No false start for Betfair float
Betfair shares got off to a good start last Friday on the London stock exchange. I am sure there will be plenty of excitement and speculation around the shares for some time. Betfair is a ‘new’ business, has good competitive aspects and is one that has seen rapid growth. Surely a ‘hot’ stock.
As you may be aware, I have been brought up on a diet of long term investing on the stock market and not speculation. My focus has always been on value and not price. So there is the reason why I’ve been generally been luke warm on Betfiar’s flotation. This is not because Betfair isn’t a great company, but it’s just the price I would have to pay to own part of it.
If you want to rationalise how I see stocks, imagine you are betting on a football team to win a match. You are searching for situatons that are stacked in your favour and where doubt has been minimised, you know there will be goals. The sort of value I am looking for when buying shares, would be the equivalent of the team I was betting on being a goal up already or been able to back them knowing they are definately about to score. Of course that never really happens in the sports market, but these type of situations can occur in the stock market.
If you buy a growth stock it’s like betting that a football team will win by a set number of goals. The high valution of growth stocks represents the future, the trouble is, that hasn’t happened yet! Any hint of a failure to fulfill the expected future can be crushing to a companies valuation. When buying growth stocks you are betting on there being many goals rather than exploiting value.
All that said, I will almost certainly become a Betfair shareholder at some point, why? The lure of being a owner and a customer is tough to resist. While shareholder rights are generally poorly understood, you do have them and this makes it worth holding a few shares at least.
And there're off!
Category: Betfair, Industry news
