Forum Archive Index - October 2003

["Soarer2" <soarer2@xtra.co.nz>]

Hi Snoopy,


' He ran & she ran"

Ever let you hair down ?!?


Gold is money but ain't everything












----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Thursday, October 09, 2003 3:43 PM
Subject: Re: [sharechat] The RBD rebound.


> Hi Phaedrus,
>
> >
> >Snoopy,
> >You state
> >>"The more I study the RBD share price chart, the  more I am
> >>convinced that it has almost no value."
> >
> >You must surely be joking!!! The RBD chart has so far proved its
> > worth in a very satisfactory manner.
> >
>
> Ah, I thought you might bite Phaedrus ;-)
>
> >
> > The chart gave an absolutely
> >unequivocal SELL signal on 7/5/02, giving an exit at $2.10
> >(Price/volume climax, trendline break, moving average
> >crossover etc) The simplest of TA techniques got you out of
> > this stock just after its peak and kept you out for a year and
> > a half while it fell by over 40%.
> >
>
> I think the event you refer to was the AMP selling out.   They had a large
> volume of shares to sell, so it is not surprising that the price became
> depressed in the time immediately following the sale which would have
> also depressed the moving average.   IOW those multiple signals you
> noted were simply three different manifestations of the same thing.
>
> IIRC AMP was facing an outflow of client funds at the time so why not
> sell something on which they had made a good profit?    I don't see that
> AMP selling out is a reason for all other shareholders to do the same.
>
> As it turned out perhaps they should have, but it is easy to say a lot of
> things in hindsight.   Please note I am talking from an F/A perspective at
> the time here.   I know the pure chartist would have sold as your chart
> demonstrated.  But I don't use 'pure charting'.
>
> >
> >RBD gave a trendline break
> >buy signal yesterday at $1.33, though it is still in a
> >long-term downtrend and the moving average has not been
> >crossed yet.
> >
>
> So I should wait until other fundamental analysts have done the work
> that I have already done before buying in, you mean......
>
> >
> >Contrast this with your actions/recommendations based on
> >fundamentals. On 29/5/02, when RBD was $2.06 and a confirmed
> >downtrend was in place, you said "The fact that the yield of these
> >shares is so good means there exists a floor through which the share
> >price is unlikely to fall".
> >
>
> Yes.   It looks like that 'floor' was around the $1.25, with the benefit
of
> hindsight.   We are talking about a significant correction but not an ITC
> like collapse here.
>
> >
> >You spoke of RBD "having a growth  strategy in place"
> >
>
> It did.  Still does.  But business plans do not always go exactly in
> accordance with shareholder expectations.
>
> >
> >and continued "I won't be quitting any of my
> >income portfolio shares. I don't have to sell them, and I am quite
> >happy to keep the income rolling in". While this modest income
> >"rolled in", the capital value of your investment fell by over 40%.
> >
>
> No, the value of my RBD shares, part of a much larger portfolio,  fell by
> 40%.   Or adding back in the 18c per share of dividend I have received
> brings the share price fall down to 30%.    Considering you selectively
> charted some of the darkest days of RBD history, and this is my worst
> performing 'income' share I am quite pleased if this is as dark as it
gets.
>
> Nevertheless, despite all this chart drama, (while the actual performance
> of the underlying business was quite steady) I would still be cash flow
> positive on my RBD investment if I sold today.
>
> >
> >By 25/7/02, when RBD had fallen by about 20% and the downtrend
> rolled
> >on, you said "RBD is a 'Buffespeculative' buy at these levels" and
> >"RBD, at $1.75, is one of those rare shares that is of interest to
> >  both the 'income' and 'growth' investor".
> >
>
> You did see the word 'speculative'  there, didn't you?
>
> A 'speculative buy' consists of swallowing the management's recovery
> story and seeing it come right.    It doesn't always happen.    In this
case
> the speculation did not pay off.     The best way to pop a share price is
> to destroy any built in inflated expectations of growth.   That is exactly
> what happened with RBD.  None of this means that RBD was *not* a
> speculative buy at the time, as the story could have gone the other way.
> None of this means that RBD is not a good buy today.
>
> But yes, buying in at $1.75 was a mistake for the income investor, with
> hindsight, seen in the cold light of today.    Come back in another three
> years and it might not be a mistake though, if the alternative was
> sticking your money in the bank for five years at 6%.   The RBD share
> price would only have to recover to $1.50 or so by 2006 for the
> economic analysis to look much better.
>
> >
> >RBD has fallen a further 25% since then.
> > So much for standalone fundamental analysis and high
> >yields providing a floor. What price income?
> >
>
