Monday, July 15, 2013

Share Price Alert: Xero Ltd 5



I wasn't sure Id be back so soon but here I am gassing about Xero Ltd [XRO.NZX]which is at $16.70 today, almost 50% higher than its share prices since we last visited this share in March 21 and short of its all time high of $18.90 reached a week or so ago.

This is higher than the $1.12 price it was trading at back in July 2007  and way higher than its 2007 IPO price of a dollar.

What is the share trading at ridiculous prices like this then?

Well the reason is quite visible US buying, not by international standards but quite high in New Zealand for such a thinly traded stock. Most of the last $5, and more I suspect,  rise, can be put down to these insiders buying in the hope of making money off some fully news related stock - it has a mention at least a few times a week of something "hot" going on down at Xero headquarters and is undergoing a correction of sorts as we speak due to a few of these folk making enough moola.

It isnt massive buying though, almost 5 million or so most days - not yet hot.

Lets get this straight the rise in the share price has nothing at all to do with reality, the company has yet to make a profit, according to some it will be $200 million a year or more, but I have yet to be convinced that they will make a cent. These enterprises are highly speculative and the chance of them making a profit are close to zero.

The reason why the share price is so high, apart from a few Americans getting fatter, is speculation pure and simple and investors expect to see a profit, when it doesn't come the only way is down.

I value this share at $2.50.  


Xero Ltd @ Share Investor 

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The Intelligent Investor: The Definitive Book on Value Investing. A    Book of Practical Counsel (Revised Edition)
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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Shareinvestor 2013