Wild punt – or a careful speculation?

One of the many nice things about the sharemarket is that it lets you make wild punts with half a chance that the odds are actually in your favour. Here's one that's on my list.

Anyone who knows me will know that I live and breathe the value investing philosophy: of careful analysis, margins of safety, circles of competence and investments rather than speculation.

But anybody that knows me really well will know that I also love a wild punt. One of the many nice things about the sharemarket is that it lets you make wild punts with half a chance that the odds are actually in your favour.

But let’s go back to that value investing philosophy. Intelligent Investor Share Advisor is an investor newsletter that promotes this worthy approach to investment, which is why I love working for it, and we have to be careful not to dilute that message with wild punts.

Our members need to know that our recommendations are the result of careful analysis within our circle of competence – which is why I got sent over here when I mentioned ASX minnow iCarAsia.

Riding on Carsales' coattails

The story is pretty simple. Carsales, which I recently reviewed on Intelligent Investor Share Advsior (following a thorough analysis) recently announced a plan to buy a 20% stake in the company at 37.5 cents and (I presume) aims to lend its expertise to help the company become the leading online car portal in Malaysia, Indonesia and/or Thailand (one would probably do).

I like Carsales’ management; I think there’s a reasonable chance they’ll achieve their aims; and I’d be happy to back them if I can buy in at a similar price. The current price of around 50 cents is probably close enough, although I wouldn’t want to pay 70 cents.

iCarAsia has other interesting backers, most notably Singapore’s Catcha Group, the vehicle for Patrick Grove (iCarAsia’s chairman) a 38-year old Australian/Singaporean entrepreneur, which will have a bit less than half the company after dilution for the shares issued to Carsales, by my calculations. I'm not sure how much this adds or detracts from the story – but presumably Carsales is comfortable with it. Catcha also has a stake in iProperty Group, an Asian real estate portal also listed on the ASX – but that, as they say, is another story.

Small flutter

Success in this industry doesn’t happen by accident and I believe Carsales has what it takes to make a success of iCarAsia. I plan to have a small flutter in the shares myself, but in the interests of openness I first wanted to give Intelligent Investor Share Advsior members (and anyone else that reads this blog) a bite at the apple.

Bear in mind that this company is a long way from making any money and it may never do – I might well have a similar experience with the shares, so I will only be investing money that I'm happy to lose (or at least not too unhappy).

My knowledge of the company is very limited – I’m just hoping to ride on Carsales’ coattails – so if anyone has anything to add, I’d love to hear it. Or you could just try to talk me out of such a crazy speculation.

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