Don't Follow The Herd Into Low-Quality Earnings

Avoid cyclical businesses, such as construction, for long-term investments, decide on the price that you’re prepared to pay – and don’t spend a cent more.

- Simon Brown

In light of a possible takeover of Murray & Roberts (at 1 500c and rejected by the board), shareholder activist Albie Cilliers (@albie_cilliers) tweeted the following stats for construction companies: Losses from highs in 2007/8: Group Five -98.6%; Murray & Roberts -91.2%; Aveng -98.6%; and Basil Read -99.5%. Not forgetting a number who have not survived (Sanyati, RBA, Buildmax and Protech). A bleak picture. We can also add some recent share price collapses in other sectors – Aspen Pharmacare off 44% since the highs of early 2015 and shopping mall owner and developer Resilient down 67% since the highs of January.