Forum Archive Index - June 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

>
>im interested to know what shares you feel might come under  
>the defensive heading, in a recessionry environment (nzse) 
> maybe i should of asked what sectors of the economy  (and 
>the companies related to these) thanks  in advance  Mike G 
> 
Even 5 years or so ago, I would have answered this question with with 
a simple answer.  Companies that produce daily staples 
thinking in terms of both goods and services (newspapers, food, 
utility services, roofs over a businesses head, financial services).  

However, it is surprising how many risky investments you can find in 
these supposedly safe haven areas of the NZSE without looking too 
hard.

Who would have thought, for instance, that 10 years after the great 
property crash of 1989-90, that companies such as "Trans Tasman 
Properties" are still writing down the value of the properties they 
hold and are in a position where rent received barely covers the debt 
repayments and build up of equity needed to meet the 
continuing property value write downs.

Then we have the case of "Telecom" and "INL" who are pouring a large 
slice of their monopoly profits into the integrated technology 
convergent dream of:
 
'news on line'/'satellite television'/'3G phone networks'.

The talk is that this is the way of the future.   But as it stands 
today these three 'pillars of tomorrow' are gigantic sinks of red 
ink.

Then we have "Goodman Fielder", our 'staple' producer of 
margerine, flour and bread.  People keep buying the the stuff but the 
price wars for market share continue, and profit margins remain 
slim.

And as for financial services, we only need to look at AMP insurance 
to see what can happen if a big financial institution gets its risks 
wrong.  (although in fairness to AMP they now seem to have extracted 
themselves from the GIO debarcle).

So I think the  answer to your question must be 'individual share' 
based rather than 'sector' based.

I'll stick my neck out and pick a couple of individual companies 
from these traditionally defensive sectors:

Property:  Auckland International Airport, Port of Lyttelton
Utilities:  United Networks, Telstra
Food:  Restaurant Brands, Montana
Financial:  Westpac Trust, Sky City Casino

You might also note that many of these are trading at 3-4 year highs. 

So although I would class them all as to some extent 'defensive', 
this is not to say that the share price of the any of the above won't 
fall in the short term.   Given a longer term perspective though, I 
would class all of the above as 'safe' (if you can use that word 
at all with individual shares) bets.
SNOOPY




  






 
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