Forum Archive Index - January 2002

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

Hi Phil and Co,

Good to see the competition running.  And whaddya know, I'm in the 
lead already?   Does everyone else just want to give up now ;-)?

Actually, I doubt if I'll be there for very long as my portfolio is 
quite conservative.  The sort of thing you might invest in in real 
life, but not the type of thing that will win a competition such as 
this.  But as 'overnight leader' I'll take my fleeting moment in the 
sun and give you my 'yellow jersey' end of the day acceptance speech.

It is great to see so many people involved this year.   And may I 
wish all 400 odd of you the best of luck.  It doesn't take a genius 
to work out that the reason for my strong early showing is the 
performance of Scott Technology.  That and the fact that I haven't 
done anything drastically wrong with my other selections!

SCT is what I would class as a recovery share, but one that has a 
history of good dividend payouts and high ROE when things are working 
for them.  Last year was not one of those years.  With the global 
slowdown, the last thing the mind of many whiteware executives was 
tooling up for a new washing machine.  I selected SCT thinking that 
there might be some sort of recovery in the "production line" market 
overseas before the end of the year.  I was somewhat surprised to see 
SCT shoot up so fast on the first day of the competition.  Obviously 
the recent orders from the USA caught the market napping!  

The lesson I learn from this is, "don't put too much faith in your 
ability to time things exactly".  I was certainly prepared for a lean 
few months with SCT!   But I also knew that they possessed the 
marketing and management skills to 'come right', whenever that might 
be.  Second line shares like SCT are often difficult to trade because 
the volume is so light.  You can easily force the price up or down 
quite a few percent with an 'at market' order.   

My theory for buying into secondary market shares goes against all 
trader instinct.   You should buy them on the way down, when the 
market has lost interest in them, but only after doing sufficient 
fundamental analysis to know that the price you are buying in at is 
'cheap'.   Buying on the way down means little competition from 
the share traders.  Often the two or three months following the 
release of a bad result is a good time to pick up such bargains.  
Your secondary share selection may very well get cheaper, but this is 
where you have to have faith in your own homework over and above what 
'Mr Market' is telling you short term.  By the time the tide turns it 
will be too late IMHO!

I hope that as the competition goes on and others rise to the top, 
there will be more 'acceptance speeches' given.   Perusing the entry 
list is great, but it would be interesting to learn who picked what 
and why too, and what better time to speak than when you have just 
had a good day!  Perhaps we might all be able to learn something off 
our daily winners?   Thank you all for listening.

SNOOPY




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