Forum Archive Index - August 2000

["Peter Maiden" <pmaiden@today.com.au>]

Hi - something to think about on a miserable Sunday (rugby and weather wise 
that is)

Warner alluded to the number of small trades in some stocks. This forum has 
also had many posts about making the market more attractive for the small 
investor etc.

Read the Sydney Morning Herald story on the increasing number of retail 
investors in OZ - http://www.smh.com.au/news/0008/19/business/business3.html
- that shows that retail investors now make up 40% of net transactions.

Then to put it in context read the O'Brien column in the NBR this week 
http://www.sharechat.co.nz/articles/nbr/20000818-15-money.shtml

Put the two together and basically NZ does not have enough big companies to 
support a lot of activity. Another underlying factor is that not many of the 
NZSE40 companies could boast of a consistent stream of increased earnings over 
many years. (Remember the ANZ report that said that these companies had 
destroyed X billion of shareholder wealth over the past few years).

There are only 43 companies with a market cap of >$200M and that is the level 
that institutional investors and fund managers are likely to be interested in 
becoming involved. In other words there is likely to be fight for stocks.

Not that these institutional investors appear to do much anyway. I would say 
most are driven by beating the index anyway. The index itself is a mixture of 
winners and losers anyway. Understanding the make up of any index is important 
if this is used as a benchmark for investors. If fund managers use the NZSE40 
as their benchmark then be rest assured that most have a 20-30% weighting of 
TEL stock - would many of us have that much weighting of TEL in our own 
portfolios?

Because they maaaged returns to beat an index and because of many large 
institutional investors reluctance to get and shake up the poor performing 
companies (would you allow CAH to return less than the cost of capital over 
many years) and extract the wealth in them I decided to do my pwn investing. I 
think that is what has driven the OZ retail investors as well.

Merging the ASX and NZSE would be the best move for NZ investors but could be a 
wake up call for many NZ companies. Because at the end of the day we really are 
small fish.

Personally last week was a pretty good one for me - even though the NZSE did 
not appear to move much. Look at Friday - all indices down - 47 winners and 77 
losers. Our aim is not to beat the index but to pick the winners in the long 
term and do a do a bit of trading along the way.

In spite of what we hear there are some companies that are wll managed and will 
create shareholder wealth over time.

We need to promote this fact and tell our friends etc that it is good place to 
invest. also how easy it is to invest in the stock market these days.

Good investing

Peter

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