Forum Archive Index - June 2002

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

Hi ichi
>
>
>> 
>> With hindsight those who jumped in at 40c earned a
>> great return, but I would argue at high risk, 
> 
> As someone who bought Wrightson at 33c, I must ask
> the question:  What risk?  Wrightson had no debt
> and was the dominant player in a key sector that 
> had heaps of upside.  It was just matter of sitting
> and waiting for the inevitable upturn.
> 
> 

Things look different with hindsight.  

At the time Wrightson had no debt because they had sold their best 
asset (the rural financing branch)!  

Now have a look back at the investor interview with MD Dr Freeth on 
'Sharechat'.  A 15-20% loss of market share between 1996 and 1998!  
If you have a fixed cost base, that can devastate profits and it did! 
 That was the reason the share price sunk to 30c or so and stuck 
there.  Then there was the disastrous move to centralize some 
functions at head office, when really the decisions were better made 
at the branches.  Of course, Dr Freeth has since reversed at  lot of 
that.

Want more?   Here is my stage 1 screen of Wrightson for the Focus 
investing group.

http://www.sharechat.co.nz/cgi-bin/msgboards/post_show.pl?id=2328

The short summary is that Wrightson are a commodity business with a 
history of making a very poor return on shareholders funds.  They may 
have been the largest rural retailer but to suggest they were not in 
danger of becoming number 2 is, I think, underestimating the severity 
of their troubles with hindsight.  

'Woolworths Variety' was once the number one discount retailer in New 
Zealand.  Then they became DEKA and then....
 
For another example, look at K-Mart in the USA.  Formerly the number 
one discount retailer in the USA.  Now bankrupt.

Make no mistake retailing is a tough game.  There is fantastic 
success for those that can do it right (Walmart, Warehouse), but 
being number one is no guarantee of an assured future.  

To your great credit 'ichi', you saw something in Wrightson that even 
Tony Gibbs and the GPG team didn't cotton onto until a bit later.  
You and GPG have done well out of WRI and that is fantastic.   But 
did you do it with no risk?  Not in my view.  YMMV and obviously 
does.

Out or curiosity, do you still hold WRI?

SNOOPY

disclosure: Hold WRI






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