> Share prices do rise and fall.  Income investors know this.  The share
> price floor of around $1.25 may have been lower than some income
> investors would have hoped for, but 'hey' that's life.     The share price
> did not keep falling when it breached the $1.25 support line.
>
> >
> >Snoopy, you must learn to recognise a downtrend. You claim "Over the
> >last year RBD has been in a trading range of $1.25 to $1.60" Quite
> >wrong. Over the last year RBD has been making lower highs and lower
> >lows - this is a downtrend.
> >
>
> OK it has been in a downtrend *and* in a trading range of around $1.25
> to $1.60.  The question is, does the fact that it has been in a downtrend
> mean that the downtrend will continue?    At some point the downtrend
> will surely end.    I see a support line on your chart Phaedrus at $1.25
> which you haven't marked.    Yes I know it was 'breached' when the
> share went down to $1.23 but I would regard that as 'noise' rather than a
> breach of any significance.
>
> >
> >>It is in the nature of charting that entry into a share is always
> >>late.... all a late entry does is reduce your potential profits"
> >
> >Wrong. If you wait for an established downtrend to reverse before
> >buying, "late" entries also reduce your risk of loss and often give a
> >more favourable entry price.
> >
>
> That depends on whether you think a share in a downtrend will continue
> in a downtrend.  The lower the downtrend goes, provided business
> prospects remain reasonable, the greater the chance that it will end.
> At a certain point the share price becomes so cheap the chances of the
> share price suddenly spiking higher become greater than the chances of
> it descending further.    I use F/A to determine such points and in my
> judgement $1.25 is such a point for RBD.
>
> >
> >I'll bet you wish that your entries into  RBD earlier this
> > year had been "late"!
> >
>
> No, I wish I hadn't believed the RBD PR hype.    If I hadn't swallowed it,
> F/A would have kept me out of the share.
>
> >
> >>"The other 'problem' with charting is that the share price movements
> >>do not seem to relate to any developments within the company. In
> >> other words share price movements seem to be essentially random
> and
> >> unrelated to underlying performance."
> >
> >Snoopy, this is not the problem
> >with charting - this is the problem with fundamental analysis!!!! In
> >any case, over the period of the chart, RBD's shareprice movement
> has
> >most certainly NOT been random. There was a very clear uptrend
> >immediately followed by an equally obvious downtrend.
> >
>
> I think it depends on how you define 'random', and what part of the chart
> you are concentrating on.   Of particular interest to me is what has
> happened over the past year.
>
> I would like to think that with the benefit of hindsight you can correlate
> share price movements with real events.  In the period immediately prior
> to the announcement of the FY2003 financial results the share price
> moved from $1.35 to $1.60 and back down to $1.25 all within a period of
> three months.     What   announcements could have caused this?   I
> don't recall any.
>
> I don't believe there was anything in the fundamentals of the business
> that varied that much in such a short timeframe.    I don't believe the
> investors who traded RBD shares in this time period believed that what
> they were doing had any fundamental relationship with the performance
> of the business.     That being so then,  I see no reason to change my
> opinion now, with comments on the other channel about selling because
> the share price breached the $1.25 level reinforcing my point.  However,
> if there are RBD punters who are so foolish out there then I will
certainly
> take advantage of them - and I did.
>
> >
> >"It is very difficult to be an F/A person then use T/A to select an
> >entry point in such circumstances" Not at all. Your primary investment
> >parameters are still valid. Just don't buy into an established
> >downtrend, that's all. It is that easy to combine the two techniques.
> >
>
> I didn't believe the downtrend was established any more.    That is why I
> bought.  I was prepared to stick my neck out and use F/A to choose a
> turning point.    If I had been wrong so-be-it.  But at that price ($1.25)
it
> was a gamble worth taking in my judgement.
>
> >
> >Snoopy, we have had this same discussion time after time after time.
> >We could just as easily be talking about WHS or TLS. Same story.
> Same
> >arguments. Same entrenched positions. Same consequences. I
> despair.
> >
>
> Consequences like those dividends keeping on flowing in and
> increasing you mean, and the apparently severe share price corrections
> not being as bad as everyone thought ;-)?
>
> SNOOPY
>
>
>
>
>
>
>   --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "Q: If you call a dog tail a leg, how many legs does a dog have?"
> "A: Four.  Calling a tail a leg doesn't make it a leg."
>
>
>
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