Forum Archive Index - August 2003

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

Earlier in the week someone asked if Tower was a good buy.

Here is what my broker said about TWR last week:

"The risk with this stock is that we are looking for a recovery
situation *and only time will tell*.  BUY for anticipated recovery and
possible takeover."

(Note the emphasis between the asterisks is mine)

Then yesterday Morgy made the following comment on AMP.

"The problem with fundamental analysis is you can be right but it still 
doesn't help if the share slides, ask anyone who was still buying into 
AMP when the analysts were recommending it as an undervalued 
stock and fundamentally a buy, by the time you get the numbers they 
are so old and manipulated that they are almost worthless"

It's not too often that I am 'on side' with Morgy but in this case I would 
go even further than him.     From an investment perspective IMO the 
previous results of AMP are completely worthless.    The AMP 
business has changed so much (they are in full retreat from the UK 
market) and public perceptions of fund managers have changed so 
much (many conservative traditional 'do nothing' investors are 
questioning their fund management commitment, after past 5-7 year 
performance has shown sticking money in the bank would have been a 
far better option than using managed funds) that forecasting future 
results from any past 'fundamentals' is virtually impossible.

Switching back to Tower, I think that professional analysts and spotters 
of situation shares, GPG, must be ruing the day they bought 5% of 
Tower at some $4 per share.    The best my broker can come up with 
as a longer term recommendation for Tower is: 

"and only time will tell"

In my view, Tower, AMP and all the other big player wealth 
management companies listed on the stock exchanges absolutely stink 
- as *investments*.  This is not to say you cannot make money if you 
buy into this industry.  Indeed I am sure some will do very well.     My 
argument is that you cannot make a sensible *investment* decision 
without having some reliable model of business cashflow forecasts.    
The future of AMP and TWR will depend on the net proceeds that 
people put into them and people's perception of where the listed 
investment markets will go relative to other investment classes.

Can you look at how much people will invest in the sharemarkets by 
considering what happened over the last ten or so years?   I think not.    
Will future investment performance of the markets relate in any way to 
the boom and bust NASDAQ bubble behaviour of the last ten years?   I 
think not.   From an investment point of view investors in this industry 
are flying blind IMO.     Buying shares in AMP or TWR cannot even be 
classified as investing, by my definition of investing.

Personally I think the outlook for the sharemarkets is quite good.    
Perversely because the bulk of investors 'get it wrong' my view is that 
we will see the whole wealth management industry underperform, while 
unsophisticated investors chase yesterday's winners like residential 
housing and high risk term deposits from finance companies.    In my 
view people will not put their money into the sharemarkets when they 
are cheap which means that both TWR and AMP will continue to 
struggle.    Investors will continue to pull money out of these 
companies forcing them to sell fundamentally sound underlying 
investments at poor prices, leading to further poor returns and another 
wave of fund management withdrawals.  

In my view, the winners in this market will be the boutique fund 
managers who are not weighed down by the millstone of bad 
investment history, and those dealing with the least sophisticated 
investors of all and are least likely to change ships in mid stream- the 
banks (who deal with those who invest their funds only with the bank 
they know).

IMO, AMP and TWR are strictly for the punters. Yuk yuk!

SNOOPY

discl: no AMP or TWR shares held



--
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