prognosis® and PowerMinder®


Design, development and sale of systems and applications management computer software for business-critical computing and Internet protocol (IP) telephony networks.


The Company’s PROGNOSIS product range is an integrated suite of monitoring and management software, designed to give an organization’s technical personnel operational insight into their HP NonStop, Windows, uniplexed information and computing system (UNIX) and Linux servers, and IP telephony environments and the business applications that runs on computer software. PROGNOSIS is used in automated teller machine (ATM) and Electronic Funds Transfer at Point of Sale (EFTPOS) transaction systems, Web applications and telecommunications systems. It services customers in more than 50 countries. The Company generates the majority of its revenue from upfront license fees, recurring maintenance and recurring license fees.

Data from Reuters

The Meeting
Thanks for Gilles, Tom,Mark, Cameron and Camerons Brother for coming on Wednesday.

Overview
The company routinely has a high profit margin and return on capital in the mid 20's it has no long term debt and consistent earnings there is also very little share dilution and little options. The MD has been with the company for along time and he hold a good chunk of shares and also the company is in a space (IP telephony) that could make it a takeover target in future. On the negative side the earnings are flat (falling just short of inflation).  The dividend payout is routinely 90% of the yearly earnings.

Valuation
Special thanks to Cameron for driving a truck through my incorrect valuation method! My flawed valuation came up with a valuation of $1.05, both Cameron and Mark came up with around 18 cents. Tom came up with more (about 60 cents - I think)

Valuations spreadsheet will be found here

Next Meeting
We will be submitting valuations of Invocare

Meeting #38 - MTU

M2 Telecommunications Group Limited is engaged in the supplying of fixed line voice, mobile telecommunications and broadband data services within the Australian and New Zealand markets through its retail and wholesale operating divisions. Retail business segment offers unique packaged telecommunications services, targeted particularly to small and medium sized enterprises, offering fixed line voice services, including line rental services, mobile voice and data services, information technology (IT), terrestrial dial-up and broadband Internet services, as well as mobile telephone hardware. Wholesale business segment offers a full suite of fixed-line voice services, including line rental services, mobile voice and data services, terrestrial dial-up and high speed broadband Internet services, and mobile telephone hardware. On August 3, 2010, People Telecommunications Pty Ltd, wholly owned subsidiary, acquired Bell Networks Voice ; Data Pty Ltd (Bell Networks).


Results Of Our Analysis


Find Our Valuations here

Notes about the Meeting

1. We should look into Excel functions that automatically calculate an initial price from an final price & interest rate, instead of implementing an iterative solution (ALL);
2. We should look into implementing checks to ensure our calculated growths are feasible. Possible things to include on checks are the current size of the sector (or whole economy), factored over 10 years for typical population growth & inflation. This needs to be dicsussed further if we are to come up with a workable check we all agree on (ALL);
3. We should also look at whether or not a company has previously grown by acquisition. If this is the case, there may be a limit on future growth. We should flag this in future calculations, and should certainly be implemented in Point 2, above. (ALL)
4. Roys should evaluate gearing as Gearing=Debt/Assets, which is preferable to my current system of years to pay off debt (ROY)
5. Roy should include Interest Coverage Ratio (ROY)
6. Roy shouldn't calcualate growth as an average value, but use at Growth Rate =(final  - initial)/No. years  (ROY)
7. Roy should divide EBITDA by the net assets to evaluate the amount of assets in the business that are being used to generate profits (ROY)
8. Next Meeting: Present analysus of IRI  & Discuss the assessment of many companies. (ALL)

Meeting #37 Evaluating Cardno

Cardno 

"Cardno Limited is a provider of professional services in physical and social infrastructure. The Company has three business segments: Professional Services Australia and New Zealand, Professional Services Americas and Software, and International Development Assistance. Professional Services Australia and New Zealand provides consulting engineering, planning, surveying, landscape architecture, environmental services and geotechnical services. Professional Services Americas and Software provides services in the Americas and software sales globally. International Development Assistance manages aid projects on behalf of unilateral and multilateral government agencies and private clients."

is an interesting company with a soaring stock price

All our analysis can be found here

Meeting #36 ARB Deep dive

We have previously analysed ARB and thought it was worthy of a second closer look. So our task for the next meeting is to really get under the hood with ARB and develop our understanding that we had from meeting 34

The Meeting
Attendees: Mark, Tom, Gilles and Paul

We basically confirmed our previous analysis that ARB is a stellar company. The question is this growth cannot continue like this forever. Priced at a 16 x multiple of earnings it is expensive compared to other engineering stocks. However it has shown extremely consistently high performance However we all do think it is a bit expensive right now we have bandied about prices of between 4.50 and 5.50

Analysis will be being put on the spreadsheet here

Next Meeting
We will be evaluating Cardno

Meeting # 35 SDI Valuation

This meeting is due to occur in the future in May 2011 (see calendar above for exact date).

