Forum Archive Index - November 2000

["P Maiden" <pmaiden@xtra.co.nz>]

Has the NZSE been marked down so far that many stocks are under valued?

 

To get an idea of how diverse 'expert' opinion can be on such matters read this article from the New York Times about the S&P500. One analyst has the US market 22% undervalued while another has it still  overvalued by 12%

 

http://www.nytimes.com/2000/11/26/technology/26PORT.html

 

 

The difference between the two is how much one forecasts earnings to grow by.

 

What about the NZ market?  IMO a lot of shares are still overvalued - eg ADV which has some big earnings expectations to meet to justify the current price. A rule of thumb I use for a lot of these new economy stocks such as ADV, SKY etc is that the current valuation (on my calcs) is about where the share price was in early 1999.

 

Some other stocks  appear undervalued but these have to achieve pretty strong earnings growth to meet future expected prices. One in this camp is THL - current price OK but if strong earnings growth don't eventuate a higher price would not be justified.

 

The underlying driver of a lot of the future share prices will be earnings over the next year. Remember we have gone through a year with record profits being reported by many companies.  Most companies are stating tough times ahead - high costs etc and questionable demand with lower earnings forecast.

 

I have a fair bit of cash at the moment but finding it hard to find any new value investments in NZ to diversify the portfolio (down to 5 stocks at present). Looks like Aust has to be the place but the situation is much the same over there - and they tend to have the economic problems we have several months after we do, eg their dollar fell to record lows last week, long after ours fell to 39-40 cents.

 

So it looks like I'll have to do a bit of trading on some of these 'undervalued stocks' which will no doubt rise in the short term before .........

 

Any ideas?

 

 

Peter