|Phil Eriksen <email@example.com>
|Sat, 29 Jan 2000 14:52:07 +1300
> However in the long term its earnings yield per > share that matters most and in any severe downturn (which usually catch > most people by surprise) its the quality stocks with good earnings per > share which don't collapse in a heap like the rest. The fact that dividend > yield is overseas is very low and often irrelevant is a sign that (a) there > are some good fast growing quality techs and some bad techs with fast > growing share prices (b) that share markets overseas are over mature and > due for a healthy correction. (once previously where that statement > "dividend yield is very low and often irrelevant" was true Warren Buffett > sold off everything and returned the money to his investors. After the > correction when "dividend yield is very low and often irrelevant" was no > longer true he started up Berkshire Hathaway and did brilliantly). In NZ in > 1987 the "dividend yield was very low and often irrelevant". To the best of my knowledge, dividend yields in the US have almost always been lower than in countries such as New Zealand. The reason I think is simply that American business is less conservative, as are it's investors, who demand aggressive expanding companies. To fund this, US business retains a much higher % of earnings, whereas NZ companies often pay out virtually everything. As for Buffett, my understanding of the man is that dividend yield wasn't of much importance to him, but what the company did with its retained earnings was the absolute key. When analysing a company, if he could plainly see that the company was generating well over a dollar of value for each dollar retained, he would be keen. If the company was able to retain earnings to add huge amounts of value, I would think his preferred dividend yield would be zero. I'm not surprised he isn't active to any great degree in the market. A huge amount of money has flowed into the market due to the "baby boomers", the boom, the internet age etc, and i simply can't see proof that this capital is being deployed in a way that will create long term value. I followed a link off Sharechat the other day to an article talking about advertising during the Superbowl. I forget the exact number, but many of the businesses advertising are net companies. And not just Yahoo. One of them is a business (computer.com, i think) that is launching its business that day by spending half of it's money on a superbowl ad. I visited the site, there was no original idea, nothing. If I gave you $50,000 to start a fish and chip shop, would you spend half of it on the sign on the window? It's madness. The Buffett situation will be fascinating over coming years. His situation (little debt, owning highly profitible companies, having access to the float from insurance operations) means that if the market goes mad in the other direction(ie down) he might well be able to do his favorite thing - "something really big". Although it's a bold prediction, i wouldn't be shocked, if the market allowed it, to see Berkshire owning 100% of Coke. > Spreading over x number of shares is, as Warren says, a way of covering up > your mistakes and its much better to do more thorough analysis or hold off > a bit and try and get them all right. With larger numbers of shares you're > just locking into mediocrity and a low average rate of return. Completely agree, but when stocks are going up 500%, but anyone can see that these shares are risky, diversification is a must. If I was gonna invest in, say, NZ listed tech companies, I would put small amounts in all of them. I'd rather, however, try and put bigger amounts in a company i (hoped!) was well selected. Cheers, Phil ---------------------------------------------------------------------------- http://www.sharechat.co.nz/ New Zealand's home for market investors To remove yourself from this list, please us the form at http://www.sharechat.co.nz/forum.html.