Forum Archive Index - February 2002

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

Hi Phaedrus,
 
>
> 
>TWR is a good illustration that buying solely on fundamentals can
>carry very high opportunity costs - substantial funds may be tied up
>for literally years without any return, preventing investment in
>stocks with equally good fundamentals that are in longterm uptrends.
>
>


I would say 'very high opportunity costs' is a bit of an emotive 
phrase.  A dividend yield of 4% imputed, is equivalent to a 6% 
dividend before tax (based on 33% tax rate).   So far from having a 
'very high opportunity cost' as you put it, Tower shareholders are 
doing far better than they would than if their money was in the bank 
*even if the share price goes nowhere*!

The other thing that you have neglected to mention is that keeping a 
watch on trends is significant work.  Probably you do better than me, 
per dollar invested, but so you should because I'm sure you put a 
lot more work into tracking your shares than I do into tracking 
mine.  

As a 'value' type investor I generally don't hold shares in 
many high P/E ratio companies but I could always do with more time to 
analyze my investments - particularly those that may be approaching 
the top end of a rising trend.   As such, I am to some extent 
grateful to have some shares in my portfolio that don't require 
'constant attention'.   Far from being an opportunity cost, holding 
shares 'such as Tower' allow me to devote more time to other parts of 
my portfolio that do need attention. SNOOPY


disclosure: do not hold TWR







                  
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