Forum Archive Index - July 2003

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

Hi Pat,

> 
>  the essence of what you're saying is that your portfolio of
> five shares is likely to grow at a compounding rate of 15% (as per WB
> screening criteria) starting today and for the next 10 years -
> property is likely to underperform such total return.  However, the
> rate of 15% assumes that the purchase of shares is made at a point
> when Mr Market goes a little bit funny (peculiar), and this may not be
> happening now or in the foreseeable future.  
>  
> what five shares you would choose if the bet were accepted?, and
> whether you'd buy them today?
> 
> I suppose that only very few shares would fall in WB's category, and I
> can only think of WHS, MHI, AIA, POA, POT, LPT, and SKC.  You've
> analysed some of these in the Focus discussion group and come to the
> conclusion that, at today's price, none would seduce WB.  Perhaps only
> WHS and MHI are at a relatively interesting price. So... what would
> you do?
> 
>

Good point you raise there Pat.   You are right of course.  It is not just 
a matter of dipping into Warren's bucket of favourite shares and pulling 
out the five best ones.    The timing of your share purchases are critical 
as ultimately it this timing that makes the difference between an 
average return and a great return.     The problem with trying to time 
purchases is that it is very difficult to predict when the market will 
plunge to give you that once in a lifetime purchasing opportunity.  The 
only solution I can offer is to always have some cash aside and be 
ready for that unexpected price plunge event.

So what five shares would I choose?    Well those gateway utilities 
(AIA, POA, LPC) are getting up there a bit in price, so I think I would by 
pass those for the time being.  MHI?   I think the other retailer you list 
(WHS) offers significantly better value.

WHS is the most obvious first choice.  

I think because of that impressive yield I would have to throw in SKC.  
The conference centre in Downtown Auckland proves that SKC hasn't 
run out of ways to leverage on that downtown Auckland casino site.  

I don't think I could leave out WPT, particularly with that price gap 
between WBC and WPT which with trans tasman tax reform surely 
can't last.   Those banks seem to be relentless money generating 
machines.  

Selection number four is another cross listed Aussie: TLS.   It is going 
to have to be politically dressed up so the Australian government can 
sell the 51% they still own.  And if you still believe through all the 
difficulties they have had that Telstra is an Aussie icon, it has hardly 
ever been cheaper.

And my final choice is ... drumroll.....

A war-chest of cash.     I would want to have that money available to 
cash in on whatever unexpected opportunity presents itself in the next 
year or so.     Or perhaps I would stick my 'cash' in WRI shares, as 
14% is a lot more than I could get in the bank!  Might as well make that 
money work while I am waiting.

How does that sound?  Enough to make Macdunks house tremble all 
the way to its foundations do you think?

SNOOPY

discl: hold WHS, SKC, WPT, TLS and WRI




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