Forum Archive Index - March 2003

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

Hi Pat,

 
> 
>What specific
>companies have received a "pass" in your focus investment group?  I
>have reviewed most past messages in the forum (from over the last
>couple of years) and have found it difficult to pinpoint which ones
>are "in" - I think the only one I've managed to pinpoint was WHS.
> 



The term 'pass' is a bit misleading as the process isn't as 
straightforward as that.

The first part of the process is a screening test to see if the 
companies have the kind of positive earnings characteristics that 
will allow them to prosper in the future.

The second part of the test is to check they haven't engineered a 
high rate of return by borrowing too heavily.

The third part of the process is to see if the share is cheap or 
expensive.

The WHS certainly meets the four initial screening criteria.  
Furthermore, they could pay back all their debt in under five years 
if pressed.

Lastly buying in at $5.88 would give you an expected return over ten 
years of some 10.9% (if my earnings projections are correct).

Does that make it a 'pass'?  I guess it depends on how you view that 
return of 10.9%.

It is certainly a higher return that you might reasonably expect out 
of Woolworths (ASX) which offers something like 5.7% buying in at 
$A11.50, and also meets our focus group screening and debt criteria.

So does WHS pass and WOW fail?   Or do both pass?  Or do both fail?
There is no definitive answer to this question.  The answer depends 
on your own expectations and risk tolerance.

SNOOPY

PS In case what you really wanted to know was what shares meet our 
initial screening criteria I'll draw up a short list and put them on 
the focus investment group.









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Message posted by Harry Tennyson
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