2016 – The Great Irish Share Valuation Project (Part IV)

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Botswana Diamonds, Brexit, Connemara Mining Company, Dalata Hotel Group, GAN, Green REIT, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, Mincon Group, New Ireland Fund, TGISVP, The Great Irish Share Valuation Project, UDG Healthcare

Continued from here.

Apologies, I abandoned TGISVP for a few months there…dealing with a mild case of PBSD. Yes, I mean Post-Brexit Stress Disorder, which I suspect the entire island’s been experiencing too! Dare I say it, Ireland’s officially the kids in this bloody divorce – did Brexiteers ever stop & consider them when they were voting? Which begs the question:

What did they really think they were voting for..?!

Noting the 51.9% final tally for the Leave vote, we can presume a distinct minority of the population specifically voted for Hard Brexit. And yet, that’s what the UK now seems to be getting. [Again, when the Tories voted for Theresa May, what did they really think they were voting for..?!] But maybe it was inevitable…by default, Remainers now favour a Soft Brexit, which unfortunately seems to have persuaded the entire Leave campaign they believed in Hard Brexit from day one. And that’s what we’re seeing reflected in May’s government, which on occasion appears to have swung even to the right of Enoch Powell, and where Hammond & Carney were even branded traitors for simply highlighting some of the inevitable fiscal/economic consequences of a (Hard) Brexit. And anyway, the Soft Brexit peddled by the Leave campaign was sheer fantasy – no open borders (except the Irish border!?), no nasty EU-type regulations, free trade into the EU, jobs for all, etc. – basically, you can have your cake & eat it too (ooh la la, that’s a bit French!). In the end, it’s hard to know which was worse – the cynicism of the Leave campaign, or the gullibility of millions of Brexit voters who swallowed it hook, line & sinker…

But anyway, despite May’s current stance, we’re really no better informed than we were in the aftermath of the referendum, and it will be a few years down the road (possibly with an additional transition period) before a new Brexit reality’s nailed down properly. [And never under-estimate the possibility of another referendum!] Which means it’s still nigh on impossible to evaluate the potential future impact on Irish companies & the economy – overall, my (generally positive) perspective on Brexit hasn’t changed much since July, with the EUR/GBP rate still presenting the primary medium-term challenge. [Fortunately, the rate’s back within a percent of July levels, after hitting 0.9100+ in October]. But as I’ve highlighted before, Irish companies have actually proven themselves time & again over decades of Irish-UK exchange rate volatility. And looking at a longer term chart, today’s rate isn’t all that extraordinary anyway:

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2014 – The Great Irish Share Valuation Project (Part I)

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Abbey plc, Aminex, Andor Technology, Connemara Mining Company, DCC, Irish shares, Irish Stock Exchange, Irish value investing, ISEQ, portfolio performance, Smurfit Kappa Group, TGISVP, The Great Irish Share Valuation Project, UDG Healthcare, US Oil & Gas

Thanks, I’ve received some great feedback & encouragement from readers in the past couple of weeks…so why not, let’s rock this TGISVP bitch all over again! Despite the exclusive focus on Irish stocks, I’m also hoping to see a lot of international readers checking in (& commenting) on these posts. For two good reasons, I hope:

i) Regardless of my individual price targets, many readers have highlighted their appreciation of the wide variety of valuation techniques & perspectives I’ve employed here across a broad spectrum of companies. I’ll try to place even more emphasis on the valuation process this year, so hopefully this project will prove interesting to a far wider readership.

ii) I mean, have you noticed the Irish market – it’s bloody on fire! The ISEQ was up +17.1% in 2012, and nearly doubled that return in 2013 (+33.6%) – um, like wow! And to top it all, my TGISVP portfolios actually out-performed the index, across the board in 2012 & on average in 2013. Uhoh, I think I’m scaring the value investors away…

However, it’s worth remembering I’ve been bullish on Irish stocks for a couple of years now – but a lot of investors really only started to pay attention last year. And much of the overseas interest to date, for example, has been primarily focused on (distressed) property & loans – rather than equities. So, arguably, we may only be reaching a point now where sentiment & interest in the Irish market’s fully blossoming. It’s also worth highlighting the rather unique economic & fiscal abyss the market’s rallying out of – in fact, the ISEQ remains 55% below its May-2007 highs.

Now, I hasten to add – I’m not actually making a specific ISEQ call here. I usually don’t think about indices in that manner (& often find the main indices too expensive anyway). I prefer to get comfortable with the current macro backdrop – as opposed to making macro predictions. [A fool’s game – noting current growth forecasts, and historical error ranges, all those highly-paid forecasters are really telling you is that developed market growth may be positive…or, um, negative!] Presuming a market passes enough macro hurdles, I’ll usually ignore the index & simply focus on stock-picking. Exactly as I’ll be doing here – though it will surely prove tempting to draw some overall market conclusion(s) near the end of the valuation stage (of this project).