Forum Archive Index - October 2000

["Grant Keymer" <grant@jenlogix.co.nz>]

Hi Moose and Jefley

 

I too have been more a spectator than a participant in this forum...

Just feeling my way and not wanting to leap in before I see the way things work.

 

I must say, the quality of postings on this forum is light-years ahead of "ShareTrader".

Novice investors like myself can learn a lot from browsing thru the postings, whereas ShareTrader reminds me of a teenage chatroom.

 

My portfolio bears the scars of "averaging down" on several stocks that have just continued to fall, way beyond where I (in my naivety) expected the bottom to be...  ADV  ITC   SPE   NGL...  Need I say more!  I am sure I'm not the only one.

 

As you say Moose, it's hard to admit that you've made a bad call with an initial investment, so the temptation is to throw more money at it, in an attempt to come out with a profit overall.  ADV is a case in point...

 

I bought some at $4.40 just before the meltdown in April.  Then after (I thought) a bottom had been reached I bought more @ $3.10, then again @ $2.63.  I still believe this stock has a future, but in hindsight I would have been better to have sold out my initial investment @ $3.80 which happened on a "dead-cat" bounce just after April 17.  And then to have kept out of this stock until the recent lows of $1.75 which occurred last week.

Ah, but hindsight is a wonderful thing...

 

It is a good (but painful for me) illustration of where "averaging down" can get you.

My average cost for ADV is $3.26, and in early August when ADV reached $3.10, I should have cut my losses and sold out.  Again, isn't hindsight wonderful!

 

What do you reckon Moose (or anybody else reading this) -- does ADV have any change of regaining $3 in the foreseeable?  Or should I bite the bullet and move on to a better researched stock as you say with brighter immediate prospects?

 

Regarding your comments on THL Jefley, I agree with your broker on this one.  It has a great future, but may not realise a profit for a few months yet.  When it does though, I'm sure the wait will be worth it.  I picked some up @ $2.29 earlier in the year, and I'm watching with baited breath to see what happens after ex-div on Monday.  If it dips down significantly, I might just grab some more.  Either way I'm happy.

 

CAH I also agree has good prospects, though it's hard to say exactly when the long anticipated re-rating will occur.  It looks as though a support level has been established at $1.60, and if the doom and gloom of Sept/Oct haven't driven it lower I don't imagine anything (short of a thermo-nuclear devastation of NZ's Forests) will.

 

FFS like a lot of people I have too many of, though my average cost is 68c which I guess isn't too bad.

Let everybody else bail out if they want to -- I believe the asset backing will see this stock recover in the 1-2 year time frame.  Meantime I plan to take up the rights issue, though you may be right Moose, there are plenty of other stocks which display better immediate prospects.  It would pain me to sell out my rights at a discount.

 

If FFS stabilises around 50c (a big question), the adjusted price after rights issue will be 33c as many others here have pointed out.  Which means that the rights should theoretically trade @ 8c.  But in practice it will be discounted by some amount.

 

Anyone have any estimate on how much below 8c the rights could trade at:  4c / 6c ???

One suggestion I have seen elsewhere is to buy some rights near the end of their trading period, at which time those without the cash may be keen/desperate to get shot of them...

 

Or is it better to wait for signs of a bottom in FFS prior to the rights issue, and buy some then?

At some point they HAVE to be a good buy, but after the falls of yesterday and today there's no telling how far they'll drop before recovering.  Volume of shares traded isn't huge though, so that augurs well once people stop bailing out.

 

Any brave people care to hazard a guess on a likely bottom for FFS?

At what point would they be such a good buy you just couldn't lose?

The arithmetic surrounding dilution of NTA by the rights, as well as share price movement pre/post rights takes a little bit of getting to grips with if you haven't seen this happen before.  Any pointers and enlightenment would be much appreciated.

 

Thanks to all for the well thought out and informative postings which characterise this forum.

 

Cheers

 

Grant Keymer
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