Forum Archive Index - February 2003

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

Hi Rory and Allan,


Wow, WHS down 88c to $6.20 as I write this!  Still I don't think the 
situation is as bad as this dramatic drop indicates.   Add back in 
the pre-tax provision of the Australian operations of $7m back onto 
the expected profit of $95m and you are not too far behind the bottom 
end forecast of analysts predictions before today ( $106m ).   This 
$7m write down is a one off event that will not be repeated this 
year.  The rest of the profit dowgrade can be explained by having the 
wrong toys on the shelf for Christmas.   These are all historical 
events which will not have an ongoing effect on the Warehouse.  For 
the long term investor I can't see much to worry about.

>
>
>I am open about the fact I am a novice investor and perhaps I was
>naive to be drawn into the security of a blue chip investment ;). I
>have however drawn a number of conclusions from this investment, and
>todays fall in particular, which I consider to be of value in the
>future;
> 
> - As mentioned above, don't be drawn into the fact that blue chip
> investemnts, especially medium growers (which I believed the
> warehouse to be) are safe income investments 
>

There are no safe investments on the sharemarket.  If you want 
absolutely assured preservation of capital you should put your money 
in a term deposit in the bank.

However if you take a twenty year timeframe there is no period where 
bank deposits have ever outperformed shares.  So investing in bank 
deposits guarantees underperformance in the longer term.  
Nevertheless you can reduce the risk on shares by having a 
diversified share portfolio.  

That way, if one share takes a big dive, it doesn't look so dramatic 
across your whole portfolio of investments.   Of course the larger 
your portfolio is, the more chance one of the shares in it will 
suffer an unexpected event.   If you are truly an 'investor' you will 
have to learn to expect events like today.

Lastly where do you the idea that WHS is not a safe *income* 
investment.  Will the dividend be reduced?  I think not.   Your 
income from the Warehouse is quite safe as the dividend is well 
covered. 

>
>
> I know that a high P:E can be justified by high
> future earnings ability but was the warehouse overvalued by the
> market? 
>
>

Perhaps.  But perhaps the share price drop is just a short term 
blip?

>
>
>Maybe it was expecting a much higher increase in sales? 
>
>

The market was expecting higher profits.  But sales growth looks on 
track.

>
>
>Add to this the stagnant sales predictions for the 
> financial year and the relatively limp performance 
> of the red shed (which suprised me also).
> 
>If anyone disagrees, agrees or has something they think is valuable
>for a  novice shareholder to know to avoid this situation. 
>
>

I think you need to decide what your investment objective is.   If 
you were after a long term growth share that will pay you a little 
income on the way you still have it.  If you weren't after that, you 
shouldn't have bought Warehouse shares in the first place.

>From the fundamentals perspective I'm not sure why you are trying to 
avoid anything.  I don't think the big picture has changed for the 
Warehouse with today's announcement.  Perhaps what you haven't done 
is clarify your original investment objective?

SNOOPY

discl: no WHS, but if I did have some I'd probably just keep holding 
them, and perhaps buy a few more if the price is now trading at a 
level where 'everyone gets a bargain'.


---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"Dogs have big tongues, so you can bet they don't 
bite them by accident"

----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/