Forum Archive Index - June 2003

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

Today Harry Potter fans, both young and old,  will be rushing to their 
local store, WHS included, to purchase the latest volume in the epic 
series.  However, it is the Warehouse itself that probably deserves the 
real 'Order of the Pheonix' award.

On the 2nd of May the price of the Warehouse shares fell 25% in a 
day.

On that the same day, the 2nd of May, on the Focus Investment Board, 
I wrote the following.

"By my calculations were are now at the Buffett style sweet spot. It is 
very rarely that you can pick up a quality company such as the 
Warehouse as cheaply as this. Strictly following Buffett's rule I should 
have waited until I was offered shares at $3.99. But the way I see it, it 
is better to pay a bit more to secure the shares rather than miss out on 
what may prove the bargain of the year for the want of a few cents (I 
bought at $4.08)."

Now it is barely six weeks later and all of that one day loss has been 
recovered.  This is an example of how the market misprices things.   
Clearly the real potential of the Warehouse has not fluctuated by 25% 
in such a short time.

At the time of the share price plunge, I had a look at the other channel 
and saw all sorts of hysteria about how the WHS strategy in Australia 
had failed, and it no longer deserved any price premium over other 
shares etc. etc.     To me it made no sense at all that all of Tindall's 
tens years plus expertise and business record was suddenly 
discounted with a hiccup in Australia.     It is true that the fate of the 
Australian expansion is not certain.   But if the value of the Australian 
expansion is reflected as having no value in the WHS shareprice, then 
so what?   If WHS Australia is closed down, then buying in at $4.08 
means it hasn't cost *me* anything.

When I bought in at $4.08, I had no idea the share price would recover 
so fast.    I knew the odds were that it would recover.   Companies that 
meet the focus investment group screening criteria have an incredible 
capacity to do so.   But whether it took weeks, months or years to 
recover is something I never try to predict.

I guess the question on many people's minds now is having risen so 
far so fast, is it now time to take profits on the WHS?    If you have a 
time frame measured in weeks and months I wouldn't dare predict 
where the WHS share price will go from here.     If you are a long term 
investor, then the answer to this question can be found in the most 
recent WHS threads archived in the focus investment group.

The moral of this story?
Perhaps it is that listening to the news too closely and taking it too 
seriously can be hazardous to your wealth.     However, if you ignore 
what most people are saying and do the opposite action to the doom 
and gloom merchants you can get a marvellous (low risk)/(high return) 
buying opportunity.

SNOOPY

discl: hold WHS, all bought at $4.08 recently.    But, with hindsight, 
wishing I had had more spare capital sitting there so that I could have 
bought more :-(.   




--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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