ABC Learning (ABS) Price Crash - Is It A Buying Opportunity?

ABC Learning (ASX Code ABS) shares plummeted yesterday. ABC Learning shares - listed on the Australian stock market - reached an intra-day low of $1.15 before closing the day at $2.14. Shares are now in a trading halt. The current price is a far cry from the peak of over $8.50 reached early last year.

ABC Learning's drop in share price was apparently triggered by a lower profit result and investor concerns over high debt levels. To be honest, I haven't followed this company terribly closely over the last couple years as I thought it was way too expensive. But the market appears to have been concerned that the company's lending covenants contained provisions related to shire price or market capitalization. The company has since released a statement that this is not the case and that it's not in breach of it's lending covenants.

I just heard on ABC News that 1 director of ABC Learning sold shares just before the share price plunged. And 19 million shares were sold yesterday by CEO Eddie Groves and his wife. From what I understand, a large portion of the stock owned by Groves was exposed to margin loans and that's what triggered his selling. That was after Groves had told the Australian Financial Review that he would be safe from any margin calls. On top of that, it seems that while Groves was telling the market that the fundamentals of the company remained strong, his lenders were dumping his shares to meet margin calls. While nobody knows for sure there was a margin call, at would seem to be the case given the large number of shares the Groves' sold.

Insider trading laws will be put to the test with one director selling shares just before the share price drop. From what I understand, the sale was due to a margin call. But the director would not normally have been allowed to trade shares immediately before the profit was announced. While I don't know the insider trading laws very well, this does seem to be an anomaly.

And just to complicate things further, as part of the request for a trading halt this morning ABC Learning also indicated that there was a potential buyer for parts of it's business. What does this mean? Is the company under pressure due to its high debt levels - so much so that it may need to sell off part of the business to pay down it's debt levels.

I haven't been able to confirm it, but everyone is saying that this was triggered by the sub-prime mortgage melt down in the US. I presume that as ABC Learning has refinanced its debt, it's had to pay more as lending have become a lot more cautious about risk.

While I haven't been through the figures yet, I think anecdotal evidence suggests that I should be staying away from the company for now. But I will certainly have a closer look at recent ABC Learning financial statements because these situations of doom and gloom can sometimes provide great stock market investing opportunities.

Update:
I Have since written more about ABC Learning.

MYOB Rejects Private Equity Offer - What's Next?

The MYOB board's rejection of a recent private equity approach is predictable if nothing else. This is how the game is played. Regardless of whether MYOB really is receptive to a private equity deal, the first approach was always going to be denied.

The interesting thing now is the watch how the Australian stock market reacts. The share price jumped today on the news as you would expect but does the market believe that MYOB is up for sale? As I mentioned in MYOB Rejects Private Equity Offer, the company's founder - Craig Winkler - will have the last say in any deal, whether by entering into a partnership or by selling outright.

Taking MYOB private would give the company to pursue more aggressive (read risky) growth strategies than a public structure might allow. Not having the stock market looking over your shoulder gives you more time to concentrate on the task at hand.

I will be following the MYOB private equity approach closely over the next days and weeks.

MYOB Rejects Private Equity Offer

MYOB appears to be the latest target of a private equity deal - something which has been rampant on the Australian stock market in recent times. MYOB has reportedly rejected the private equity approach. The deal is said to be worth $1.90 per share - a premium to the recent share price but a far cry from the heights attained during the heady days of the dot com boom.

From what I understand, MYOB's founder Craig Winkler owns a significant amount of the company - more than enough to block an unfriendly approach from a private equity player. Could it be that he is either willing to take MYOB private again in conjunction with a private equity partner, or would he sell out of the company completely?

For now, the MYOB board have rejected the offer as inadequate.

ASX Website - A Wealth Of Free Information

The ASX website really is a wealth of free information (please pardon the pun). I am a regular at the ASX website because it's regularly updated with useful Australian stock market investment information - all of it free. For those not familiar with it, the Australian Stock Exchange website is the home of the ASX on the web. In this post, I just wanted to point you in the direction of a few of the useful resources available.

Free Online Sharemarket Investment Courses

The ASX website contains a large number of free online sharemarket investment courses. Topics range from beginner to advanced. Here is a small selection of course titles:

• Sharemarket Investment Stategies
• Fundamental Analysis
• Technical Analysis

And the list goes on. Learning is self paced so you work through the units in your own time. You will need to register as a user of the ASX website to gain access, but registration is free.

Investment Podcasts

Free investment podcasts are made available for a selection of the Investor Hour Seminars. The Investor Hour Seminars are a series of regular presentations at the Australian Stock Exchange on a range of investment related topics. These investment podcasts are made available on the ASX website soon after each presentation has been delivered.

ASX Sharemarket Games

Also on the ASX website you can access the ASX sharemarket game. Participants start with a hypothetical $50,000 to invest. You can test your trading skills against thousands of others. I have tried this game a couple of times but found it was oriented more towards traders due to the short term nature of the game. However, if you are interested in trading the market, the ASX Sharemarket game can be a good way to find out if you are any good.

