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Author: jona123 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 51863  
Subject: A quick view of the FTSE100 banks Date: 16/06/2011 21:30
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Hello,

I'm new to investigating potential value shares so was keen to make a start. I now subscribe to SharelockHolmes (great resource and possible to create some illuminating filters) and did a little digging into the Banks and some filters on the FTSE100 (please do check any figures yourselves in case of errors at source). 

Given the recent value portfolio buy here are some figures you may find interesting:

EPIC	Share_Name	                PBV	PTBV	PER	PER_Projected	PER_Projected2	Yield	Yield_Projected	Yield_Projected2	Div_Cover
BARC	BARCLAYS	                0.6	0.7	8.8	8.8	        6.3	        2.3	2.3	        2.6	                5.0
HSBA	HSBC HOLDINGS 	                1.1	1.4	11.9	11.0	        9.0	        3.9	4.2	        4.9	                2.1
LLOY	LLOYDS BANKING	                0.7	1.0	22.0	26.1	        7.5	        1.5	3.0	        4.5	                3.0
RBS	ROYAL BANK OF SCOTLAND GROUP	0.3	0.4	47.5	21.1	        8.8	        0.0	0.0	        2.5	 
STAN	STANDARD CHARTERED	        1.6	1.9	12.7	12.5	        11.0	        2.9	3.1	        3.5	                2.7


Some observations:

PBV: RBS the lowest by far in this group, half that of the next lowest, with Barclays then Lloyds. Looking separately RBS has the lowest PBV of the whole FTSE100, with Barclays 2nd and Lloyds 5th.

PTBV: again RBS the lowest by far in this group, with Barclays then Lloyds. Looking separately RBS has the lowest PTBV of the whole FTSE100, with Barclays 2nd and Lloyds 7th.

Current PE: Barclays the lowest at 8.8 (10th lowest in the FTSE100), then HSBC, the others all above 12. PEs for RBS and LLoyds are very high i.e. low earnings.

PE next year:	similar to above

PE the year after that: bigger changes here - Barclays at 6.3, Lloyds at 7.5, RBS at 8.8. Analyst forecasts of two years away so clearly unlikely to be very accurate.

Dividends: Currently only HSBC paying over 3%, analyst forecasts have Lloyds and RBS restarting dividends in two years time. Again analyst forecasts to be taken with a pinch of salt.


In summary from a value perspective:

RBS appears extremely cheap on book values, with the prospect of (possible) future earnings growth and, one day, a dividend. Large government ownership a key concern - will recouping the cash put a ceiling on the share price for a long, long time?

Lloyds is also relatively cheap on book value, with again prospect of some earnings growth and a dividend. Government ownership here also.

Barclays surprised me - a low book value, with a very low forecast PE and already paying a dividend in the meantime, and no government ownership.

I recall an old Pyad article talking about banks being to buy when the PE hits 7, so there may well be even better opportunities in the future, but currently its looks more like asset worth is high rather than earnings. 

I looked at these last month and could see appeal in each, but was not comfortable to focus on just RBS in case the large government ownership and need to sell blocked the recovery. I decided to invest a little equally between RBS, Barclays and Lloyds as a very long term recovery play, with aspirations that these may be kept indefinitely if they grow back into more reliable HYP-type shares.

Regards
Jonathan
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Author: jona123 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48324 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 18/06/2011 17:12
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Thanks to the Fool who emailed me to let me know how to improve the table formatting.

The post hasn't generated any comments though I appreciate the recs.

Cheers
Jonathan - off to dig into some Dreman filters.

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Author: GrahamPlatt Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48325 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 19/06/2011 22:07
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Hello,

I'm new to investigating potential value shares so was keen to make a start. I now subscribe to SharelockHolmes (great resource and possible to create some illuminating filters) and did a little digging into the Banks and some filters on the FTSE100 (please do check any figures yourselves in case of errors at source).

