Forum Archive Index - February 2000

[Glen Whiteman <quality.res.ltd@xtra.co.nz>]

Whos going to invest in RadioNet? - SVY or SEU.
Did somebody mention SVY and wireless technology?
I haven't read any announcements to this effect yet.
Regards
Glen
ps I agree with you comments below. Dorchester had a nice little
increase today I note.

Phil Eriksen wrote:
> 
> > I suspect, considering the state of the NZ stock market now, that the
> > days of the long-term investors are numbered. The name of the game now
> > appears to be to latch on to the flavour of the week or month, buy up
> > when the shares are cheap, and sell up before they start to plateau
> > out.
> 
> Well, the flavour of the month is never cheap.  For it to become the
> flavour of the month, it must have attracted enough attention to ensure
> it is no longer cheap.  As for the days of long term investors being
> numbered, how can that possibly be justified?  I agree that the New
> Zealand sharemarket is a small market, getting smaller, is insignificant
> internationally, and will probably not have a "boom" market in the near
> future.  However, a long term investor is somebody who tends not to look
> at whether the market is in 'boom" or "bust" mode (i don't care either
> way really), but somebody who looks at individual companies and tries to
> buy when the price is right.
> 
> Since the beginning of time, the role of business has been to generate a
> profit.  Do you see that changing?  The "proper" role of the sharemarket
> is to raise capital for expansion, to hopefully generate future profits
> - do you see that changing?  Eventually, the value of a share is
> directly tied to the profits a company produces, and how well these
> profits are used to generate growth.  Despite the problems of the NZ
> market, if one can identify the "right" companies, and buy at the
> "right" time, and the company manages to improve the underlying
> business, there will still be room for a long term investor to prosper.
> And if there are no shares with substance listed in NZ, well, look
> offshore, as I and many others in this forum have done.
> 
> <whinge>
> 
> I'm totally sick of seeing media reports/company announcements that
> trumpet massive growth in market share and/or sales.  The major factor
> that decides whether or not a companys share price goes up or done is
> how quickly they are able to grow.  When somebody recommends a share to
> me, the first thing they say is "they are growing by 50% annually" etc.
> While growth is obviously important, what really counts is turning these
> growth numbers into cold hard cash.  However, even growth rates (lets
> take "sales") can be very misleading to an investor.  Example - lets
> takes the following 3 fictional companies, say that all their shares are
> $1 and and there are 100 shares(ie you can have an equal slice of either
> pie), and finally, you have no other data - just what i've listed, and
> your own sense.
> 
> Free Internet.Com - Gives away access, sells advertising.  Sales growing
> at 150% per year.
> Joes Condom Factory - Sales growing at 15% per year.
> Freds Bookstore - Sales growing at 15% per year.
> 
> Now, looking at this example Free Internet.Com is the "best" buy, of
> course.  But "growth" isn't the real question - the question is "How
> good is their business model?" and "Is there a long term future in this
> business?".  Free Internet.Com is the "boom" share, but even a casual
> observer must have issues with its model.  They may have growth, but is
> it sustainable, or even a good thing? (why grow losses?)
> 
> Looking at Joes Condom Factory, they are growing more slowly.  But an
> eye to the future says that (a) people won't stop having sex (b) third
> world countries and their AIDS problems could offer huge growth and (c)
> while not an "exciting" or immensely profitable business, it is clear
> that if this business outperforms its competitors, it can continue to
> grow.
> 
> As for Freds bookstore, while (a) books are a real product and (b)
> people won't stop reading any time soon, one must ponder the effect of
> the internet/technology - people will still be reading, but will they be
> reading books?  Could fred adapt his business quickly to whatever the
> future holds?
> 
> I realise the example is crude.  But growth is meaningless without
> considering what it is that is actually growing, what factors could slow
> the growth, and can the growth be turned into cold hard cash.  For me,
> i'd be into the condom factory.
> 
> Sure, growth is great, but the people who appear to think all growth is
> created equal should realise that there is a big difference between,
> say, the growth in a bank account balance, and the growth in the size of
> a pimple.  Sure, the pimple may be growing at a faster rate, but I know
> which one i'd rather have.  The question with shares isnt "how fast is
> this company growing?" but "Is it a Pimple?"
> 
> </whinge>
> 
> Cheers,
> Phil
> 
> P.S     Would be interested in hearing other peoples views on Dorchester -
> they seem to be one of few companies listed in NZ that offers both
> "growth" and "value".
> 
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