Forum Archive Index - June 2002

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

Hi trader 100,

>
>
>Following Snoopy's excellent post on WRI I thought a chart may be of
>interest to some.  WRI has broken below a confirmed medium to long
>term trendline so traders (other than those with a short term
>perspective) are unlikely to see WRI as a buy currently.
> 
>

Thanks for the chart, and, as I thought, WRI is not one for the 
medium term trader.  I think it is worth noting on your chart the 
huge volume of shares traded in mid July 2001.   This was the point 
that major shareholder GPG sold out of the company.  If you observe 
the chart from this point onwards only, you will see it is much 
flatter. GPG sold out at a share price of $1, and the hsare price is 
only $1.04 today.

GPG are a growth seeking company.  They got their growth from WRI and 
moved on.  Does this mean that the people who bought those WRI shares 
off GPG are fools?  No, not at all.   Those people were more than 
likely income investors, and buying in at the GPG exit point makes 
sense if that is your focus.   

The ideal income investor share chart is a horizontal line (allowing 
for dividends).   This means the income investor just sits on their 
shares, which keep their value, and lets the dividends roll in.   
Boring I know, and useless for traders, but it does keep the income 
rolling in!  And having income rolling in is of course the objective 
of the income investor.   Of course, all companies have growth and 
income elements built into them, so the notion of a 'pure' income 
investment on the sharemarket is hypothetical.

Nevertheless the fact that the WRI chart has broken its medium and 
long term trendline is not a surprise.   Effectively WRI has gone 
from being a 'mostly growth' investment to a 'mostly income' 
investment.  It would be far more surprising if the trendlines were 
*not broken*!   From the point that GPG sold out, it would have been 
a fairly safe prediction to make that the long term 'growth 
trendline' would have been broken, and indeed it has happened.   WRI 
hasn't been a growth share for about a year.  So by my reckoning, the 
share chart is somewhat tardy in telling us this information!  

My prediction from here is that Wrightson will now range trade 
between $1 and $1.20 (if things go well) or between 80c and $1 (if 
they don't) for the next few years.  I certainly won't be putting all 
my 'income' money into WRI as I can't be sure this will happen.  But 
as part of a diversified portfolio of income investments I think a 
stake in WRI makes sense.

Traders I know will regard this sort of thing as boring.   Those who 
get their income investment money only from bank term deposits, might 
take one look at the dividend yield of 15%, gasp, and say it is 
reckless. 

Investing in WRI certainly is much riskier than putting money in the 
bank.  But like all investments you have to evaluate the reward with 
the risk.  Weighing everything up and looking forwards, I think $1.04 
is a very fair entry price.  Because I now see WRI as an income 
share, the fact that the medium and long term growth trendlines have 
been broken is of no concern.

SNOOPY


---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
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"Stay on the upside of the downside, 
Anticipate the anticipation!"



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