Forum Archive Index - June 2002

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

Hi phjones,


>
>
> Looks to me as if you have missed one boat and are about 
> to sink the other.
>
>


Missed the boat by not buying gold a few months ago?   Possibly, but 
there is no need to catch every boat to be a successful investor.  
There are always choices, and your choice depends on what your 
strategy is.   I wasn't out to discredit gold per se.  I made the 
'Revisiting Wrightsons' post to show that in times of uncertainty 
there are other strategies, rather than buying gold, out there.

*I* don't invest in gold for the following reason.  It is 
difficult to mount a discounted cash flow argument based on the use 
of gold as a material to justify the price of gold.  There is a 
fair amount of fear and greed built into the gold price movements.  I 
find emotions notoriously difficult to forecast.   So why invest in 
gold when, as I see it, there are far less risky strategies out 
there?

Personally I have two investment strategies running side by side.  
There is my 'growth' strategy as reflected by the sort of investments 
discussed in the focus investment group.  There is my 'income' 
strategy as reflected in my entry into the stock guru competition.  I 
realise that may sound a little perverse as the stock guru 
competition is a growth competition.  But I thought it interesting to 
have have an 'anti-growth' (income) portfolio in there to keep all 
you growth guys honest ;-).

For you to criticise my income startegy ( specifically re Wrightsons 
) just because it doesn't fit with *your* idea of a good investment 
is I think a little unfair.   I topped on up WRI because of the yield 
available. In hindsight it would have been better to buy in a couple 
a years ago at 40c or so.  So why didn't I do it then?  At that stage 
it was only paying a dividend of 1c per share, giving a gross yield 
of only 3.5%.   That sort of return is of no interest to an income 
investor.  So why didn't I buy WRI as a growth share at that time?   
The management at the time had a poor track record, and there were 
better growth opportunities available (as I saw it).  And I think the 
market today is telling us the WRI management still need to prove 
themselves.   With hindsight those who jumped in at 40c earned a 
great return, but I would argue at high risk, if you take away the 
benefit of the hindsight.

Summing up, I don't think that with Wrightson at $1.04, my 
suggestion of:

short/medium term trader:  Don't buy.
growth investor:  Don't buy.
income investor:  Buy

is out of line.   

For the long term income investor (there is no other kind of income 
investor that should be in the sharemarket as I see it), then I am 
suggesting WRI is a good buy at today's prices.  The long term income 
investor is concerned with sustainable yield and I think WRI stacks 
up well.  If you think that buying into a share with the possibility 
of a sustained yield of 15% is 'missing the boat', then I think you 
have very little knowledge of income investing.  I'm not saying *you* 
should 'income invest'.   It may not be right for you.  I am saying 
you should have some respect for those who use investment styles that 
are different to what you yourself might use.  Those people are not 
necessarily wrong.   In the investment game it's the discipline of 
sticking to your own well thought out strategy that counts, whatever 
that might be.   And in my experience those who invest in bubble type 
investments (as I believe gold is at the moment) usually don't have 
the experience to know what a good entry price is, or when to get 
out.  But if you do, then good luck to you.

SNOOPY



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