Stock in Focus: DGL Limited
DGL stock fell ~17% as it revised its EBITDA for FY23 from $71.5 – $73.5million to $64 – $66 million. Feels a little oversold to us – cost increases have eroded margins but trading at 6x EV/EBITDA – -10% cut to EBITDA but -17% stock re-rate – doesn’t feel like the “worst” entry point to us. Mgmt has fueled growth via acquisitions in the past and our main question is where does future growth come from – more acquisitions to come? Note CEO Simon Henry recently made ~$500,000 of purchases of DGL stock on the open market.
NASDAQ Rebound: History Tells a Rough Time Ahead
NASDAQ DotCom Bubble
NASDAQ GFC
NASDAQ 2021-2023
Food for thought: Interesting looking into how the NADAQ sold off during the DotCom and GFC crash, after an initial sell-off there was a bound which was of a similar percentage. GFC fell -25% accompanied by a +23% rebound, and Dotcom fell -39%, accompanied by a +42% rebound.
Another interesting point — the capitulation sell-off after was -51% for GFC and -81%both double the initial fall and rebound, the final capitulation being longer than the initial sell-off.
Looking currently the sell-off was initially -37% and now A.I optimism pushed the rebound up +45%.
We are wary of current market froth (that this rebound being just a bear market rally) and would be on the side of caution, especially at current levels and prefer to be defensive and hold onto cash for a long and painful sell-off which has a high chance of eventuating.
US
MANU stock is in a trading halt as the football club announced it’s in exclusive talks with the Qataris. You have heard us talk enough about Manchester United – but the end game looks to be in sight – sitting at ~$25.25 after market. We first recommended MANU at the ~$19 mark and expect an all-cash acquisition to price it at ~$31-32.
Mediterranean fast food chain Cava debuted on the NYSE, roughly rising ~100%. Talk about irrational exuberance. Its prospectus makes for interesting reading: it promises “satisfying flavors at scale.” (doesn’t every chain restaurant?). Of course, it makes a loss.
Chart – Berkshire Hathaway performance vs. if Berkshire paid a dividend – look at how much is lost to tax!
