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Transcript: Time To Build A Position In The Housebuilders?

Money Talk host Owain Bennallack is joined by Nate Weisshaar to debate a trio of investing topics. Top of the list are house builders: Is the market being irrational in marking down their shares in the face of higher house prices, or could another crash be around the corner? Plus the Saga (LSE: SAGA) IPO, the FTSE 100 at nearly 7,000, and two shares that have caught the team’s attention: HSBC (LSE: HSBA) (NYSE: HSBC.US) and Supergroup (LSE: SGP).

The following is an unedited transcript of this podcast.

Owain Bennallack: Hello and welcome to Money Talk, the investing roundtable from The Motley Fool. I’m Owain Bennallack, and joining me today is Nate Weisshaar, who is calling in for his first podcast since he relocated to The Motley Fool’s Global Headquarters in the United States.

Nate works on our U.K.-focussed Champion Shares Pro and Share Advisor services, despite his U.S. heritage, and now his U.S. utility bills. Hello, Nate, and welcome home, so to speak, even though obviously you’re not home here — you’re home there.

Nate Weisshaar: It’s good to be back, I guess. Back here.

Bennallack: Back in the land of the doughnuts and the not being harassed by me and Mark Rogers in the U.K. office.

Weisshaar: At least not in person.

Bennallack: No, just in podcasts. I was about to say that you were calling in from The Motley Fool’s Global Headquarters in Alexandria. But then I thought, “That can’t be right,” because Alexandria was a place in ancient history, not in North America.

Then I realised that was silly, because my GSCE history taught me that there are loads of Alexandrias all over the world — principally cities named after Alexander the Great, who was nothing if not egotistical. Alexander the Great wanted to go to the end of the world, but I’m hoping, for the sake of your quality of life, that the end of the world doesn’t include Virginia, and that he never made it that far.

Weisshaar: I don’t think he did, unless he’s been reincarnated. But, no. I think we’ve chosen Alexandria out of an homage to the Old World, rather than being conquered by someone.

Bennallack: So basically, whoever named Alexandria was naming it after some town in the Middle East that was named after Alexander the Great — sort of a second-derivative name.

Weisshaar: Something along those lines.

Bennallack: Interesting — says no-one — so let’s move on before I get deported to the States. Sorry, Nate, I mean “relocated to the epicentre of The Motley Fool’s global operations.”

Let’s crack on and talk about the housebuilders. The traditional spring bounce for the sector of the market has turned into a slump, pretty early — well before summer. Why? Why are shares falling, and is it rational?

Next, let’s talk about the imminent Saga IPO, which I cannot wait to call the “Saga Saga,” as the shares stumble around. I suspect a fair few of The Motley Fool’s wide audience are actually Saga members, but should they also become Saga shareholders? I will be asking Nate that very question.

Then we’ll take a quick look at the FTSE 100. It’s once more approaching the seemingly unbreachable level of 7,000, but does it look as expensive as the last time it approached the seemingly unbreachable level of 7,000, and should stock pickers like us even care?

Finally, we’ll conclude with two companies that we’ve been looking at — one each. Normally we do three, but it’s just me and Nate on the call today, so we will do two, although I may ask him for a bonus one.

Nate, are you ready to crack on?

Weisshaar: Let’s do this.

Bennallack: Let’s do it. There’s going to be a little bit of lag, because you’re on the ISDN obviously, so listeners who are used to our incredible repartee, riposte, and counter-riposte will have to listen to it slightly sped-up, I guess.

(unclear) computers can give you that power.

Let’s start with the housebuilders. House prices are roaring back, particularly in the South East and London. In fact, Rightmove reckons average asking prices have leapt, in London, by £80,000 in 2014 alone.

At the same time, Bank of England Governor Mark Carney has said that the U.K. property market has, “Deep, deep” — two “deeps” — “Deep, deep structural issues,” the chief one being, in his view, that not enough new homes are being built.

