Forum Archive Index - February 2004

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

Hi Shayne,

I am not wanting to rub salt into any wounds here.   Please note that 
any comments I make are in the spirit of learning from the situation.
 
>
>Just thought i would share the dissappointments of my portfolio with
>you all. I have faith though, its current losses only represent its
>current market value, not actual realised gains/losses. My portfolio
>consists of AIR, BGR, IHG (ASX), RMG and TWR. 
>
>Indicators of where I
>bought at was 1.05, 1.50, 49.5c, 8c and 1.17.
>

Interesting but sadly not relevant.   Unfortunately you can only make 
money from where the share is trading at today, compared to where 
you can sell out in the future, not forgetting (of course) the very 
important dividend stream.

>
> I have taken some
> massive paper losses on AIR, RMG and IHG. 
>

These are real losses you have taken Shayne.  It may be irrational to 
sell at today's prices.   It may be that this week Mr Market has got it 
wrong and the outlook going forward is good and you should buy some 
more.   It may be you should not worry about your losses.   After all 
presumably you didn't invest on the premise you would sell out 'this 
month' did you?   You have to keep the original premise as to why you 
invested in mind.  But those *are* real losses you have suffered.  Don't 
kid yourself.

>
>I have yet to see the outcome of my purchase into BGR 
> BGR was my latest purchase. My reason for buying was simple. Revenue
> was up over the past two years of about 14 and 16%. profit was up 34
> and 40% of the last two years. If profit increases for the 2004 year
> of say 28% (min) and since 60% of profit is paid out as dividend, that
> will give a yeild of 5% based on its stock price of 1.50. I am happy
> with that yeild. of course they have to make not only a prfit, but an
> increase. 
>

Investing on the premise of a 28% profit rise in a difficult retail market 
is quite a bet!   Where do you see the net profit increase coming from?
Rebel Sports?

>
>has anyone ever tracked WHS stock chart with BGR? it seems
>BGR stock price always falls before WHS and when BGR does fall it
>falls a lot but then WHS falls just as much but later. check it out,
>it will explain what i am trying to say.
>

I think what you are seeing here is a correlation.    Correlation does not 
necessarily imply causality or any underlying link, although of course it 
may do so.

The drop in the Warehouse share price is largely explained by their 
difficult venture into Australia, and is largely, as I see it, a matter of 
perception.     Shareholders went in with the perception that growth 
would explode in Australia, yet a trickle of marginal results to 
increasing losses has swung the perception pendulum to such an 
extent that Australia is now viewed as a millstone.   But nevertheless 
throughout this price volatility, the actual performance of the 
Warehouse has been remarkably flat.

I can't see that any of this has any parallels with the Briscoe group.

The one common factor is that both BGR and WHS are reasonably 
sized fish in the retail pond.  Perhaps BGR, being the smaller fish, is 
the one that is buffetted first by any month by month 'food shortage'? 

>
>. RMG has potential and
> perhaps the future will be brighter. They have a lot to prove to the
> market because ever since its public issue, it has been a disaster.
> Jim Boult, the famous Baycorp CEO proved his talents did not extend
> outside of the people he worked with when with Baycorp. His
> performance with RMG was shocking. He seem to only create 
> problems for the company of which are only now being fixed.
>
> RMG are a small player
> in the market but as Baycorp have signalled just recently, the market
> looks a little better so hopefully some of that will filter down to
> RMG.
>

Or maybe Baycorp will simply hammer the minnow playes like RMG?
Has RMG ever made a profit?    For me RMG would be far too risky an 
investment, but that is not to say you won't do well if things eventually 
'come right'.

>
> IHG is another bundle of joy.
>

No comment.  I know nothing about this one

>
>and TWR are proving to worth their value.
>TWR is my favourite. But only because its up 17% for me.
>It is clearly out of favour with the market, and again has a lot  to
>prove. Out of favour stocks however do give an opportunity for big
>gains.For example, check out Baycorp. 
>

Yes, but shares may also be out of favour because they are no good.

>
>Their stock had been underperforming for about one year.
> Its acquistions and profit downgrades lead the stock 
> to fall in value.     At its lowest point, even
> though news wasnt so good, it still had value. Since August last year
> this stock has become a favourite again. A bit of good news, all of
> which the market knew it was capable of, and the share price rebounded.
> I hope TWR can follow in the same footsteps. It was in a downward
> trend until may of 2003 and since then has showed signs of a recovery.
>

What worries me about TWR is that the smart guys at GPG, Weiss 
and Gibbs knowingly bought into Tower (originally) at a much higher 
price than Tower trades at today.    I'm prepared to lay down odds that 
those two guys are smarter than I am.  So if those guys can't 
understand the potential of the business properly, where does that 
leave me?    I am afraid I still see Tower as some sort of leveraged 
play on the international markets which are tied into their bread and 
butter life insurance and fund management business.   I am prepared 
to speculate on where a particular share will end up in five years time, 
but as for the index and any index hugging fund,  I have no idea.   
Again no dividend is on the horizon so I see the whole thing as too 
risky for me.    Actually I see investing in the fund management 
industry *as a whole* as too risky for me!

>
> AIR was my biggest mistake. I rushed into that purchase and
>only have myself to blame. 
>

If you bought in at $1.05, that sounds about the same time as I was 
selling mine ;-)!   But I didn't make any money on mine either ;-(

>
> for future gains however as for AIR, they can bite me
> 

I have to admit AIR look expensive to me at 40c.    Huge indebtedness 
and almost no possibility of a dividend, despite the seemingly good 
work that CEO Ralph Norris has done since being at the helm.  There 
is also the upcoming cash issue to consider.   Even Brierley 
Investments sold out of AIR.  Although, come to think of it, I must admit 
'selling out by BIL'  has often been seen as a 'buy' signal for any share 
that BIL exits in recent years! ;-)

SNOOPY



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on Pegasus Mail version 4.02
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"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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