BSL: Why don't you sell?

Yesterday, I got some BSL at $0.67 since it was very bad day when too many just wanted to throw away their babies with bath water. I bought BSL to lower the cost of my portfolio and prepare to sell it could get some penny profit for me.

Should I sell today? No way! I trade but I don't trade for days. I could not see the benefit rather than make myself fretted, frustrated, and right up in the night with a lot of wonders, which I would never could figure out the reasons!

It was not best buying but definitely not worst buying too. There are too many genius and bums lost their shirts with BSL and fortunately I am not one of them. It kept to move down yesterday and today its performance is not better. However I do believe this buying was a reasonable good buying.

I don't think it would come back to $12 soon. It is impossible but BSL lost so much and its management team if have any self-esteem, would try all to turn the ship around. Yes we could not trust them. Yes how could we trust them let alone BSL is running a sun-sunk business in Australia?

However it has some remaining value there. The desperate and panic selling with so much serious crises internally and externally should push its price into a deep discount. Don't be fully trust me too. It could be down and down to the hell. Who knows?

After I rebalanced my portfolio, I just feel(before I believe) Australia is stable in politics and economies. Is it right or not? The market is voting that it would crash down to ground! So It is acceptable that BSL share holders or traders are voting for a sure hell journey for it. However logically I suspect the wisdom or intelligence of the people who keep to sell their capital on fire.

I bought and would like to hold it for a few months with the faith I could get some 20% profit! I could not afford the brokerage fees if I just get 2% profit let alone what if I just lost 30% when I am sleeping.

I should not forget it is a time everything seems too expensive even it is terribly cheaper than that in 2002 - 20010. When do you really want to buy, now or then? To me I prefer to buy now. What if it drops down to the bin? Possible but unlikely in a months or a year. What if Euro and US just escape the default? What if Australia just could not sink into the ocean? What if China could not tip off in a year?

Inverting and inverting, right? Where do you invert to and when you invert and invert for your rationality and intelligence? Of course now most of market players are inverting toward the rubbish bins for their capital.

Could I pay too much for BSL? Possible but seriously saying I really don't know! What I know is if I am wrong, it would not hurt me seriously since I am not synchronized with the market! I have bought other fishes too which could compensate the loss each other in long enough time!

From the ashes, phoenix would be reborn. Do you know which is future phoenix? Really don't know. That is why I rebalance my portfolio and hold some very tightly to give the time and energy for the rebirth of some great swans or phoenix. I still have not found how to identify the phoenix, which makes me very frustrated.

Do I have my worries about BSL? Of course! You could argue it has been discounted too much but Mr Market could set price lower than any price until it touches a rock bottom and you just could not control where it is. That’s not unusual. The unpredictability of Mr. Market’s moods and the accumulated ashes can make it get into a self-destructive cycle. If anyone who dared to bet on his house at $2.00 just a few months ago, he would pry now for the cycle to be at the end.

Could it reach to $0.50 or $0.10 or $0.01? Look improbable but could be possible. Do you have plan B for it?

 

What's remaining value of BSL?

On 17 June 2011, it was reported that "Deutsche held its buy recommendation and $2.60 price target for the stock" and now market votes it at $0.66 around. In short time with the Euro deficit tsunami is worrying everyone, does Deutsche still hold its recommendation? I don't know. However its analysts should do some research as Australian tell us:

It was said at $1.20 BSL's price is factoring in zero value for its Australian business. In my knowledge its value in Australia should not be zero!

It was said Bluescope's book value ex-Australia is $1.13 a share.

The company also operates in Asia and the US, which should be not zero too. It was said the value is $1.15.

***
BSL lost more than $1 billion! But it was largely because of non-cash write-downs.

Yet the write-downs arguably didn’t go nearly far enough.
1. Cheap Chinese imports,
2. the record high Australian dollar,
3. surging iron ore prices and inflexible Australian work practices

It usually happens the asset is written down too much at the worst time.

***
Even after the write-downs, the BlueScope directors are claiming to have gross assets of $7.8 billion, total liabilities of $3.34 billion and net assets or total equity worth $4.4 billion.

$4.4 billion, is it overpriced or underpriced? In my view it is hard not underpriced if management decided to introduce a tsunami into the market.