In fact, Carney pointed out that, in his native Canada, the land of the Canooks — is that what they call themselves, Nate?

Weisshaar: Canucks.

Bennallack: Canucks — the land of the Canucks — there’s only half as many Canucks as there are Brits, but there is twice the rate of housebuilding. I’m not quite sure why that’s relevant, but I suppose it’s an interesting stat.

Nate, a shortage of new homes here in the U.K., soaring house prices … this sounds like great news for anyone in the business of making houses to address that shortage — i.e., housebuilders — but investors seem to be taking a different view, recently.

Weisshaar: Yes, we’ve seen quite a few of the home builders take a bit of a hit. They peaked around late February/early March, and have just been tumbling, generally, since then. We saw Barratt Development peak around 450p, Taylor Wimpey peaked around 130p, Redrow peaked around 345p, and Bovis peaked around 945p. Of those, Taylor Wimpey has performed the best recently, falling only 18%. The others have fallen over 20%, so it’s been a rough ride.

Bennallack: When you say “fallen over 20%,” we’re not talking about over five years here, are we? We’re talking about over five weeks, or thereabouts — three months.

Weisshaar: Yes, just a few months.

Bennallack: When I see steep falls like that, I get turned on, Nate — in a stock-picking sense! I think, “Great, maybe I can bag a bargain.” But we have to remember, the stock market looks forward, not backwards. Much of the buoyant conditions that I had previously spoke about, were already priced in. That’s what got the shares up to that higher level.

Barratt, I think, rose about 500% from its lowest point in 2011 and, crucially, along the way it went from a big discount to book value, to a premium of, I think it was getting up towards twice book value.

As you know, that means that people expected a lot more good times to come. They thought that Barratt was going to add a lot of value to the land and its other assets that it already held. When people get carried away, when they get excited, they can get too excited, can’t they? And that leaves the shared vulnerable to a fall.

Are people getting nervous rationally, or is it just that they got too optimistic in the first place?

Weisshaar: I think there are no clear signs, which is partially what makes everyone nervous. The market hates uncertainty.

We’ve got a bit of trouble here because the U.K. economy is growing nicely. The GDP, we’ve just learned, is approaching the pre-crisis peak. Inflation has been coming down, but it popped a little bit in the last month, which surprised everyone and might put a little bit of fear into people, mainly because the Bank of England may be forced to push up rates.

That’s one of the big fears — you touched on it earlier — with Mark Carney talking about the housing market getting a little bit out of control. One of the ways the Central Bank can try to put a brake on that is by raising interest rates, which would make getting a mortgage that much harder and less affordable to new homebuyers.

Bennallack: At the moment, though, he seems to be suggesting that rather than raise interest rates — which obviously hits everyone, not just house buyers — he maybe will ask the banks to restrict the loans that they give, or even perhaps curb the government’s funding for lending program.

Weisshaar: Yes, he’s really running out of … as he points out, the housing market has structural issues. There just isn’t enough supply for the demand, and there’s only so much a central banker can do to fix that.

He’s been doing what he can, and the government’s support of homebuyers — the fund to buy program — doesn’t address the supply side, it just makes the demand that much higher. It achieves the goal of increasing property values, but it doesn’t really address the issue of getting more people into homes, affordably.

Bennallack: It’s interesting, whether it does do that or not, because a capitalist would say that by Help to Buy making it easier to buy a home, by prices rising, that would suck in more development. More houses would get built, and ultimately if you increase supply, you take some of the pressure off prices as you meet more of the demand.

But then, in the U.K., as you now know — having been here for three years before defecting back to Motley Fool Global Headquarters in Alexandria — we don’t have that much land around, or at least we don’t have very much we’re happy to build on, I guess is the key difference.

That’s the inherent difficulty, isn’t it — that even if there’s this deep, deep structural problem that there’s not enough houses being built, Carney can’t just let prices soar on the grounds that suddenly everyone will rush out and put up another house in their own back garden. It’s not that simple, is it?

