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Friday, 2 January 2009

Insanity is repeating the same thing time and again and expecting a different outcome...

I just couldn't resist it. IPE dropped from $0.40 to $0.35 today, so I decided to place an after-hours order to buy 10,000 of them. If the order is filled on Monday it will increase my current block of IPE to 100,000 shares (the current 90,000 I hold were bought at $1.00 each). The company announces NTA figures each month, and they reported an NTA of around $1.04 at the end of October and $0.99 at the end of November. The 31 December NTA figure should be released around the 12th, and I expect it will still be in the high 90c region, given the overall stock market movement last month. Of course "Mr Market" must consider the NTA figures to be completely unbelievable for the price of IPE to be where it is, but I'm gambling that if the market recovers somewhat during 2009 the NTA figures will stay around $1.00 per share. In 2007 the NTA was around $1.35 when the shares traded around $1.05-$1.20, so if market confidence is restored the current NTA would indicate a possible market valuation of around 75c. Then again, the fact that the NTA has only dropped around 35% when the overall stock market has dropped by about 45% suggests there's something fishy about the NTA figures. The one good thing with my IPE investment is that Comsec has a 0% margin valuation for this stock - so my margin utilisation isn't affected by fluctuations in the price of my IPE holding. If the trade goes through on Monday I'll have to transfer $3,520 from my St George Portfolio Loan into my Comsec margin lending account to cover the settlement.

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2 comments:

mOOm said...

Most such stocks currently have ridiculously low valuations in Australia. Trouble is they are illiquid and people have had to dump them to raise money. There's nothing wrong with something being down 35% when the market's down 45%. For example PSS(AP)'s "Sustainable Fund" is down about 33% from the peak... It also depends on the mix of businesses in the fund which is probably the case with the Sustainable Fund.

JW said...

I love reading your blog and appreciate your comments on my blog.

Could you post your opinion on the future of the American economy in 2009. I am sure there are many who be interested in your view about where it is heading.

Thanks :)