Were he alive today, Benjamin Graham would surely be taking a close look at two bombed out stocks which I’ve followed over the years. The father of investing – Warren Buffett’s mentor – loved nothing better than buying shares in the bargain basement. And then watching such “cigar butts” post spectacular recoveries as time unfolded.
Relative to recent years, SA’s horse racing and betting company Phumelela and the UK’s rapidly-growing Metrobank are now clearly on the market’s “price reduced, must clear” rack. This week Phumelela shares hit a 15 year low of 480c, down 75% in two years. Metrobank, at 560p, has lost almost 90% since March 2018.
Phumelela was negotiating with the Gauteng Gambling Board after an edict to deprive its loss-making SA racing business of R75m a year. It is also addressing a scathing report from SA’s erratic Public Protector, plus trade unions threatening to disrupt its busiest trading day. Metro is dealing with fallout from an accounting error and a hostile UK media.
Their challenges are not insignificant. Neither are they insurmountable. A sober assessment suggests all the bad news, and more, is now priced into the fallen darlings. I’m not predicting a rapid return to former glory. But a healthy recovery in the share prices from currently depressed levels is a very real prospect. Also with shares, this too shall pass.
*If you missed last night’s Rational Radio – you can catch the full show here,
