Forum Archive Index - May 2001

[tennyson@caverock.net.nz]

Quoting G Stolwyk <stolwyk@wave.co.nz>:

> 
> I don't think that no matter how good an investment, nobody should put 
> all his money into one basket; however, you would think that chatters 
> would be aware of this, wouldn't you? 
>
The chatters are a wide audience Gerry.  For all we know Warren Buffet 
himself might be a subscriber, as might the 11 year old school kid next 
door who sees share trading as a computer game.  I don't think we can 
make too few assumptions!
>
> Then you say: "One wrong move and the share price could halve 
> overnight"
> 
> And that is exactly what happened to AIRVA , $ 4 in 1997/98,  
> 2.70 in June 1999, 
> $1.40 in March this year
><speculation of Air NZs future funding snipped> 
> 
> It is clear that the investment risk has been very high 
> in the case of AIRVA. 
>
Yes with the benefit of hindsight I would agree.  And there is nothing to stop 
MMD from doing the same in teh future (which is not to say that it will).
>
>Then you say "MMD is *the* riskiest share that has been discussed on 
>the forum this year" I think that AIRVA would compete for that title, 
>don't you?
>
Well I might have been exaggerating there a bit to make a point :-)

But no, I would not agree with you.  Air New Zealand has a track record as a 
publically listed company for around a dozen years and can trace its roots back 
half a century or more to the old 'Tasman Empire Airlines Limited' (TEAL) and 
'National Airways Corporation' (NAC).   Admittedly the track record isn't that 
flash but the point is there *is* a track record.  The company makes real sales 
and real profits (Ok we might have to scratch the 'profit' bit this year ;-)).  
When I talk about low risk I am talking about the existance of a business plan 
, the demonstrated ability to carry it out, and real cash flow.

I don't think in all seriousness you could say the same about MMD.  Which is 
not to say that MMD won't turn out to be a better investment than AIRVA.  Just 
that without any hard financial data on the artificial heart project I don't 
think you can predict it, which means the investment is speculative until there 
are some sales on the board.  AIRVA has always been a volatile share in a 
cyclical market but this was not the sense in which I used the word 
speculative.  I have read that Warren Buffet is very strict on a company having 
a five year business track record before he invests in it.
So I think it is fair to say that both AIRVA and MMD would be off his 
investment list, albeit for different reasons.

But if you had only 3% or so of your portfolio in MMD, I would not regard that 
as foolish, as that is money you could afford to lose.  I just didn't want to 
see anyone 'betting the farm' on MMD (or AIRVA for that matter).  SNOOPY

(who wishes he had followed some of Gerry's recommendations on the Australian 
market more closely)
   


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