Forum Archive Index - January 2004

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

It has been a great 2003 on the New Zealand sharemarket with a 
result that bargains are harder to find in 2004.     I have a group of 
shares in my own portfolio that I call my 'growth' shares.     That means 
the dividend yield is generally(*)  less than you can get in the bank.  In 
turn those businesses are investing a large proportion of company 
earnings back in the business.   That means they can grow the 
business and, over time, grow the dividend.  When the market 
recognizes this retained earnings effect, the share price can grow too.     

So where do you invest in 2004 for growth?   It's a much more difficult 
question than picking out income shares.    I make no claim that my 
own growth portfolio is optimal.    I hope others will be able to point out 
any flaws in my thinking!

Pick 1/  CAH:   Literally a 'growth' story, Carter Holt has been a 
disappointment, well, since it was formed really.  So why am I in it?   

I like the management .   I like the entrepeneurial flair that former CEO 
Chris Liddell has injected into the company.  I like the fact that it is 
cheap relative to the value of its assets (even taking into account last 
years write down).    I like the fact it has low overall debt levels.  And I 
sense a bit of corporate activity, the unlocking of the branded 
consumer business, may offer shareholders, at long last, a chance to 
realize the hidden value that has long been in there.   Finally, when I 
compare it to 'rival' FFS it always comes out looking better on a point 
for point basis.

Pick 2/ SCT:  Scott Technology, manufacturer of whiteware production 
lines.  I like the fact that despite being located thousands of kilometres 
from their target markets they are still competitive.   I like the fact that 
they hang onto their staff for long periods.  They know how to preserve 
and grow their 'human capital' and that is something that doesn't often 
come through in company accounts.   I like the fact they are 'really' a 
US company in drag, which gives me geographic market 
diversification.  I like the fact that if the manufacturing tide turns even 
more towards China then Scotts are in that market too.   I like the wild-
card factor of the 'boning robot' being developed for use in meat works.    
No significant profits from that arm of the business yet, but I see that 
as the potential hidden 'growth engine' of the future, not yet factored 
into the share price.

Pick 3/ WHS:   A relatively new holding of mine, which I picked up 
when the share price balloon pricked during 2003.   I see the 'recovery' 
(although personally I am well up on my purchase price anyway, so I 
don't need a 'recovery' to kick in) as being slower than some 
commentators.  I spent some time in Victoria and NSW over Christmas 
and can see why Australians are addicted to their malls.    Who wants 
to seek out a hot and sweaty stand alone WHS, when they can do all 
their shopping completely under cover in air conditioned comfort?   But 
I remember having similar 'uncompetitive' thoughts when WHS in NZ 
meant a small stand alone importer of junk that couldn't possibly 
compete with incumbants Farmers and Deka and look where they are 
in NZ now!    I am going to stick my neck out here and say that 
Stephen Tindall is NZ's best businessman bar none.   In developing a 
concept from scratch and having the street fighter agility to manage it 
to where it is today I would say he is as near to a business genius as 
NZ has produced.  On strictly economic grounds buying a retailer on a 
P/E of 20 in a highly competitive market doesn't sound too bright.    But 
there is something about WHS that cannot be measured by looking at 
a single years annual accounts.  I am talking here about high ROE 
over many years.   And an incredible record of profit growth unbroken 
until last year (which fortunately for me produced the window of 
opportunity for a cheap entry price).


Pick 4/ SKC:   Now I know what you are thinking.  Sky City 
Entertainment has long been part of my 'income' portfolio, so what is it 
doing here?  The reason is 'trans tasman tax reform'.    If SKC can start 
to get some real earnings performance from their Adelaide Casino, and 
I think they can, I think this share will be 'discovered' by Australian 
investors.  Already SKC is listed in Australia and in the ASX top 100.  
With Aussie franking credits, the gross yield to Australians will rise to 
something like 7.5%.    That is ridiculously high by Australian 
standards, for a share with as good a growth record as SKC.    My only 
conclusion is that we could be in for a drastic re-rating of the SKC 
share price.

So there is where my 'growth money' will be in 2004.  Anyone got any 
counter opinions?

SNOOPY

(*) SKC is the obvious exception

discl: hold CAH. SCT, SKC, WHS



--
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."



----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/