Qantas: How come nine analysts had ‘buy’ ratings?

Qantas Limited (ASX: QAN) yesterday announced a surprise profit downgrade – well a surprise to many, but not me. As I mentioned a few weeks ago, “Airlines are notoriously bad investments – In aggregate airlines globally lose billions most years.”  The share price subsequently dropped 18.7% to close at $1.155.

What was most surprising to me was that nine out of 13 analysts had a ‘buy’ or ‘strong buy’ rating on the stock before the announcement. How did they get it so wrong? I have several possible explanations for that.

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Hastie Group – The writing was on the wall

In today’s Australian Financial Review, Hastie Group Limited (ASX: HST) director Harry Boon blames three of the company’s seven banks yesterday for refusing to take a write-down on their debt s th reason for the collapse of Hastie Group.  He said that directors had tried hard to budge the banks, after the company had found two willing financiers, but according to Mr Boon, the banks were acting unreasonably.

Well, I beg to differ. The collapse of Hastie Group and the loss of 2,000 jobs had nothing to do with how the banks acted. Hastie Group was an ordinary business, with low profit margins, poor returns on equity, and constant capital raisings and new debt financing, it was always going to struggle. Directors are the ones to blame for the collapse of the company. If they had concentrated on making the business profitable, and not gone on a spending spree, acquiring companies at ridiculously high prices, Hastie may have survived. Read more of this post

Would I buy shares in Warren Buffet’s company – Berkshire Hathaway?

While this might be controversial, there are several issues I see with investing in Berkshire Hathaway (BRK-A, BRK-B), that would stop me from buying shares. While I’m a great admirer of Warren Buffett and Charlie Munger, as an investor, I want to know when and how I will receive a return on my investment. There’s not much point in investing in something, if you can’t envision the end game. At some point as an investor, you either want to be able to sell the investment and make a profit, or you want to receive a return along the way (usually in the form of dividends).

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JB HiFi: Is NOW the time to buy?

JB HiFi Limited’s (ASX: JBH) share price has been pummelled over the last year and is down 40% since 29th March 2011, and currently trading at $11.06.

As my Motley Fool colleague Bruce Jackson mentioned in this article, “You don’t make money looking backwards. Yet so many people do exactly that. They look at the recent past, and extrapolate that deep into the future.”

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Vocus Communications – New Post on Motley Fool site

Vocus Communications Limited (ASX:VOC) recently updated the market with its expected half year results. I wrote an in-depth article for the Motley Fool, which you can view here.

Billabong International Limited (ASX:BBG) – Capital raising on the cards

Billabong released a trading update on Monday 19th December, announcing a profit downgrade, an operational review and a strategic capital structure review. Billabong’s share price subsequently fell by 40%.

The company said that sales in Europe have been affected by “Sovereign debt issues and fears of a global recession, impacting consumer spending patterns significantly”. Europe is also being affected by bad weather due to limited snowfalls.

Sales in Australia have been significantly affected by unseasonably cold summer weather, despite the November rate cut by the RBA. Read more of this post

Spotless Group (ASX:SPT) – Arbitrage opportunity or trap?

Spotless Group LimitedSpotless Group Limited (ASX:SPT) received a takeover offer from Pacific Equity Partners Pty Ltd (PEP) for $2.50 per share on 9th May 2011. The Offer was revised to $2.68 on 30th November 2011. What is unusual is that SPT’s shares haven’t traded above $2.50. Buyer’s today could make 18 cents per share (8%) return by buying shares today and holding until the deal completes. The question is, what is the risk of the takeover not-proceeding? Read more of this post

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