Forum Archive Index - August 2003

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

Hi Macdunk,

>
> I sold Wri at$1.30 last Sept watched them drop In price and against
> all my expectations rise back to an all time high today. What I find
> hard to figure out after a 13pc drop In profit which was expected and
> the next 12 months prospects not any better the share price Is going
> up.      
>

The WRI result was down for sure, but the second half was not nearly 
as down as the first half.   I think that your comment Macdunk

"the next 12 months prospects not any better"

explains to me why you are baffled by the run up in the WRI share 
price.   

Bar all standards except the 2001-2002 year, the 2002-2003 year for 
WRI has been very good.  But if you only look at the trends and do not 
understand how to value the fundamental strength of this business 
( like 95% of sharemarket investors do, I'm not singling you out here ) 
you will completely miss this.

>
>It must be the high dividend that Is the attraction not the
> short term prospect.   
>

I think you are right there.   The WRI dividend is still well covered and 
is not likely to decrease.   Furthermore you will get over twice the 
income from WRI shares than you would from holding a bank term 
deposit.

Again, if you only follow the trends you will completely miss that fact. 

>
> I set my sights higher than an above average
> dividend to keep me happy If I am to stay on a 20pc pa target.  
>

20% pa compounded is a far greater return that even Warren Buffett 
has achieved over the last ten years.   Perhaps I am missing the point 
Macdunk and you will still be happy if you fall short of your target.   But 
could I suggest to you that if you are changing your investment 
strategy to try and achieve this self imposed target you may be taking 
extreme and IMO, unnecessary and unwise risk.   Myself, I'll be very 
happy if I score an 11% return on my so called 'income' portfolio (the 
one in the Stockguru competition) this year.

>   
>pwc Is paying 16c a share dividend pa with better short term 
> prospects than WRI but I am slightly over weighted with them 
> even although they are trending along  nicely.  
>  

16c on $1.70 is a yield of 9.4%.   A good yield, but nowhere near as 
good as WRI, principally because WRI dividends contain a tax credit 
and I understand PWC shares do not.

Since I think the outlook for both PWC (an electricity lines company) 
and WRI is fairly flat, can you explain to me why you see PWC as 
having the better short term outlook?  For a start doesn't PWC have a 
lot of debt?   OTOH, WRI has very little term debt.    Do you think PWC 
can maintain their profitability as interest rates rise?

SNOOPY

discl: hold WRI, do not hold PWC but interested in keeping tabs on 
them.





>
> Has anyone any Ideas on what Is likely to start up
> trending? I am running out of companies.    
>

--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."




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