Given the recent value portfolio buy here are some figures you may find interesting:


Prjctd Prjctd Prjctd Prjctd
EPIC Share_Name PBV PTBV PER PER PER2 Yield Yield Yield2 Div_Cover
BARC BARCLAYS 0.6 0.7 8.8 8.8 6.3 2.3 2.3 2.6 5.0
HSBA HSBC HOLDINGS 1.1 1.4 11.9 11.0 9.0 3.9 4.2 4.9 2.1
LLOY LLOYDS BANKING 0.7 1.0 22.0 26.1 7.5 1.5 3.0 4.5 3.0
RBS ROYAL BANK OF SCOTLAND GROUP 0.3 0.4 47.5 21.1 8.8 0.0 0.0 2.5
STAN STANDARD CHARTERED 1.6 1.9 12.7 12.5 11.0 2.9 3.1 3.5 2.7


Some observations:

PBV: RBS the lowest by far in this group, half that of the next lowest, with Barclays then Lloyds. Looking separately RBS has the lowest PBV of the whole FTSE100, with Barclays 2nd and Lloyds 5th.

PTBV: again RBS the lowest by far in this group, with Barclays then Lloyds. Looking separately RBS has the lowest PTBV of the whole FTSE100, with Barclays 2nd and Lloyds 7th.

Current PE: Barclays the lowest at 8.8 (10th lowest in the FTSE100), then HSBC, the others all above 12. PEs for RBS and LLoyds are very high i.e. low earnings.

PE next year: similar to above

PE the year after that: bigger changes here - Barclays at 6.3, Lloyds at 7.5, RBS at 8.8. Analyst forecasts of two years away so clearly unlikely to be very accurate.

Dividends: Currently only HSBC paying over 3%, analyst forecasts have Lloyds and RBS restarting dividends in two years time. Again analyst forecasts to be taken with a pinch of salt.


In summary from a value perspective:

RBS appears extremely cheap on book values, with the prospect of (possible) future earnings growth and, one day, a dividend. Large government ownership a key concern - will recouping the cash put a ceiling on the share price for a long, long time?

Lloyds is also relatively cheap on book value, with again prospect of some earnings growth and a dividend. Government ownership here also.

Barclays surprised me - a low book value, with a very low forecast PE and already paying a dividend in the meantime, and no government ownership.

I recall an old Pyad article talking about banks being to buy when the PE hits 7, so there may well be even better opportunities in the future, but currently its looks more like asset worth is high rather than earnings.

I looked at these last month and could see appeal in each, but was not comfortable to focus on just RBS in case the large government ownership and need to sell blocked the recovery. I decided to invest a little equally between RBS, Barclays and Lloyds as a very long term recovery play, with aspirations that these may be kept indefinitely if they grow back into more reliable HYP-type shares.

Regards
Jonathan

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Author: rgifford Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48326 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 19/06/2011 22:43
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The post hasn't generated any comments though I appreciate the recs.

The problem with banks from my POV are twofold:

Forecasts are currently of dubious value given that the government apparently haven't yet finished playing about with regulations. The government have a poor track record of avoiding unexpected consequences of new legislation/regulations however well meant they may be.

The large government ownership of two of the banks is a cap to their price (in my view) and there is almost bound to be a temptation to favour those two banks when changing regulations to allow the government to make a profit on their holdings. Long term I have little doubt that both RBS and LLOY will do well as businesses. I suspect that may mean they are very different businesses to the ones we see today. Whether that means they will do well for their minority shareholders is a different question.

Talk of an IPO (or equivalent) for Nationwide only muddies the waters further.

Jonathan - off to dig into some Dreman filters.

I tried building mechanical Dremen filters in Sharescope some time ago but found them to be of little value. Your findings, either here or on one of the mech boards, would be of interest.

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Author: lookingforclues Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48327 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 10:56
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The large government ownership of two of the banks is a cap to their price

Why?

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Author: Marklucas1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48328 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 10:56
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Pyad's article http://www.fool.co.uk/news/investing/company-comment/2011/05... shows RBS on a PBV of 0.78. Screening databases often update balance sheets only once a year, so can be very out of date.

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Author: rgifford Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48329 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 11:49
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The large government ownership of two of the banks is a cap to their price

Why?

Because they will have to sell when they reach a position of not making a loss. Every time that the government sell a block of shares, and they will be big blocks, supply and demand will push the price down again.