The market disagrees. It could not disagree this price of the asset!

At 67c, BlueScope’s market capitalisation is only $1.2 billion, some $3.2 billion less than the equity valuation claimed by the directors.

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I feel the market prices BSL too little. In the eye of tsunami, what is the price of the gold in the safety box?

What if the tsunami just passes by and BSL could rebuild its house? Do you believe BSL could build its new house somewhere?

Market is voting machine in short time. It is weighing machine for long term. Do you think BSL would be much less in weight?

Could we say the tsunami is gone? Definitely not but in case some one take all of the gold away in BSL, I just hold some of it in case I lose all of the chances!

***
News said BLUESCOPE Steel and OneSteel are a step closer to securing a $300 million lifeline from Canberra, as the government seeks to shore up political support for its steel rescue package.

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All in all I recommend the buying price is $0.67. Value is allusive. My feeling if $4.4 billion is too much $1.23 is too little. So if we bet on the too little, we would not absolutely wrong.

The above is my homework to use what I really know for my market service business! I feel I need the patience for 6 months - 2 years for market corrects its calculation faults.

What if the value of BSL much lower than $1.23? I would be wrong and if I realize it anytime I should sell.

What if market keeps to sell BSL at bigger and bigger discount to its value? Buy more and should think how to buy for great reduction of the buying cost. That means I have to use the time average properly!

 

Value and market sentiment

Nothing could give you profit at all of the time. If you expect profit from value, the market could price it much lower than the value for any time you could image.

It is not bad since if any discount itself could mean profit, the life and market would be too dull to play and life would be much less colorful. Who don't want the profit? The profit is few and then it could reward you greatly. Sometimes all just jump to the value and then when everyone act for discount, it would probably stop working.

In other words, if everyone is bullish for BSL's calculated value and believe the price would move toward its value, sooner or later we would have no value at all. The bargains would disappear and all of the market would be ruined. It is what happened before GFC and IT bust!

That’s why we’re so lucky the market just doesn't think BSL is in discount or believe it would be discount much more than it is providing now.

The discount or margin of safety doesn’t work all the time. In fact, it might be broke in short time. So you need some cash as your last buffers. Sometimes I just wonder why I could not see the two sides of one thing always.

We are human and we are always in paradox or we have to choose from different options!

September and October would be very volatile generally. Hope VIX could back to the value below 30 soon! If so BSL and PPX would be damaged less and perhaps recover some loss in price.

***
GFC made too many people lose their shirt. No too many retail warriors had ride on the V-Shape recovery. When FMS dropped down to $0.025 from its peak of $0.23 around in GFC crash, all of my friends urged me to sell since it still could give me 2.5 baggers. However I believe its IO asset and the corresponding value. I believe it needs the time to let the value to be seen by the market. So I held it until it reached to $0.16 and started to drop back.

I still believe the 24 months correction especially the recent crash have greatly discounted the value of Australia stock market as a whole. After I rebalanced my portfolio I believe my portfolio have been priced not too far than its possible lowest value. Naturally I believe value investing, especially its core value, margin of safety. I believe men could not ignore the environment and should have simple rules and laws to manage our market business.

30 dirty-cheap fishes at its lowest price, if it is the case, just need the storm to pass by. It needs the gut in storm, faith on value and margin of safety and the sky, the patience to wait with good enough cash reserve.

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Hope the mistakes between April and June would open the door for me to catch up the key to be a market master in my circle and only in my circle. Don't believe you need to be genius or extremely smart to be a master in the market!

You just need to form your own market philosophy which you don't need to create but take and understand it onto the earth. You just need to get your market playing strategy and approaches, which you don't need to make by yourself too but understand the context and conditions to apply them. You just need to know whom you are and be fine tune your position with your philosophy and approaches in some system ways!

Be alerted if you feel you are genius rather than a fool in the market! What if some gives me 10 baggers again? It is because I just find a gem when all of the genius ignores it! BSL has been sold by the genius in the stock market. Who could push down BSL's price so low that it is much less than its value? The guys with the complicated computers and systems to destroy their money with the very primary animal instincts!

Why? Stop losses and make more losses until they could not stop any losses since they could not have anything to lose!