SDI is a company that operates in the research and development, manufacturing and marketing of dental restorative materials. SDI’s products include alloys, etchants, glass ionomers, sealants, cement, equipment, tooth whitening, composites. It operates in Australia, Europe, the United States and Brazil. The Company’s subsidiaries include SDI (North America), Inc, SDI Holdings Pty Ltd, Southern Dental Industries GmbH, SDI Brasil Industria e Comercio Ltda and SDI Dental Limited.

The share price has taken a hammering recently with the high price of silver and high Aussie dollar. At this time of wring the share price is 17 cents.

Discussion points prior to the meeting
In the last valuation we found some descepencies with what comsec claimed the debt levels were against what was in the annual report. For this valuation I did some cross verification and was supprised to see the cash in the annual report to be 875,000 but in comsec it was 3,406,000.

ThenI realized that the 3406 is for the consolidated entity not the company (we'll need to discuss this)


The Meeting
Attendees Paul, Mark, Justin, Tom and analysis was sent from Roy in the UK

Findings
As a value investment it was not good and the inconsistent earnings have made it a difficult company to value. Return on capital is also not good.

Click Here for our Valuations

Meeting # 34 ARB

This meeting was to present our findings on ARB 
Attendees
Thanks to Mark Justin for attending and Roy for sending in analysis (despite not being able to attend as he was in the UK.


Findings
Our analysis varied in values from $3.30 to $17 most of the reason for the difference was around the margin of safety we employed. Both Justin and Paul missed the high level of debt (%35 of total assets) from looking at the figures from commsec. Mark has calculated a more accurate earnings figure by basing his figures on a free cash flow. Mark and Paul got earnings growth at around 35%. Justin was around 8%.

Spreadsheet of our analysis can be found here

Tasks for next meeting
We will all analyse another very interesting company called SDI which is a dental company that has been hammered recently on the share price. Go Forth and Value!


For everyone could we please base our valuations on beating a 12% bank return. Roy asked me to do this so the valuations can be more easily compared

Where did the $9 trillion go?

In the quite amazing videos from May - June 2009 being questioned around the 2009 bailouts and where the money went.

• The Inspector General of the Federal Reserve
• The Chairman of the Federal Reserve
• The Chairman of the Federal Housing Committee

#1 Alan Grayson vs Elizabeth A Coleman  
Inspector General of the Federal Reserve

She is asked where the $9 trillion went that has disappeared in the last 18 months. To put that in context the GDP of the US is about $12 trillion, the yearly US tax income base is about $3 trillion.




#2 Alan Grayson vs Ben Beranke 
The Chairman of the Federal Reserve Bank of America
Ben Bernanke getting very nervous trying to explain a $550billion entry on the balance sheet



#3 Alan Grayson Vs James Lockhart 
Chairman of the Oversight Board of the Federal Housing Finance Agency


James has some very nervous looking body language trying to explain how $1 trillion of derivatives were used to hedge a $200 bad million loans and ultimately resulted in a $100 billion bailout.




Where did the 9trillion dollars go?
Those videos above were made 2 years ago and since then there have been actions that have taken place to start to get to the bottom of the situation

• Nov 2008 Obama Elected
• Feb 2009  Obama signed  American Recovery and Reinvestment Act of 2009 (Economic Stimulus package)
• June 2009 the you tube videos were posted on youtube
• Nov 2009  The Federal Reserve Transparency Act of 2009 (H.R. 1207) was passed

After the passing of Federal Reserve Transparency Act of 2009 (H.R. 1207)

The Federal Reserve was forced to publish where the money went and did so in December 2010

Article source http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm

[when I find the actual data I will put it here]

Meeting #33

The meeting was to present our further analysis of JBHIFI
It was a very interesting meeting thanks to Roy , Justin and Mark for coming. A few items were discussed that I found very interesting

• How significant the stock options value are
• Margin of Safety
• Using 6 monthly financial reports

Stock options can cost 50% of the Annual Gross profit
If you look at a companies annual share volume and it steadily increases by a small number each year then the directors are probably giving themselves stock options. The value of these options is often significant. In JBHIFI it was worth about 10% of the revenue. The value is often between 10 to 20% of the gross profit.

Margin of Safety (10-17%)
To calculate the return I was looking to calculate  price for JBHIFI I used 10%. This resulted in a price of around $25 for JB. Mark used a figure of 17% which together with a discount for the value of the stock options resulted in a value of around $12.

We also discussed the benefit of using the 6 month data instead of just the 12 months data

Our Analysis of JBHIFI can be found here 


For Next Meeting

• We will tidy up our analysis for JBHIFI  can be found here 
• We will start analysis of a new company 1300 SMILES
• We present our analysis at our next meetup

Meeting # 32

The meeting was to present our valuations of JB HI-FI. 
We also had some good general conversations about JBHIFI as well. I thought it was a very effective meeting and feel we made some good progress.

Attendees  

• Roy 
• Olzhas
• Paul
• Jeffery had also kindly send us some documents that I brought along with some valuations he had got from a variety of sources.

I presented my workings to Roy and Olzhaz and they gave me feedback. My workings got so far as calculating a minimum share price and the earnings per share growth rate. The next step is to use these workings and apply the future predicted share price with a return of 10% per year to back calculate a maximum price which takes into account.