Weisshaar: No. The planning commissions and the zoning of land is really the big hurdle here. The policy in place right now should promote rising home prices, as well as more homes being built, but there’s a big roadblock as far as these homebuilders getting permission to actually turn open land into more homes.

That’s where the problem comes, and that’s kind of what Carney is getting at, when he’s saying that there are deep structural issues here.

Bennallack: Is the difficulty for investors in the shares, then, that even if they can be confident that there would be sufficient demand for maybe even all the houses their companies could build, that some other measure that’s taken to curb prices will ultimately hit demand, even though in the bigger picture we need more houses to be built — thinking about those falls in the share price?

Weisshaar: Yes. I think that uncertainty facing where we go from here, as far as how we control what people are generally calling a too-steep rise in home prices — or people are having trouble affording their new houses, or getting onto the property ladder.

I think there’s just a lot of concern about how the government will take that, and how they will react, because we do have election cycles, and politicians like to be re-elected, so how they make the voters happy could have a negative impact on shareholders.

Bennallack: Exactly.  The only way, really, the government could succeed would be if it actually hit the shareholders, because they’re the smallest constituency!

There’s the people who own houses, who want prices to go up, and yet often they have children and whatnot, who can’t afford to buy houses and obviously would like prices to be lower, so that’s kind of an intractable paradox there, whereas if there is some way that they could force builders to build unprofitable homes, or something like that … I guess that would be a danger to investors.

Weisshaar: We’ve also got the risk of rising land prices hurting the homebuilders’ margins. Most of the homebuilders have nice portfolios of properties that they’ve picked up during the property slump after the financial crisis, so that shouldn’t be an issue right away. But as you look out further, because this supply/demand imbalance would take years to offset, it becomes a bigger issue, going forward.

Bennallack: So, tread warily, but potentially there’s bargains there.

On to the Saga IPO, which I first heard about not from the Financial Times, not as a hot tip from a hedge fund manager, but from my Mum, who is a Saga member. She was peddled the IPO by Saga, which canvassed 2.5 million of its customers and said, “Would you like to buy shares in our company, if we were to float it?” — and apparently 700,000 of them said yes.

I guess I’m not surprised, because I think it is an interesting company, and it targets an interesting demographic. When I say “interesting,” I mean “one with money.”

For those of you who are under 50, Saga is a company that specialises in those of us who are over 50. I said “those of us” there. I’m still on the right side of the fence! It’s for that demographic who go on cruises, and who can afford to buy houses, I guess would be the best way to sum it up.

It’s mainly an insurance company, but also has a magazine, it has a holiday business, it has a financial arm that does savings products and whatnot. It looks like it’s going to be valued at about £2.5 to maybe £3 billion.

I think it’s potentially an interesting company. It’s touting shares to my Mum. My Mum considered investing in them, which she has never really considered investing in any specific shares. I think that shows the trust and loyalty that the brand has.

But, at the end of the day, an interesting company with engaged customers isn’t necessarily enough if the numbers don’t work, right Nate? It’s basically an insurance company.

Weisshaar: Yes, and right now the insurance industry — especially motor vehicle insurance — is under a lot of pressure. I think it’s an interesting move by Saga, to canvass their customers for this IPO.

Recently, companies going public have caught a lot of flak from retail investors, because the shares are being snatched up by institutional investors, and retail investors don’t have a chance to buy them and participate in whatever pop may follow.

But Saga has taken a completely different path and one that intrigues me, because as you say, your Mum has never considered investing in any company, but they’ve contacted her and now she’s expressed interest in investing. They’re tapping a bunch of relatively inexperienced, possibly, investors …

Bennallack: The cynic in me there thinks that tapping a bunch of people who won’t look at the P/E ratio or the dividend yield or the cash flow or the debt or whatnot, and will just buy the shares blind. Would that be too cynical, Nate?

