Forum Archive Index - April 2000

["nick" <acummin@es.co.nz>]

Reading some of the posts on the various message boards

it appears there are many panicking and many others (ie ril)

talking up a crash.

      Lets look at this rationally rather than emotionally

 

 1.) We all knew the tech sector was way over valued (still is)

     We also knew that a big correction was around the corner

       and that it would also affect (less so ) old economy stocks.

 

2)  We must seperate the good techs from bad and it has to

be said many deserve to be caned.  Some have deliberatly jumped

on the tech bandwagon with no real hope of profits. People buying into

these pyramid schemes deserve all thats coming to them.  However,

i do have some sympathy as unlike most pyramid schemes the institutions

and media etc have encouraged participation.

        Most these companies were never going to make profits and will cease

to exist. The future for the yahoos and dells however is very bright and they

deserve there very high p.e valuations. They will tumble in a panic

but will in a few months or years be back on top.

 

3) NZ has largely been left behind in the internet boom.  However we do follow wall street

and the market will go lower but not by much compared to the nasdaq.

        For months now investers in the NZ market have been complaining that the

market has been going nowhere and we have watched all other markets surge ahead.

       In hindsight it looks like the NZ market has remained slightly undervalued

while some others have gone crazy in the rush for techs.

 

4) If you have kept faith in the NZ market and have invested in solid companies with low p.e

and good divident yields then there is no need to worry, the tech shakeout may even help

in the medium term.

      If however you have deserted our market to chase up wall street then be rather more

concerned, but as long as you have invested in top revenue earners you will be fine.

     Its hard to imagine some of our beligered cyclicals going much lower and if they do its

just another good buying opportunity. In fact im especially hoping the fletcher stocks will fall

as i want to top up on forests energy and building. Carter holt i want too plus some gpg, the

list goes on. May be an uncomfortable few days but in the long run could be a great opportunity

to benifit from the nasdaqs pain

 

 

 5) Now for the bad news, if you have been gambling as opposed to investing on fundamentals

then it may be time to cash in whats left of your chips.

       Take aquaria 21 as an example. Ok it never did go up much but it will do.

     They build an aquarium in china, then look around and see all these internet

 stocks racing away and think "sod this for a laugh lets quit aquariums and jump on the wagon"

         All they have is some cash worth around 4 cents a share and a possibility

they may call themselves aquaria.com.  People were prepared to put down 12-20c a share

 for something worth 4c, a pure gamble. 

       That example shows a true gamble, some of the other nz tech stocks the picture

is less clear.

      Take ITC , go from growing extra large chickens in vietnam to jump into internet sector.

           Do a very good public relations job and pick up a couple of interesting looking

investments. IE virtual spectator which was helped by the americas cup. The stock price

soared many times over and many people have made a killing, well done you gambled and won!!

          Fact remains ITC is very speculative and way over valued (still) there is only small chance

virtual spectator will amount to anything, the competition is intense for the internet dollar

and is heating uop all the time. 

       Take beauty direct  (nice timing NOT!!)  a good example of a bad investment, many

small etailers got the jump on the big boys and pioneered internet shopping. While the

wallmarts the estee lauders etc sat back and watched. The big boys have now

had time to plan things out properly and are about to move online en mass. The

original small etailers have yet to make profits and never will.  

        E- commerse b2b looks much more promising and i like advantage group.

 Still overpriced but could have a future. Hopefully will fall enough to become a bargain.

 

6)   The nasdaq is going through what we suffered in 87, we are in a different

position in that our market is already undervalued, if you are a long term investor

in NZ you will be fine and your loyalty will be rewarded eventually.

     Keep banking those dividends and wait for the good times.

     

 nick