Forum Archive Index - January 2000

["Mike Hudson" <mikehudson@clear.net.nz>]

Hugh wrote

"Let us in on where this fabulous place in New Zealand is Mike & Tony.....
Naturally I'd like to make one or two comments on Mike's observations.
Firstly, May 1994 was near
the top of the market, about the only time the NZ second liners have had a
boom since 1987. I don't
know what the gross yield was off hand but I don't think it would have been
nearly as attractive as today.
I had a better experience, I bought HLG for $1.60 in October 1997 (not
recommended by any brokers at that time)
as a contrarian on the basis of gross yield, low debt, good management and
sold for $2.80 in April 1999 and
enjoyed some good dividends in between. The operative thing is to buy on
high gross yields and sell when
they have gone down due to the market rising. I wouldn't agree HLG is going
nowhere - I have seen brokers
 recommending it not too long ago partly because its now got a good
beachhead in Melbourne and is opening
more shops in Oz. Unlike the property shares it has full imputation."


Firstly if told you where we lived we would have to kill you.

The point I was trying to make was that over a period "growth" stocks will
produce a better return (capital growth plus interest) than yield stocks. Of
course if one can time your entry and exit as Hugh did the returns can be
enhanced.

Interestingly in this case though when I looked at the numbers (I had to
make some assumptions on dates as I think Hugh's recollection must be a bit
astray in this area as HLG did not, according to my records, trade as low as
$1.60 in October 1997, more likely he bought them in between Dec 97 and Feb
98 which would have given him an even better return than he claimed) the
return on WHS would have been only slightly less.

The point is that over time WHS has been a far superior investment to HLG -
the longer the perod, the greater the difference.

Hugh is correct that HLG dividends are fully imputed wheras the property
companies are not. The gross returns after adjusting for imputation credits
(for a 33% taxpayer) are

HLG 11.2%, KIT 11.1%, PFI 10.4%, APT 10%, STL 7.4%, WHS 3.4%

Cheers
Mike H







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