Forum Archive Index - January 2001

["Mike Hudson" <mikehudson@clear.net.nz>]

Happy New Year sharechatters and I certainly hope that 2001 will be better than 2000.

After the easy pickings of the previous three years a portfolio return of only 4.3% (after tax and including dividends and realised and unrealised capital gains and losses) was a bit of a downer although it could have been a lot worse given the performance of the major indices.

Lessons learned the hard way

1. Don’t try and catch a falling knife.

I bought FFS when they fell to 60c and more the next day at 46c. I also bought TEL on the way down at $7. I now know that when a share drops precipitously there is a good reason.

2. Don’t believe the brokers and analysts.

They are in the same league as real estate agents and used car salesmen, except they have MBAs. How anyone could have seriously recommend those techs and dot.coms with a straight face is beyond me. Do your own research and add a little common sense into the equation.

3. Don’t get greedy

My investing year was saved by getting out of Kingston Communications (LSE KCOM) and 3v Semiconductor (NASDAQ VVVI) before the tech wreck. Unfortunately the greed factor made me hold on to some others notably Trex Company (NYSE TWP) Rubios Restaurants (NASDAQ RUBO) Securenet (ASX SNX) and SKY when the head told me to sell.

4. Patience

About nine months ago after a fair amount of research I picked USG Corporation (NYSE USG) as a seriously undervalued stock. Imagine my delight when the great Warren Buffet came to the same conclusion a month or so ago and bought 15% of the company. Problem is that I paid an average of $US36 for mine and he paid $US15 for his. They are currently about $US24.

 

Lesson Reinforced. Diversify, Diversify, Diversify.

I know that Hugh and some others don’t agree with this but I believe that if you have serious money invested that you can’t afford to lose you must spread the risk across a wide range of investment classes, markets, sectors and currencies if you want to sleep at night.

 

So what’s going to happen this year? This time last year brokers were picking a 15% rise for the NZSE and an appreciating currency – sound familiar?

FWIW here are my guesses

• The NZSE will be 10% up on where it is now
• Investors will start to focus on earnings, cash flow and yields. I like AIA, CAH, SKC, FLB, PFI, WAM and as potential recovery situations AIR, TEL, FFS.
• The Dow will be around 9000
• The Nasdaq will be below 2000
• The FTSE and the All Ords will be about where they are now
• The NZ dollar will be slightly down against the US

Of course the chances are that I could be totally wrong which gives me an idea for a competition – see next post.

Cheers

Mike H