Forum Archive Index - February 2003

["Rory Macewan" <macewarory@student.vuw.ac.nz>]

Thanks Snoopy,

Its good to hear it straight up! 
I think I need to clarify some investemnts objectives too. Perhaps a
weeee bit anxious to get my hands dirty. Its a difficult position to
be in when you have so little leverage, regaining brokerage seems
like a mighty hurdle :).

Advice taken Snoopy :)
Thanks.



From: tennyson@caverock.net.nz
To: sharechat@sharechat.co.nz
Subject: RE: [sharechat] WHS Chart
Date: Wed, 5 Feb 2003 18:22:45 +0000

>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"
>
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