Forum Archive Index - September 2000

[Brian Gale <brigale@i4free.co.nz>]

Good points Phil.
  I strikes me that a fundamental decision has to be made as to one's 
objectives i.e Am I a Trader or an Investor with regard to this particular 
stock, because the decisions required are totally different.  It seems that 
often there is talk of long term gains related to a particular security but 
then when there is some short term volatility (which has little bearing on 
the long term ) panic sets in and the ' long term purchase ' is sold at a loss.
On the surface the reaction to many announcements seems to be quite 
illogical but when looking at the broader picture it usually starts to make 
some sense.
Taking the example of  ITC which was all the rage with Chatters a little 
while ago. When the sale of Exo-net was announced the price went slightly 
backwards . There was little comment from Chatters, possibly because they 
were all in state of shock. However the reason the price didn't improve is 
because it already had a built in premium, but it was reclassified as a 
Long Term Buy.  Read the CIBC report (18/8/00) at the ITC web-site.
When ITC was launched there was so much enthusiasm that the price soared to 
a ridiculous premium level (as has been the case with many tech stocks) but 
inevitably there is a return to fundamentals and a settling back to 
reality. The objectives of the Company haven't changed and so far the 
achievements have been pretty good but those high prices were never 
sustainable in the short term. IMO the current price is sustainable but we 
won't really see any great improvement until the next financial figs are 
produced in Dec. It's a long term investment.
Of course being an investor can be rather dull as patience is required and 
we see all sorts of other tempting offerings popping up, so it is hard to 
stick with our original convictions. But if the original decision  was 
based on sound judgement why abandon it and turn into a trader, often 
losing in the process?

BG
(hold ITC for the long term)
At 17:31 03-09-00 +1200, you wrote:
>   Being able to anticipate what reaction the "market" will have to
>something is vital for trading, but I believe it is a big mistake for
>long term investors.
>
>I think the best thing a long term investor can do is look at each
>announcement or action, and think of the probable outcome for the
>underlying business.  Forget it is a listed company - pretend you own
>the whole thing.  Would you be making the same move?  Will it increase
>or decrease earnings in the short and long term?  Will it
>encourage/discourage competitors?  Watch the implementation - if
>possible, be a customer of the firm - are you being positively or
>negatively affected by what the company is doing?
>
>I think it is really important to "visualise" the impact on the
>underlying business rather than on the shareprice.
>
>Bottom line - Many times, what is good for the share price is actually
>bad for the business.  Those with a good understanding of the "herd
>mentality" may be able to guess what will be good for the share price,
>but its a dangerous game.  I generally prefer to avoid this game and say
>"stuff the hype - 2 years out, what will result from this?" because for
>a long term investor, 2 years out is what counts.
>
>Cheers,
>Phil
>
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