Listed Company Information

As you would expect on the ASX website, you can view information about all companies listed on the Australian Stock Exchange. Information available includes price data (with a 20 minute delay), listing details, company announcements and dividend history. However, there is no detailed financial data, but you could go to Yahoo Finance or ComSec for that.

I have only scratched the surface or what's available on the ASX website. I recommend you add it to your list of free online investing resources. You can visit the ASX website here.

Update: I know this is not really related, but I've tried to find out more about Walker Thompson Trading Software based on a comment left below.

How To Invest In Gold

How To Invest In Gold.

Lots of new investors want to know how to invest in gold, especially with the recent resources boom on the Australian stock market. In this post I will discuss some of the methods available to investors who don't currently have exposure to gold, and who want to learn how to invest in gold.

Before we get started, I just want to make it perfectly clear that this article is about how to invest in gold. I'm not making any recommendations as to whether now is a good time to invest in gold. With gold currently trading at over $1,000 per ounce, it is certainly a long way from it's low point, but who knows how much higher it can go?

Invest In Gold Producing Companies.

There are many gold producing companies listed on the Australian Stock Market, not to mention a plethora of junior explorers if you are looking for a more speculative investment in gold. Buying a gold producer will give you exposure to rising gold prices as well as any upside in the specific company. This may include exploration potential and efficiency gains.

The downside to investing directly in gold producing companies is the company specific risk you will take on. An individual company may underperform the gold price for many reasons. In the worst case scenario, insolvency is not out out of the question. Recall Sons Of Gwalia.

A couple of the larger gold producing companies listed on the ASX include:

• Newcrest Mining Limited (ASX:NCM)
  
• Sino Gold Limited (ASX:SGX)
  

Invest In An ETF.

Investors can gain direct exposure to the price of gold bullion by investing in a gold exchange traded fund. The only gold ETF I know of listed on the ASX trades under the symbol GOLD. Through this vehicle, investors gain beneficial ownership of 1/10th of an ounce of gold bullion for each GOLD share held. Read more about investing in GOLD shares.

Buying an ETF is like buying any other share. They offer liquidity since they are easily traded on the stock market. And if you want to know how to invest in gold with little money, you can investigate the use of leverage with ETF's. Margin lending among other lending products may let you get started with just a small amount of your own money.

Invest In Gold Bullion or Coins.

You can also invest in gold by buying gold directly from gold dealers in Australia. Gold can be bought in a variety of forms including different sized gold bars and coins. Dealers will normally buy at the spot price then charge a commission plus a delivery fee, but there are a few different variations.

Unless you want to want to actually be able to see and touch the gold, ETF's are probably a better option as they will give you the same exposure to the gold price but you don't need to worry about storage and handling.

If you really want to know how to invest in gold coinage, I would suggest you speak directly to a dealer about your specific needs. They will be able to tell you how to invest in gold coins.

Podcasts Available From The ASX Website

The Australian Stock Exchange run a program called Investor Hour Seminars with is a series of one hour lunchtime presentations. Podcasts of selected presentations can be found here.

There are a couple of really good presentations there. I find this a useful resource as I am not able to attend the seminars in person, and the presentations are normally of a high quality.

LIC Portfolio Update

Welcome to the first portfolio update of the Australian Investing Blog's LIC Portfolio (read more about it's origins here).

I am making the first purchase for the portfolio. I am using the NTA figures from the end of November 2006 as the December figures aren't available yet.

The first purchase is LinQ Resources Fund (ASX:LRF). The discount to Net Tangible Assets after tax of LRF was -31.79% at the end of November. I will be buying 4,878 shares of LRF at today's closing price of $1.025 for a total of $4,999.95.

The following is taken from the company's website.

LRF is an actively managed resources fund, which specialises in investments in small to medium resources companies both in Australia and overseas. The Fund may invest in companies at all stages of development from exploration through to production, however the Fund typically focuses on investments in companies that are in the later stage exploration and economic evaluation phases, between discovery and completion of bankable feasibility studies. Companies in these stages are often valued substantially lower than producers. The Fund aims to provide both yield and capital growth for its investors.

The website was experiencing technical difficulties when I looked at it so I couldn't delve any deeper than the first page. However, looking back over the LRF's announcement to the stock exchange over the past year, there does not seem to be anything untoward.

Although this is basically a mechanical exercise, I wanted to make sure there were no skeletons in LRF's closet. While my analysis was far from comprehensive, there appear to be no drastic problems with the company. The discount to NTA is probably a function of the large amount of un-invested funds, and investors looking through the resources cycle and maybe allowing for a loss in value for some of LRF's holdings.

This post should not be considered investment advice. This portfolio is hypothetical in nature. Professional advice should be sought before making any investment decision.