Forum Archive Index - May 2003

[Jerry&sam <samjer@xtra.co.nz>]

Hi Snoopy

I guess what our discussion boils down to is a matter of personal taste 
....  I really  enjoy the thrill of the chase ( I realise this will make 
you shudder) in picking a biotech stock, finding out all about it, and 
then hitching a ride on it when it goes up, monitoring the trend, 
checking the market depth and deciding if and when to  sell,  and even 
when I've sold,  still following it like a fond parent to see what's 
happening with the company to see if there's more upside to it.  

 While I like your idea of going over old company reports to check out 
whether management stick to their predictions and courses of action, I 
find that usually them so vague,  like with the usual  assurances to 
increase margins, cut costs, spin out non-core businesses etc, that it 
means very little to me.   It's taken me years of following the NZ 
market to gain any idea at all of what companies have good managment, 
and I'm still not all that clear.   And yet that is one of Warren 
Buffet's basic tenet of investing: only invest in a company with good 
management.

But thank you, Snoopy,  for yet again taking the time to post your 
sector picks.  The problem for me, is that I can see potential  problems 
with all of them.

  Lyttelton Port Company has had a track record of poor managment (blame 
the unions if you will, but modern  idustrial relations mean being able  
to work with unions),   is terribly unpopular with Lytellton residents 
and seems to have a knack for making relations worse, like this latest 
cement dust fiasco.  Also, money that should have been spent on 
increasing port infrastructure and cargo handling facilities, has been 
bled off by its major shareholder, the Christchurch City Council in 
continued payments of too high a dividend ratio.   

>With Restaurant Brands, there is the competition of every Mum and Dad takeway, 
> other better pizza-makers such as Mad Dog,  Starbucks same store sales seem 
>to be dropping with every earnings announcement, and KFC likewise. Plus the 
>expensive and risky foray into the usual graveyard of NZ companies, ie  
>Autralia. 
>
Wrightson only recently has come to be regarded as having good managment 
(in fact, I was warned off this one for that reason by my "financial 
advisor" at Ord Minnet just before it started going up ...). And it's 
already given one earnings downgrade warning.  As the Sage of O  often 
says" There's usually more than one cockroach in the kitchen."  Plus the 
farming sector is so vulnerable to everything from droughts to Sars to 
foot-and-mouth scares and commodity cycles and currency fluctuations.

Sky City:  with all the Sars fears, reduced tourism numbers, proposed 
anti-smoking legislation, losses on Canbet,  threat of increased gaming 
taxes, SKC doesn't look at all defensive to me, at the moment.  The only 
thing propping up its price at the moment, as far as I can see, is its 
rather inexplicable share buy back. (And I still can't figure out why, 
when they are so heavily leveredged, they aren't using surplus funds to 
reduce debt. Suspicious old cow that I am, I'm wondering if there are a 
lot of executive options which need a high share price to be worth 
exercising.)  Which is not to say,  that I haven't done extremely well 
out of SKC in the past, and hope to do so again, but not in these risky 
times.

>Contact Energy ... is this overpriced at the moment, with high electricity 
>spot prices already factored in?  Plus with the Otahu outage lasting longer 
>than anticipated, how can one predict earnings for this year? which they have 
>already warned about ....  Plus what happens to the share price if the 
>government decides on some heavy-handed regulation of the electricity 
>industry...?  But again, I did very well out of CEN with the last power 
>crisis. 
>
Ports?   Again, dependant on import / export cycles. I  made a 20% paper 
loss on POA for two years, and if it weren't for the dividends, would 
have taken a loss when I sold it when it looked like they might have 
problems with resource consent for dredging to accomodate the new 
supercontainer ships   (when, of course, it prompty went up).   Though I 
did do well out of North Port and South Port, it was more beginner's 
luck than through any understanding of how much cargo they were handling.  

Auckland Airport?  Very volatile at the moment, and again. so vulnerable 
to tourism & terrorism.

So, there it is.   Sure,  biotechs are risky, but to my paranoid mind, 
so is everything else in the market.   At least biotechs are extremely 
interesting, and able to be monitored,  and one's risks able to be managed.

But it's been a great discussion, Snoopy. Thanks.

Jerry

>  
>



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