Forum Archive Index - January 2003

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

> 
>
>Selecting just one over all others is a hard thing to justify.
> 
>However, after sleeping on it for a couple of nights I have made my
>own pick.
> 
>The particular share I have chosen is:
> 
>1/ A substantial player in their chosen market.
> 
>2/ Has a five year unbroken record of solid profit growth.
> 
>3/ Has been able to consistently deliver a return on shareholders
>equity greater than 15% per year.
> 
>4/  Has an ability to raise margins at a rate above inflation.
> 
>(readers familiar with the focus investment group will recognise
>these four characteristics as the initial screening rules for the
>focus investment group.)
> 
>AND 
> 
>5/ has such a good yield that if I were to list it in my New Zealand
>'income' portfolio it would not be out of place.
> 
>Finally, despite the good record above, the market has punished it a
>bit in FY2002 making it exceptional value.
> 
>When you put all of those factors together, how could it not be my
>selection?
> 
>So what is it?
>
>

There have been some good guesses as to what my favourite Australian 
share is, and I want to investigate some of these guesses further.

However, no-one has guessed what was foremost in my mind.  My 
favourite Australian share is:

***- drum roll -****

WBC (Westpac Bank).

I like them because of all the Aussie banks they seem to be the one 
that has stuck to their knitting the best.  No grandiose expansions 
into Europe, Asia or America.  They have kept their focus at home on 
their core business.

Eyebrows were raised when Westpac bought out fund managers Rothchilds 
and BT during the year.  This is part of the reason why the share 
price has been a bit depressed of late.  Nevertheless I think in five 
years time buying out these customer bases at a price that in 
hindsight, will be seen as not over the top, will be seen as a wise 
move.

There are persistent rumours of government intervention in the 
banking industry in Australia, due to perceived profiteering.  Still 
Westpac have been very public about dealing with the banking 
industries image problems, and they are actively working to fix them.

Another problem on the horizon is the perceived property boom in 
Australia going bust and leaving the banks with a big pile of bad 
debts.  However, since their escape from bankruptcy in the early 
nineties, Westpac, perhaps more than the other banks, know the 
importance of managing loans so that they do not go bad.

Then there is the global uncertainty of loaning money to to highly 
leveraged corporate America.  Again Westpac have some exposure, but 
it is very much under the thumb of senior staff.

Ordinarily, we kiwis come off second best to our cousins across the 
Tasman because we cannot access Aussie franking credits.  But in the 
case of Westpac we can buy the 'mirror' share WPT.  This gives us 
access to equivalent New Zealand imputation credits, which means  a 
dividend yield of 8.4% (based on a share price of $NZ14.50) !   So 
I'm going to cheat a little here and nominate WBC, but through the 
vehicle of WPT listed right here on our own New Zealand market.

I'm tempted to go out and buy a big block of WPT shares on Monday.  
But one thing stops me.  I already did just that a couple of years 
back.

SNOOPY

discl: hold WPT

PS I might have picked WPT ahead of BHP when we went through this 
exercise a year ago, but Dick beat me to it!



   
---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
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"Stay on the upside of the downside, 
Anticipate the anticipation!"



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