Forum Archive Index - January 2000

["vincent.wang" <vincent.wang@xtra.co.nz>]

It is interesting to see the debate on growth vs yield.

 

I personally do not think there is a simple rule of thumb which enable us to pick up the best performing stock among so many stocks.

 

Growth companies can become non-growth companies someday and yield stocks also can become non-yield stocks someday(or overnight).  (the only growth company on NZSE I can identify is AIA because its monopolistic nature)

 

Telecom was a growth company 10 years ago, and then gradually become a yield stock in the past few years.  Now, it is neither a growth company nor a yield stock.  It has been caught in between.

 

Wrightson, Designer Textiles, LWR, and most property companies were yield stocks 2-3 years ago.  But they have become either non-yield or low yield now.(except a few property stocks)

 

Wrightson was not a bad company before they hired G Kay as their MD, a person without agriculture background,  who suddenly sold the profit making Finance Division and turned a very profitable company into a loss making company.  Why the Board of Wrightson have made such a big mistake?(most board directors do have good agriculture experience)  When I read the news( of selling Finance Division), I thought Wrightson must have identified a better investment opportunity.  But I was terribly wrong.  The incapability of the Board and MD was much beyond my imagination.

 

The above story told us that management might be an important criteria to choose a stock.  Both Air N.Z. and Quanta are in the air transportation business and both Carter and Fletcher are in the paper and log business, why Quantas and Carter's performances are better than Air N.Z. and Quanta's?  The answer is management.

 

Of course,  there are so many other variables involved in the operation of a business, such as macroeconomic, interest rate, raw material cost change,  investors' confidence, competition, nature disaster....the list can go on an on.  This is why it is so interesting to invest in sharemarket.

 

But I have to admit that luck is also important.  I bought 12,000 shares of ADV at 20 cents when the company was in a very risky situation.(again, management issue)  But I certainly did not know its share price would have soared like it has done recently.

 

RGDS,

 

Vincent Wang