Weisshaar: Well, you just beat me to the cynicism, but I was headed down that path, myself. But it may be too cynical. It may just be a company that loves its customers and wants them to participate in the company’s potential success.

Bennallack: One interesting nugget on that note is that Saga customers — and also staff, I believe — who do invest in the shares and hold onto them for a year, they will get given a free share for every 20 that they still hold in a year’s time, which is effectively free upside of about 5% to those particular investors, so they get a bit of a bonus, ahead of the Citi funds and whatnot.

I guess it will also potentially stop them just dumping the shares if they see a quick rise, because they have to hold on for a year to get this free lift.

Weisshaar: Yes, it’s as you say, an interesting move, one that you don’t see very often. Again, it could be another indicator that this is actually a company that’s trying to help its customers out, help them share in the company’s success. Or, it could just be a gimmick to try and lure them in.

It’s a move you don’t see very often, but one that I think gives, at least customers who like the company and are willing to invest in it, a nice little one-year 5% return.

Bennallack: Yes. I would suggest people go and look at something like Direct Line, and look at the comparables there, because that’s really what Saga is; an insurance company.

In terms of loving the brand, which is how I think most people will decide to buy the shares or not, from the sounds of it, I think it’s kind of fun that this one’s coming out at the same time as Fat Face.

I say that because the other woman in my life, my girlfriend, she has come to me — again, having never really been interested in shares — and said she’s read about Fat Face doing an IPO. This is the surf-wear brand that my girlfriend singlehandedly keeps afloat. She’s even buying birthday presents for me, now, from Fat Face!

A completely different brand to Saga; obviously a completely different demographic, completely different space, on the high street — and yet, it’s still a consumer brand, and it’s still one that, at least for now, is loved by its customers.

Going back to the Peter Lynch school of investing — this is the great Fidelity fund manager from the ’80s and ’90s — he would say that you should invest in what you know and love. So, if you’re under 30 buy Fat Face, and if you’re over 50 buy Saga, assuming you like those companies.

That would be too simplistic for us, though, wouldn’t it?

Weisshaar: Oh, no. We love to dig around in numbers in order to determine where we go. I think it’s not a bad gauge, and it obviously worked fairly well for him. But I think for inexperienced investors it can be a bit dangerous, because if you don’t understand the company, how it’s operating, how it’s growing, then especially jumping into an IPO can be a bit tricky.

Bennallack: Frankly, the company could be very successful, you could be right to love it, but it could be well over-priced, couldn’t it?

Weisshaar: Exactly. I’m always suspicious of IPOs because you have to ask yourself, “Why are these insiders selling right now?” Generally, they’re selling because they think they’re getting a great price for what they own.

In the case of Saga specifically, you’ve got private equity investors who are trying to sell their stake at a profit, and most of the money being raised will be going to them, as opposed to funding the company and its future growth.

Bennallack: Yes, the key is, they’re the ones who know the company best, because they own it.

Weisshaar: Exactly. Just looking over the prospectus, I noticed that over the past three years Saga’s profits have not grown at all, and the current valuation — or the guessed valuation — is definitely implying some ability to grow. I think investors should be cautious of following their hearts, especially when an IPO is involved.

Bennallack: One thing that all this IPO activity does suggest, I think, is that we’re in a buoyant market. Typically, companies don’t go and try and flog themselves when nobody wants to hear about shares.

Sure enough, if you look at the FTSE 100, it is flirting again with that 7,000 level — a level it has not ever hit, even in late 1999 when it almost got there. From memory, I think it got to 6,930 on the last day of 1999.

Back then it was a different world, Nate. You probably were about eight. Facebook hadn’t been invented. You could go to an End of the Millennium party, and you didn’t have to see photos of yourself the next day, on Facebook, embarrassing yourself in the new century. Great times, but the FTSE was literally where it is now.

