Today I decided to look into whether it’s worth buying Briscoe Group Limited (BGP) shares. I’ve always viewed retail shares as cyclic, lending themselves to traders, but given anecdotal evidence on sharetrader.co.nz, suggesting that (until recently) Hallenstein’s has always paid a dividend (even during recessions), I decided that it might be worth investigating whether BGP are worth buying as an investment (since I’d already analysed current value in the other retailers).
To do this, before looking into whether there is value in the current share price or whether Briscoe’s is a safe / good investment (requiring research into current directors, financials, growth projections, COVID19 impact, etc.) I started by looking at the historic average annual growth to see if there was any more value offered in the stock than the dividend.
Obviously past growth is not a reflection of future growth and is insufficient to base an investment decision on, but is just intended to be a time saving exercise in case I am able to quickly identify that BGP is not worth a full investigation.
Looking at growth this way was hard to quantify because it seems that the average compounding growth in the value of this stock ranged from low single digits to high single digits, depending where you draw the lines on the graph. This is very subjective, but I choose to read the graph as no growth during non-bull markets, 7% growth pa during bull markets and significantly negative growth (negative ~50%) during recessions. BGP’s share price essentially tracks the economy.
If we add 5% to the bull figure to consider the dividend, that puts them at 12% growth per year during bull markets.
For me, 12% pa is an OK average ROI, but not one to chase during risky times as an investor. Given that BGP’s share price practically tracks the economy, I view this as (on average) no better than an average ROI for an investor on the NZX, and I therefore won’t be investing. If I was going to investigate further, I would first look into BGP’s current financial position post-lockdown, then I would try to work out the likelihood of an upcoming capital raise and what the future prospects would look like in the upcoming recession.
Based on the above, I maintain my view that BGP is probably best to leave for traders, but may be an OK investment pending further research or during a bull market. Due to my lack of interest, I am not going to do this research as there are better options available.