Forum Archive Index - December 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 

 

I believe that at the current point of the macro economic cycle, many companies with high levels of debt coupled with heavy competition, should be avoided. 

 

In the case of nursing homes if a company has this problem and -on top of this- government subsidies are not sufficient, then the share price must fall.

 

If no competitor is interested in a takeover, then you have a real problem! If a labour government is willing to throw a lot of money at that sector, than you may get somewhere! Will it do that when the previous one did'nt?

 

This situation has been going on for quite some time.

Some investors are more concerned with the calculation of the net assets of such a company in the hope that they can cash in soon. It will have to be soon in some cases, as the bleeding continues.

 

I believe that the year 2001 will see some of the heaviest shake-ups we shall ever see! 

Any company who is burdened with these twin evils and doesn't have a solid tie up, will be allowed to continue for a while by  competitors.

At some stage they can be taken over but- sometimes- at a lower price than the investor wants. 

Telecom and Air NZ could be attractive to competitors at the right price, but too many may have large debts already. 

 

There are some large companies with these problems.

I don't offer any advice on these matters- I don't hold any of these stocks!

 

Gerry