Forum Archive Index - January 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

Happy New Year to all

 

Most rural based stocks featured as the best performers in 2000. For some this also followed a very good 1999 year.

 

The numbers (price performance only) -

 

                    1999                2000

               

WRI                 0%                51%

DBN               35%              65%

WKL               21%              49%  

TAS                   ?                 58%

REI                  -3%               36%

AFF               33%               25%    

Note: WRI / WKL /  REI gross performance better because of attractive dividends

 

The main drivers of the recent success of these stocks have been i) a lot of restructuring in recent years now starting to benefit these companies and ii) a current strong rural economy based on good weather, high commodity prices and a weak dollar.

 

How much of future benefits from these two factors are already built into the share prices? IMHO most already have these expectations built in -  even though most of these companies are trading at relatively low PEs

 

This thought is supported by what happened to the AFF price after their recent profit announcement. A far better result than previous years but obviously not to analysts expectations and the price drops........

 

..........but then again WRI management publicly say that all's well down on the farm and the WRI price should be 100 during 2001 sometime.

 

I don't hold any of these stocks but looked at the numbers to see whether this was a good place to put one's money in 2001.

 

However as Warner has often reminded me there are too many droughts and floods etc to have confidence in rural stocks. Also based on the above data and because over time things 'tend to regress to the mean' I find it hard to see such performance repeated in 2001.

 

It looks like the good times (insofar as rural stocks are concerned) have passed me by.

 

Only time will tell what happens in 2001 but my prediction is small gains in all of these stocks, in some cases made more attractive because of good dividend yields. Of the ones mentioned above possibilty WRI has the most going for it.

 

Peter