Forum Archive Index - February 2000

[james chamley <james.chamley@xtra.co.nz>]

Roy wrote:
> 
> I can't help but feel that the marketplace today reminds me of 1986-7.
> 
> 1. Seems lots of people are "getting into" the market for easy money.
> 
> 2. Spectacular gains being touted by some (ie xxx% in last 12 months)
> 
> 3. Sunday papers starting better sharemarket coverage (ie the
> players).
> 
> 4. Some of the PE's are "unreal"
> 
> 5. Comments like "the modern sharemarket can't crash"
> 
> 6. Increasing levels of consumer/company debt for share investing.
> 
> 7. The futures market is looking like a "tame game"
> 
> 8. Rapidly increasing numbers of "pundits" saying thinks like XYZ
> share
> will go to $1.50 (current price 50 cents).
> 
> 9. Governments starting to crank up interest rates to "cool down" the
> economy.
> 
> 10. Tipsters buying more newspaper/magazine advertising space.
> 
> Just a thort. I have been an investor since 1969 and do not want to
> "get
> burn't again, like I did in 1987!
> 
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Roy

I can't help but agree with you in one sense and strongly disagree in
another.  What I mean is that there seems to be a real dichotomy
developing in the market. I found this in the Dominion tables

Highest P/E ratios

AFFCO        410.0
FCL Forest    71.2
NZ Experience 70.0
Energy Eq     66.6
Advantage     57.2
Baycorp       53.4
Renaissance   38.6
Trustpower    37.9
A Barnett     37.5
Carter Holt   33.1

etc etc

Now that's not the same as some US tech stocks (although those companies
that either didn't produce earnings or produced losses didn't qualify
for the table) but still some overpricing.

On the other hand

20 Lowest P/E ratios

Applefield   0.4
CapProps    3.6
McDowell    4.1
AirNZA      4.5
Worlindx    4.5
TransTasman 4.7
AirNZB      4.9
Infratil    5.3
DesignerTx  5.7
Newmarket   5.7
Ebos        6.5
Hellaby     6.7

Now maybe some of these companies have problems but some of them are
cheap IMHO at those ratios

Then on the asset front

Highest Price/NTA ratios

Radioworks   58.84
Sky TV       28.46
EPhone       26.50
Baycorp      24.73
IT Capital   21.75
Maxis Corp   14.25
Advantage    12.00
Savoy Eq      7.40

and the cheapest price/NTA

TransTasman     0.31
CapProps        0.33
DesignerTx      0.33
Brierley        0.39
Richina         0.39
FCL Forest`     0.40
Tower PP        0.40
Kingsgate       0.44
CDL Hotels      0.50
A Barnett       0.53
AirNZA          0.53
Opio            0.54
AirNZB          0.57
TasmanAg        0.58
Wrightson       0.59
DairyBrands     0.60
KiwiInc B       0.61
Seafresh        0.61
Applefields     0.62

Now in there there has to be some value.  Whilst asset valuation is not
always easy surely the low price to NTA ratios above are not indicative
of an entirely overheated bubble.  

Overall IMHO the market is (as it always has been) overheated in some
areas and undervalued in others.  The only problem seems to be that with
the current political climate there is noone ready to invest in the
market to pick up the undervalued stocks (as was the case in 86-87).
                                
Sorry for rambling on but the figures caught my eye as i hadn't been
able to find them so readily before (must ream the "Dom" more often).

Regards to all

James

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