Fourteen years have passed. Instinctively to me, because all I think about every day is investing, I’m not particularly worried that the FTSE is now at the same level again, because companies move on, they grow more profits, and just because it was at some level 14 years ago, that’s not some unbreachable level, is it? You’ve got to look at who’s in that index, and you’ve also got to look at the valuation.

Weisshaar: Yes. It’s very easy to think, “Oh, it’s been 14 years and we haven’t gone anywhere,” but in reality things have changed quite a bit. If you look at the FTSE 100, fewer than half of its constituents today were in the index in 1999, and some of them were twinkles in someone’s eye, almost, at that point.

For those that don’t know, the FTSE 100 is defined as the 100 largest companies, by market cap, listed on the London exchange. By definition, you have to be pretty big, or highly valued, to be in this index.

Bennallack: When I cast my mind back to 1999, I think of the dot-com boom. Presumably, some of them nosed into the FTSE 100.

Weisshaar: Exactly. Back then, there were 14 companies that you would consider tech companies, including Marconi, which is a name I’m sure a lot of our listeners may remember and notice that it’s missing today.

But today, there are only four tech companies and really two, in my mind — ARM and Sage — could qualify as tech companies. The other two, Vodafone and BT, are really more telecom in my mind.

But you can tell that there’s been a big shift there, with the dot-com bubble. Back in 1999, a bunch of tech companies got inflated valuations, and were pushing into the 100. Today, it’s a very different story.

We’ve still got a lot of banks in the index, but we also saw growth in emerging markets change the complexion of the FTSE 100. We’ve got Rio Tinto and BHP Billiton, big constituents now, that have grown strongly on the back of demand for raw materials in emerging markets. That’s coming off a bit now, but they’re still gigantic companies.

Similarly, Unilever and Reckitt Benckiser have ridden the demand for consumer goods around the world, and growth particularly in emerging markets. Consumer goods are now three times as big, as a percentage of the FTSE 100, as they were back in 1999.

Bennallack: It’s always worth remembering, everything changes. I can’t remember the exact Greek quote that Ben Graham used offer — something like, “Those that are now fallen will be held in esteem again, and those held in esteem will fall.”

Something more elegant than that, but obviously it’s tempting to look at the market now and go, “Oh, Unilever. That’s the sort of giant company that dominates the market.” But that wasn’t the case, and even more so the mining companies; BHP Billiton was small in the early ’90s.

I think it’s interesting as well, if you look back to 2007, because that was the end of that huge financial debt-driven explosion that we saw — he says using hindsight, because I’m not sure everyone saw it at the time — and the banks definitely dominated the market. You almost topped out with this huge attempted acquisition by RBS of a big European bank.

They were the colossi of the index then, Nate, and whilst they are still big, some of them have gone, like Northern Rock. We all remember that that crashed — there was actually a run on that bank. Some others have been merged away, so even in 2007 when the market also almost breached 7,000, it’s changed a little bit since then, too.

Weisshaar: Yes, it’s interesting. The banks have been one of the constants of the FTSE 100 although, again, the complexion has changed there. Despite the troubles in ’07-’08, banks are still a big player in the FTSE 100, although some have been gobbled up and a lot of consolidation has taken place.

So, the number of banks on the index has shrunk, and we’re stuck — we’re left with … I say “stuck.”

Bennallack: “We’re stuck.” They’re like cockroaches, you can’t kill them off!

Weisshaar: We’re left with just a handful of even bigger banks now, and some of them are still trying to find their way after the financial crash.

Bennallack: I think the key thing we have to think about with the index moving around, in terms of its constituents and the level homing into view again; this 7,000 — like the wall in Game of Thrones, that holds back the icy hordes — it seems such an impregnable level. But it’s more sensible, isn’t it, to look at valuation?

If I remember correctly, back in the late ’90s, FTSE was yielding a couple of per cent. I can’t remember what the P/E was, but I’m pretty sure it was a lot higher than today.