Key Learnings from the meeting

• For the value calculations generally you are better off using EBIT (as it is closer to the actual earning engine of the business - like the free cash flow figure)
• The calculations seemed fairly close to what we should be doing. 

The calculations can be found on this spreadsheet valuation spreadsheet if you are on the mailing list you should have write access to it. This will be the place for all our calculations  we produce about JBHIFI. 

Next Steps

We plan to continue to deep dive into JBHIFI 

• Roy will attempt to finish my calculations
• Olzhas will add some of his own valuation calculations to compare methods
• Paul will put together a financial definition cheat sheet so we can quickly check financial terms etc
• Anyone else Please read the spreadsheet and add anything you want in the blank spreadsheets. And have a go at valuing or adding to the analysis on JBHIFI

Meeting #31

At the meeting today where Jeffery , Roy, Justin and I. Justin had been very busy and had some good tips for us to look into at a later date the companies were
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We all went through the numbers on JB and have decided that our task for the next meeting is to come up with a dollar value for the shares in the company. We will then present this and work through our numbers to the group.

JBHIF 10 year numbers can be found here [when I upload them - next week]

Interest Rates

I spoke to my bank today to find that the interest rates were going up again to 7.5%. This is a big difference to 0.5% in the UK and 0.25% in the US.

Below is a chart of historical interest rates in the UK (In the last 20 years interest rates have been around 6%). You can see that 0.05% is a 20 year Low for the UK and nowhere near the mean value of about 6%. This low rates in the UK and US are just another indicator that both economies are in really bad shape and trying increasingly desperate measures to get the economies moving. I hope not too many people in the UK have bought recently thinking that a 1% mortgage is "normal".

One of the things I hear a lot is "If we get huge inflation then I'll pay off my house in double quick time" well maybe not. Countries can use inflation to pay off the national debt but for the like of you and me we cannot use inflation to easily pay off our house. The reason for this is that what often happens is interest rates can go up to match inflation. There are a few examples on Wikipedia along with more data on interest rates.

Investing in Lithium

This is a bit off topic but I am interested in having some exposure to the likely commodities boom that I see on the horizon. The most interesting for me are phosphorous and lithium. A Chilean company SQM, listed in Santiago and in New York ADRD is a company with huge reserves of both - I would like to keep this as placeholder for further analysis. The price has recently shot up. Maybe its too expensive now. In 2010 an ETF was launch for lithium (I'm not really sure how this works though) - Paul

I found another interesting site on lithium investing here

Cash Reserves of Banks

I went to my bank to get some money the other day. I needed $4000. They told me that officially I needed to give 24 hours notice for cash withdrawl over $2,000 however they had enough today so they could give me my $4000. Now my bank is probably a bit smaller than a big bank like ANZ but I found this quite startling. It got me wondering about how much money banks have in reserve.

A note about Reserve banking . Banks don't need $100 dollars to lend you $100. The US has a requirement that the banks have at least own equity worth 10% of the total loans outstanding. So if Citibank only actually owned $10 then the sum of all the loans they could make could not exceed $100.

So I did a little investigation and what I found (with a quick look on wikipedia) startled me somewhat. I knew that the US had a 10% requirement. I didn't know though that the UK and Australia does not require any reserve whatsoever. So they can make money loaning money they don't have. I wish I could do that! Below is taken from wikipedia

Country	Required reserve (in %)	Note
Australia	None	Statutory Reserve Deposits abolished in 1988, replaced with 1% Non-callable Deposits[5]
Canada	None
Mexico	None
New Zealand	None	1999 [2]
Sweden	None
United Kingdom	None
Czech Republic	2.00	Since 7 October 2009
Eurozone	2.00	Since 1999[6]
South Africa	2.50
Switzerland	2.50
Poland	3.00
Chile	4.50
India	6.00	as per RBI.
Bangladesh	5.50	Raised from 5.00. Effective from 15 May 2010
Lithuania	6.00
Pakistan	5.00	Since 1 November 2008
Taiwan	7.00	[7]
Latvia	8.00
Jordan	8.00
Malawi	15.00
Zambia	8.00
Burundi	8.50
Hungary	2.0
Ghana	9.00
United States	10.00 If anyone believes there is something incorrect or misleading with this article then please add to the comments below or send me an email

Meeting #30

Attendees
Olzhas
Paul
Justin
Roy (briefly by phone)

Short and sweet meeting. At the meeting Justin presented his work on Infomeadia.

Revenue was erratic and dividend behavior seemed out of line with profit. Roy also provided a little insight but we concluded that there financials were to erratic to make continuing evaluation worthwhile.

It was also great to see a new face ,Olzhas, who had some good input on Infomeadia as well as some good discussion about things warren buffet and more general economics.

Next Meeting
Paul Ayling, Roy, Justin , Mandy & Giselle to evaluate JBHIFI. Olzhas to present some analysis on a separate company and also provide a buffetolgy checklist and some information from morningstar. Because Christmas is coming up we made the decision to have another meeting next week to keep momentum.(see calendar)