Who do you listen to when you’re making investment decisions? Warren Buffett is high on many people’s lists of gurus, and Neil Woodford has an impressive long-term record. But do you know who else I like to listen to? The proverbial man down the pub.
By that I mean anyone who has no real knowledge of investing, but who picks up on the latest fad and asks me about it. And twice in recent weeks, I’ve been asked about this bitcoin lark.
There are sound reasons to shun bitcoin. One is that it’s horribly unstable in value and it’s more akin to gambling than rational investing. Another is that it really doesn’t possess the characteristics needed to actually work properly as a currency (essentially due to that instability), while yet another is that it also doesn’t have what it takes to work as a gold substitute.
But putting those rational fears aside, the ultimate reason to see bitcoin as the latest South Sea bubble or tulip mania is possibly when the man down the pub starts talking about buying some.
Fads like bitcoin are often likened to the greater fool theory, in that when you invest in something at an inflated price, its only value lies in there being a greater fool to whom you can sell it on for even more. And when it’s got to the man down the pub, you’re reaching the end of the greater fools line.
It happened in the dotcom boom, it happened at the buy-to-let peak, and I see it happening to bitcoin.
I am surprised by the number of people who are quite happy to consider plonking a couple of hundred down on a dodgy get-rich-quick idea, but who throw their hands up in horror at the stock market and the risk they think they see of losing their shirts.
Growth stocks
Even FTSE 100 growth candidates, like Mediclinic International (LSE: MDC), are surely going to be a lot safer.Â
I reckon Mediclinic’s erratic earnings performance of the past few years has possibly scared away a number of growth investors. After a couple of years of falling EPS following an early spike, the owner of Switzerland’s largest private hospital group recorded a flat year in 2017.
Economic weakness in its home base of South Africa, coupled with Swiss regulatory issues, lie behind those few tough years, but the company has branched out into the Middle East with the acquisition of the Al Noor Hospital group.
For the year to 31 March, Mediclinic recorded an operating loss of £288m, though that was littered with one-offs and the firm claimed an adjusted operating profit of £370m (up 3%).
While financials are tricky to make sense of in this transitional period, investors’ hopes will surely be focused in an easterly direction. Outgoing chief executive Danie Meintjes reported a “strong second half performance in Abu Dhabi,” and reckoned that, with “continued strong delivery in Dubai and the exciting expansion opportunities ahead,” there should be further growth in the Middle East in the years to come.
Analysts seem to think so too, with a modest EPS rise of 5% predicted for this year and a beefier 12% pencilled in for 2019.
That suggests a 2019 P/E of 17.7, which I don’t think is too demanding. Certainly better value than bitcoin, in my view.