Weisshaar: Yes, and you do remember correctly. The dividend yield back in ’99 was 2%. Today we’re looking at a yield of 3.5%. The P/E 14 years ago was over 30, and today we’re at 13.7, so a very different market, even as we’re approaching that magical number.

Bennallack: We’d say, more sensibly priced?

Weisshaar: I think you would, and it’s what you should expect, really. We’ve moved forward 14 years. You would expect economic growth to move forward. You would expect companies that are adding value for shareholders to keep moving forward, so you would expect a magical number of 7,000 — which really, to investors, has no real meaning — to be breached, hopefully, over a 15-year period, or as we keep going forward.

It has a psychological value, but I think that if you think about what drives the market, it really shouldn’t surprise people that we’re bumping up against 7,000 again.

Bennallack: Okay, let’s move from discussing the level of the index, to maybe some of the companies that could either be in the FTSE 100 or perhaps aspire to be there in 15 years’ time; a couple of companies that we’ve been looking at recently.

Nate, I don’t know if you’re looking at a big one or a small one, but what’s caught your eye?

Weisshaar: It’s a big one, indeed. It’s HSBC.

Bennallack: One of the biggest.

Weisshaar: One of the biggest, and one of those banks that I was just bad-mouthing so long ago.

HSBC is interesting to me because its latest results reported a less than pleasing decline in profits, but I think what we’re seeing underlying all the headline numbers is that they’re getting their costs under control, and they are shrinking the bank and focussing their resources on the most profitable parts of the business, and that’s exactly what banks need to do these days, in order to remain competitive and interesting investments for shareholders, is use what they’ve got more effectively, more efficiently, and adopt a new attitude towards cost control and growth in a world of new regulations and higher capital level.

Bennallack: The thing I always worry about with HSBC is this constant doom-mongering about a bubble in Chinese property prices. Obviously the corollary could be a crash in Chinese property.

I’ve got to think that a company like HSBC, which has got so much of its business in Hong Kong, if not directly Mainland China, that’s got to be affected if there’s a bust to follow the boom, hasn’t it?

Weisshaar: It definitely is a major risk on the horizon, but it’s not exactly a new risk, and it’s not one that will have slipped past the radar of HSBC. But yes, I think if we saw a housing crash or an economic crash in China, it would be hard for any international bank to really avoid it.

HSBC is very centred on the Hong Kong market, which is essentially a conduit to Mainland China, so trade would slow, economic growth would slow, and HSBC’s profits would probably dip and growth would slow there as well. But I think it would be more of a short-term issue. HSBC’s operations literally span the globe, and a slowdown in China would be felt around the world, but I think it would be a temporary thing, rather than the end of growth as we know it.

I think when you’re investing in emerging markets — whether you’re a company doing it specifically, or an investor — you’re going to have a bumpy ride.

I think right now the market isn’t asking a whole lot for HSBC. I think it’s priced slightly over book value, and given its geographic diversity it appeals to me. Looking at the banks listed in London, it’s one of the few that has a combination of getting its house rapidly in order, and trading at a reasonable price, so it’s one I’m interested in right now, and actually own.

Bennallack: Okay, well that’s a big one to look at.

I’m going to go down the size scale to SuperGroup, which has been a smaller company, then it’s had a recovery and now it’s a bigger company than it was, but it’s still several factors smaller than HSBC. It’s a clothing retailer. It’s the retailer that famously puts the fake Japanese writing on its shoulder.

It’s released a set of results for the fourth quarter that seems to have really spooked investors. Sales were actually up 12.4%, so that’s good. A nice, even split between retail and wholesale, not overly driven by any one particular initiative or move or whatnot.

The danger is that like-for-like sales dipped on an underlying basis, which compares as best they can the stores that they had in operation for the two periods. Like-for-like sales were down 1.3%, so that’s not good. It’s not good if you think that your clothing brand is not really driving people to its stores as much as it was, because that could be the beginning of the end.

