Forum Archive Index - February 2002

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

Hi nick,
> 
>
>Looks very hard to find anything worth buying at the moment. A
>year or two ago we had top quality stocks languishing at cheap 
>prices, ie Restaurant brands 1.00 , contact energy 2.50 auckland 
>airport 2.50 Fletcher building 2.00, wrigtsons .45  Nufarm 3.50 the 
>list goes on     Now on the other hand its difficult to recommend 
>anything with much confidence.
>
>

Looks like you're investing in the rear view mirror Nick.  My 
first motto of investing is always look forwards.  I'd 
hesitate to call Fletcher Building and Wrightson's 'quality shares' 
at any price in my terms, but I'll comment on some of the others.

'Contact Energy' has only just been independently valued at around 
$4.14 minimum value, and you can certainly buy it for less than that 
today.  Sure it is not $2.50, but when it was $2.50 none of us 
realized just how good it was.  That energy crisis winter last year 
showed up the weaknesses in the other listed energy shares.  When I 
thought I was going to be forcibly bought out of Contact, I had a 
look at Trustpower, Natural gas, Powerco and decided that even at 
$4.14 Contact was still cheap compared to them.  So at around $3.70, 
I don't think you could say Contact was a bad buy.   I am sure that 
Edison Mission will ensure that all shareholders continue to get good 
dividends out of CEN too.

'Restaurant Brands' is on a competitive dividend yield now, even at 
around $2.   Uncertainty as to where the Pizza Hut and Starbucks 
brands are going has been sorted out.  And all those property sales 
have primed Restaurant Brands up to be in a very strong cash 
position.  So although it isn't as 'cheap' any more, it's not exactly 
'bad value' either as the downside risk has been reduced as I see it.

'Sky City Entertainment' is looking a riskier proposition than at 
this time last year.  But we do have another America's cup year 
coming up.  That was good for business in Auckland the last time 
around and I think SKC could even withstand the collapse of one of 
their more risky ventures without cutting their dividend.  
Furthermore the SKC dividend today is far better than having your 
money in the bank.

Then of course there is dear old Telecom.   It is increasingly 
looking like they have made yet another hash of getting into 
Australia.  But the local market is still good for them.  And thanks 
to the share price halving over the last 18 months the dividend yield 
is still good!

Mind you I'm not saying that all of these won't go lower.  Indeed, 
with a rise in interest rates these income shares all have the 
potential to be sold off.  But I'm picking the underlying growth in 
their core businesses will mitigate any price falls - and I can't say 
the same about all of those listed property companies on similar 
yields!

Of course none of RBD, SKC, CEN or TEL will 'get you rich quick', but 
even if the global environment does go bad, so what for these four?  

NZrs will still make phone calls and use energy.   Maybe they'll 
spend less time in sit down restaurants and buy cheaper takeaways 
(good for Restaurant Brands).   And the America's Cup isn't going to 
be cancelled, which should make up for any fall off in local 
gambling (steady as she goes for SKC).

All in all I have no great wish to be "cashed up" as far as my NZ 
portfolio goes.  I think any funds I have in the above are better 
where they are rather than in the bank. SNOOPY

discl: Hold CEN, RBD, TEL and SKC


PS Don't follow Nufarm closely, but wasn't there some talk a couple 
of years ago that their true value was considerably more than $3.50?  
Perhaps a NUF shareholder could tell us why they are still apparently 
quite cheap?

Also I can't help but agree that AIA looks expensive at $3.90.  But 
with takeover activity a possibility, maybe the high price is 
justified?
---------------------------------
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