Macquarie Bank, could the times be changing?
One of my pet projects for this blog is to do an in depth review of one Australian publicly listed company every week. Choosing a company in vogue, I’d dig through news articles, press releases, finance reports, and opinions from those in the know. Although you could use it as a share trading idea, thats not really why I’m offering the information. Sometimes companies aren’t what they seem, and not necessarily in a bad way. Sometimes people don’t understand the company, and how it makes profits. The idea was kind of on the back burner till I heard Jim Cramer’s show and his trading advice was to sell Mac Bank.
Watching the video, it makes perfect sense to me as to why Macquarie Bank, often referred to as ‘the millionaires factory’, may be a great shorting (i.e, betting on a price drop) opportunity for investors. How mainstream would Cramer’s thoughts be throughout the Australian public or even the press? Its always interesting when one of our favourite son’s, whether it be One.Tel, Ansett, or HIH, run into operational difficulties, particularly to media response to such events. The reaction is almost as sad as the reality facing those who invested and worked for the company; that it was all a corporate cover up, and there was no way of knowing of the eminent collapse, except from a few obscure hindsight clues. Give me a break. Every company that fails shows a huge warning before hand. There’s only so much you can hide before common sense latches on to the puzzle pieces that are missing.
Mac Bank’s business model, although solid, is flawed in the current context of world finance. There is no denying this. I saw a flat road ahead for Mac Bank a year ago. Owning stable, high return assets, however, is never a business model thats going to take a u-turn, I thought. At the very least, it’ll keep profits stable and cash in off the hard work from the last 20 years of asset capitalisation. Cramer, although I’m not a huge fan, makes a great point about the business model.
Now, like all investment ideas, we play the waiting game. See you all in a year.