However, the CEO, he says that it’s down to a pretty warm winter that we had, and early spring — which I think is correct. I think it was a bit warm. He also says Easter was in a funny position, and he says that they’ve halted, or reduced heavily, clearance shipments to eBay. They have an outlet store there.

That one worries me a bit, because I’ve seen that story before, with Mulberry, when they said they were cleaning up their channel, and sales plunged for years on end.

But I don’t think that’s the case with SuperGroup. I think they’ve been growing consistently like-for-like sales for eight or nine quarters in a row now, so I’m prepared — this time — to give them the benefit of the doubt.

I think the market is less prepared to do that, because it’s scared that we’re going to see another collapse in the share price. For context, the shares fell from £18 to just over £2 in maybe 18 months, with a string of calamitous “mess-ups” — he says, to ensure the podcast is broadcastable.

So, I think the market’s jumping the gun a little bit there, and maybe thinking that another one of these is on the way. Obviously, if we kept seeing like-for-likes deteriorating that would be bad, but with the shares down from about £17.50 down to £10 now, in just a matter of weeks, I think quite a lot of pessimism is being priced in.

Weisshaar: Even with that pessimism, though, the shares are trading over 25x earnings, so there’s obviously some expectation of growth there. Where do you see the company, as far as their ramp-up in growth?

You’ve said at least their market cap has been up, and been down, and been up, and now I think we’re around 700 million market cap. How much growth? What are we looking at as far as, where does SuperGroup’s reach extend?

Bennallack: I think the good thing is … the first question with SuperGroup when it floated was, “Is it a niche brand that a certain, very loyal set of customers wear, and as soon as they see other people wearing it, they’ll dump it and it will never become mass market?” I think that question is settled. I think it’s now a mass market brand.

We’ve seen other mass market brands have thousands of stores — GAP or Abercrombie & Fitch, or Zara perhaps — though none of them are exactly the same, but they’ve got thousands of stores. People are happy to be seen wearing their clothes, even though other people wear their clothes.

SuperGroup is tiny, compared to them. They’ve got like 139 retail outlets at the moment. The do about the same amount of business as wholesale, so it’s not all about the retail, but still it’s pretty tiny.

Also, it’s got a lot of international potential. I think a phenomenon of the current era is that brands that work, and that catch overseas, can roll out in an efficient manner, basically by laying the trail with online and not having to start from scratch in every territory — and I think SuperGroup is doing that, and it’s got a lot of potential there.

You cite that high-ish P/E, but as a good growth investor you should look forward. P/E does drop pretty fast if analyst projections are right, if this like-for-like decline is a blip. With earnings growth of 20% pegged in for the next period — it is forecast to slip a little bit after that — but I don’t think the shares are too expensive, at £10.

I certainly don’t think that the size of the company is an impediment, yet. It’s more got to keep making the right kind of clothes for the people it’s currently satisfying.

Weisshaar: I guess my fears are quelled, at this point.

Bennallack: Okay! Well, let’s wrap it up at that point.

If you’d like to hear more from The Motley Fool, you can of course go to our website at Fool.co.uk, or else you can download our free report on becoming a millionaire. This is a pound sterling millionaire, because now Nate’s in America, it’s much easier for him to become a millionaire with the dollar. Who isn’t a millionaire, in dollar terms, Nate?

Weisshaar: Exactly.

Bennallack: If you want to find out how to become a millionaire, the slowish and Foolish way, you can get that report at Fool.co.uk/millionaire — the clue is in the name. Download that, listen to us in a couple of weeks.

Nate, thanks for dialling in. Good to hear you again.

Weisshaar: It’s good to be technologically back in the U.K.

Bennallack: I am going to subject you to the Turing test next time, just to ensure that you’re not a robot simulation.

Weisshaar: All right!

Bennallack: We’ll look forward to that. Thanks for listening, everyone, and Fool on!

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Both Owain and Nate own shares in HSBC. Owain owns shares in Supergroup.