I can't imagine them trying to get away with spending cuts on one hand and sitting on a banking shares profit on the other. The pressure to sell to relieve cuts would be significant.

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Author: LordBlagger Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48330 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:01
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Exactly.

When government holdings fall below a certain level, then there will be a break out. It won't matter any more.

Then you have the question, what is that level.

Is it the break even on the share price, or do you have to take interest on the borrowing into account. I suspect the first. They will get out even though if you take funding into account, its a loss making trade.

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Author: lookingforclues Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48331 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:11
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Every time that the government sell a block of shares, and they will be big blocks, supply and demand will push the price down again.

And if it were a local fish market I'd agree but there is a huge amount of liquidity out there looking for any sniff of value in Global equity markets. So if RBS offer value at a given price then I don't think it will make that much difference that HMG is unloading - like you say it's not as if the market doesn't understand why. Maybe a short-lived effect but little more IMO.

lfc

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Author: rgifford Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48332 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:22
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Maybe a short-lived effect but little more IMO.

Short-lived until they have sold say 80% of their holding, yes.

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Author: Jonetc96 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48333 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:24
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But meanwhile, even on the most optimistic scenario, a holding in RBS is (IMHO) dead momey that could be better deployed elsewhwere. The 'logic' of such an investment has passed me by - or, many would say - gone over my head.

[By no means everyone's cup of tea, but] worth a look to see why RBS is not a 'buy' (different from a 'sell'): http://stockcharts.com/h-sc/ui?s=RBS.L&p=D&b=5&g... and a possible low @ 30p - http://stockcharts.com/def/servlet/SC.pnf?c=rbs.l,P. These should not be treated as predictions - just a warning to steer clear for the time being at least, with upside severely limited, at best. For sceptics, have a look in 0ne and six months' time to see how this pans out...

Jon
(P.S. Getting my retaliation in first before a rush to condemn this reply, I repeat: For sceptics, have a look in 0ne and six months' time to see how this pans out...).

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Author: kempiejon Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48334 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:35
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Jon,

As A sceptic can you explain how I get to see in 1 month and six months time without waiting?

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Author: Jonetc96 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48335 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 12:39
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kempiejon

No, because we are discussing probabilities/balance of probabilities; we are not predicting...

Rgds
Jon

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Author: kempiejon Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48336 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 13:34
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OK so on balance of probabilities what might happen in 1 month and 6 mothds and how do I get to see that?

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Author: LordBlagger Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48337 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 14:18
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So if RBS offer value at a given price then I don't think it will make that much difference that HMG is unloading

=============

80% of the shares being sold has no effect?

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Author: LordBlagger Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48338 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 14:18
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The other biggy, just how much PIIGS debt does RBS have on its books?

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Author: mmepani Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48339 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 16:22
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TA is not encouraged on this board.

However, there's a Technical Analysis board where you can ask this type of questions to your hearts content - (assuming you are genuinely asking the question and not to take the p***)

http://boards.fool.co.uk/technical-analysis-50111.aspx?mid=1...

HTH

M.

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Author: lookingforclues Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48340 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 17:55
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80% of the shares being sold has no effect?

In an IPO 100% of the shares are sold but they still trade for a price that reflects the value of the underlying company. If you could buy RBS shares below par (as determined by the usual criteria) then this would consitute a free lunch for investors and the market is very efficient at arbitraging out any free lunches.

I'm not saying that HMG might not have to accept a slight discount to the market price to unload large tranches but the price will rebound very quickly. You see it all the time after big trades.

lfc

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Author: Jonetc96 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48341 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 21:11
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See my previous post.

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Author: Jonetc96 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48342 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 21:14
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I should have said "kempiejon" - please see my previous post. Over and out..

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Author: SteadyAim Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48343 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 20/06/2011 21:22
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Hi lfc,

Can I politely suggest that much as I like your posts elsewhere, talking about market efficiency on a Value board amounts to trolling, at least IMHO. We do not believe the market is efficient. Enough said.

For the concept being discussed, see for example: www.moneyweek.com/investment-advice/glossary/s/stock-overhan...

