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By Bruce Jackson (TMFGoogly@aol.com)
Baker Street, London -- Even though you're reading this on Friday, I've written today's piece yesterday (Thursday). No, and much to our long-suffering editor's chagrin, I'm not about to turn over a new leaf and get articles to him ahead of the deadline. I'm writing ahead of schedule because on Friday I'm playing golf, and no doubt very badly too. This also explains the brevity of tonight's report.
(Anyone with a sure fire cure to my chronic slice please feel free to post advice on the Land Of Off Topic Posts message board.)
So, although the numbers at the bottom of this page have been updated (thanks Martin!) I've got no idea what happened to the share prices of the Qualiport 7. In fact, I've got no idea of what the market did today. But do I care? Not really.
That's because I feel confident that the companies in the portfolio are solid long-term performers. Sure, the Qualiport is badly under-performing the market this year, but over the long term I'm hoping that situation will reverse. At the beginning of 1999, Rentokil Initial (LSE: RTO) stood at 453p and was the largest holding in the Qualiport, and by some distance. Now with the share price languishing around 250p, some 45% down on the year, it is not surprising that the Qualiport is struggling in 1999.
There are some lingering doubts in my mind as to Rentokil's long-term prospects from here. But, especially given management's exemplary record over the past 16 years, they deserve the benefit of any doubt as they set sail on a new course of enhancing shareholder value. If they can consistently grow free cash flow (as opposed to profits -- there is a very big difference) by, say, 12% per annum over the next 5 years, they will reach their goal of substantially outperforming their quoted peers. That sort of growth level is definitely within their reach.
As of writing, on Thursday afternoon, the FTSE 100 is headed south. These market correctionettes often present some buying opportunities, so personally I don't mind them at all. In fact, I'd almost go so far as to say I positively like it when the market falls. Short-term market panic attacks should be encouraged.
The more I think about it, and following on from this article, the more I like Yahoo! (NASDAQ: YHOO) the company. As for the valuation, at about US$36 billion, they're obviously not cheap. But, to those people who keep telling me "Internet companies are impossible to value", I reply "Hogwash, you can at last have a stab at it."
What's the big difference between valuing a company like Vodafone AirTouch (LSE: VOD), which requires extrapolating growth rates out into the future, and Yahoo!? I can't say for certain which way the mobile phone industry will be going in 8 years time, but I do know that Vodafone will be around, and probably still the biggest player. The same goes for Yahoo!, except the growth rates will be a little larger. Anyway, I've started putting together some numbers for Yahoo!, and will keep working away at it and see if I can't get comfortable with a valuation.
See you on Monday, where I'll report back with my golfing exploits. I also hope to look more closely at some Economic Value Added (EVA) principles, particularly with regards to PizzaExpress (LSE: PIZ). They are expected to report full year results within the next couple of weeks, and like Rentokil and Independent Insurance (LSE: IIG), I'm hoping to score myself an invitation to the post-results presentations.
Finally, the Qualiport message board awaits your valuable contributions. Have a great weekend.
Company Change Bid DELL(US)+1.75 47.75 EMA +0.50 10.40 IIG -0.02 2.78 MSY +0.47 6.05 PIZ -0.09 7.20 RTO +0.04 2.59 ULVR +0.09 5.99