Forum Archive Index - May 2004

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

Hi Harley,
 
Good to get your response on this.

> 
> This is an interesting topic, my guess is Mcdunk is right in that most
> expect to make money and  lots of it when they buy shares. His 1 in 5
> is a dog depends on how good a stock picker you are and your timing
> in buying and maybe selling.
>

I'm not sure that measuring your success in terms of winners and 
losers is a good goal.  Withe the benefit of my great skill and foresight 
I will now give you five sure fire 'winners' for the coming year.

1/  A term deposit in Westpac ban.
2/ A term deposit in ANZ bank.
3/ A term deposit in the BNZ
4/ A term deposit in the Taranaki Savings Bank

and now for the real wildcard

5/ A term deposit in Kiwibank!

I'd lay pretty good odds that I have provided you with five winners here, 
but I don't expect much praise from you on those five pearls of 
investment wisdom!

Of course it is tempting to sell  losers and hang onto, or even top up, 
your winners.   But slavishly following that philosophy means buying 
high and selling low which is not an attractive prospect in the long 
term.     

>
> It could be  3 or 4  or even 5 turn out to be loss if you 
> buy at the peak  of the market and sell on the
> bottom.  
>

Unfortunately if your main strategy is to follow what Joe Average did 
last year, that is exactly what is likely to happen!

>
>PGG is a good example of market fashions,  trading in a
> narrow band  and then climbing markedly not because of any change in
> fundamentals but because it's parent decided to list on the main board
> and there's a bit of publicity. 
>

Not so sure it is quite that simple.  There was the deal that PGG 
announced with Wrightson to merge their wool interests.  And there is 
a lot of talk of consolidation in the rural servicing industry.    Plus I 
think the PGG result was a good one in a year where many expected 
rural servicing profits to be uniformly worse.

>
>Which says a lot for efficient market theory.
>

Debunked years ago :-)

> 
>That the market will drop is a certainty, when is the question. All
>the signals indicate the US  is way overpriced. when the US falls so
>does everybody else.
>

I'm not so sure.    Alan Greenspan seems very determined to give the 
US market a soft landing and not all US profit results are bad.  I am 
sure sharechat's US correspondent, the other 'Allan' will pull me up if I 
have got that wrong.  Of course if the US market falls but the US 
currency strengthens at the same time it might not matter to NZ 
investors.

> 
> My goal is not to lose money and my philosophy  is possibly based on
> the premise that nobody lost money by taking a profit. If a share is
> profitable and the market looks dodgy sell it. In theory  this has
> cost me a lot of money  over the last 2 years Contact sold at $4, 
> Trustpower  at $4  POA  at  $5.6   and so on. But paper profits don't
> count. Money in the bank does. 
>

I can't really argue with any of that except the 'in theory' bit of the gains 
you lost out on with Contact, Trustpower and Ports of Auckland.   
Sadly, for you, the gains in these companies after you sold out were 
real :-)

>
>My problem now is having the patience
> to wait for the downturn because  I see little value in the NZ market
> at present. Still hold GPG  {even the directors are selling} SPN, BRG,
> & WRI  ( will I accept ?)  and  a couple of  Aussie  punts.  All
> except BRG are in profit  and  I  really  should sell but what if I am
> wrong and there's no downturn?     
>

It's an interesting dilemma.    Perhaps I don't 'sell' enough myself.   But 
particularly with NZ shares I do find it hard to sell shares and park the 
money in the bank knowing that my income with reduce (due to the 
high yield of the shares I have sold) by doing so.

I have been reading Norgates's offer for WRI shares over the 
weekend, about which I will post separately.    The offer has its merits, 
but it has brought home to me what a good investment WRI shares 
are, even at $1.50.   There is a large part of me hoping that the offer 
will fail, and the  price of WRI will consequently collapse.  That means 
I will be able to move in and top up my holding a ridiculous prices!

Of course if the offer succeeds it is hard to see the share price 
spending much time below $1.50 for a while.

>
>And there's a couple of companies
>I  think might be just worth an investment. 
>

I think that is not a bad way of looking at things.   Even in 'bad markets' 
there are still good individual investment opportunities.  It is just that 
they may be harder to find!

>
>Thats why I find shares interesting.
> There are no certainties.
> 

And isn't that a good thing.  if all the risk premium was taken out of the 
market, prices might increase so much that many of the opportunities 
we see out there might dry up!

Thanks again for your input, 

SNOOPY



 

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"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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