Now I certainly agree with you that the government's stake does not make it certain that the price will stay low ... but it does make it a very real possibility, that is the whole reason the market has invented a special word for this situation. I guess it's cause and effect - the known presence of a large seller makes buyers more likely to wait rather than buy - which means the price is less likely to rise.

SA

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Author: NeilW Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48344 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 21/06/2011 07:12
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There is one other factor that you may have overlooked.

There is £130 billion of cash sat in bank's reserve accounts not doing a lot, courtesy of Quantitative Easing. (Check the bank of england balance sheet to see).

Some of that will be in RBS's reserve accounts.

It would make sense for RBS to eliminate a huge overhang of shares by using that reserve account to eliminate a load of the shares the government puts on the market. It may even make sense for RBS to borrow everybody else's reserve accounts to do the same thing.

It certainly makes sense to dump the government bonds they have been accumulating and get rid of their shares.

How does that affect the numbers?

NeilW

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Author: anthonyms Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48345 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 21/06/2011 07:51
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How does that affect the numbers?
I dunno Neil what do you think?
a

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Author: lookingforclues Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48346 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 21/06/2011 10:29
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Hi SA

Can I politely suggest that much as I like your posts elsewhere, talking about market efficiency on a Value board amounts to trolling, at least IMHO. We do not believe the market is efficient.

Me neither. However it gets closer to it as the value becomes more obvious. An example would be the UK gilt market where there are many different flavours but they all trade bang on the current yield curve pretty much all the time including large new issues. So, for example, if HMG sell £billions of a 4% 2020 gilt into the market it will quickly tend to a GRY identical to similar maturities. So, basically, believing in market inefficiency is one thing but not to the extreme of thinking that it's easy to spot.

As for relevence, well it's surely pretty central to the debate on RBS as to whether or not you believe the HMG overhang will artificially depress the price. I would suggest that if you are in this camp then the buy case is actually stronger because you are getting the shares cheap and this value will out once the overhang is gone. I personally don't believe that to be the case because it just smacks of too obvious a free lunch.

It seems to me that the whole issue of stock overhang effects must be very difficult to deconvolute from other factors influencing the SP. I would still maintain it should be negligible for large, highly liquid, assets but WDIK!

Didn't mean to troll ;-)

lfc

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Author: ProfesorTom Big funky green star, 20000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48347 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 21/06/2011 12:18
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lfc
Didn't mean to troll ;-)

I, for one, certainly don't regard such discussion as trolling. Whilst pure academics might be worried about discussion of other market related matters on a Value Board it is for me, an essential part of buying and selling considerations and I welcome it. It is one reason why I use the "Value with FA and TA" Board so much...
http://boards.fool.co.uk/record-rec-12271862.aspx

Artificial restrictions on discussion relevant to investing money in Value shares make sense when a board is very very busy. The less the Board is used the stranger such rulings seem.

..it's surely pretty central to the debate on RBS as to whether or not you believe the HMG overhang will artificially depress the price. I would suggest that if you are in this camp then the buy case is actually stronger because you are getting the shares cheap and this value will out once the overhang is gone..

I agree.

There has been an assumption on this Board that such an overhang will go by the Government drip feeding the shares into the market in the manner in which other large holders have often done. Imo to suppose this is to demonstrate politically naivity and to ignore history. There is a well trodden route to Government disposal of large blocks of shares. Margaret Thatcher made a number of such journeys very successfully. Drip feeding was not part of the process. If RBS shares are also sold as a large block discounted electoral sweeteners the "capped" price that we should have in mind will be larger than the prices currently being spoken about here

ATB
Tom

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Author: lootman Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48349 of 51863
Subject: Re: A quick view of the FTSE100 banks Date: 23/06/2011 08:46
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"Can I politely suggest that much as I like your posts elsewhere, talking about market efficiency on a Value board amounts to trolling, at least IMHO. We do not believe the market is efficient. Enough said."


There are a number of different forms of the efficient market hypothesis and most of them are perfectly consistent with value investing and, indeed, can be viewed as supporting the idea.

The idea that EMH means that nobody can beat the market is a common viewpoint but it's totally incorrect, and usually based on a misunderstanding of EMH.

LFC's point here is valid and relevant, in my not so humble opinion.

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