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Re: [sharechat] exit strategy by macdunk

From: "" <>
Date: Thu, 26 Feb 2004 23:14:21 +1300

Hi Macdunk,
>It Is a complete waste of time spending countless hours working out
>what a company Is worth, doing all the mathematics, without 
>five minutes on an exit strategy when the cycle turns.   The cycle
>keeps turning, spend the time recognising what the signs are      I
>admire my old mate snoopy, and the work he puts in at the beginning
>but when It comes to knowing when to get out when the trend Is over 
>goes down with It.     

You've been telling us the price of WRI should be falling for two years 
heaven't you Macdunk?  I guess if you repeat the mantra every day 
eventually you will be right.   It doesn't say much about your ability to 
time the market though.

You think it is a good idea to sell WRI?    Perhaps, for you, it is.
It all depends on what your strategy is Macdunk.    WRI is in my 
income share portfolio and that means I am buying an income stream 
at a  coupon rate.     As of yesterday the projected gross coupon rate 
was around 11%.      Know any bank that is offering even half that rate 
of interest?   I thought not.     

In addition to my 11% bond, I have free exposure to the agro-
biotechnology business through the WRI shareholding in Genesis 
research.   If it pans out I am sitting pretty.   If not, it effectively costs 
me nothing.    I regard any gain over and above my 11% pa as a 
bonus.    There are efficiency upsides in WRI retailing that could result 
in further windfall gains too.    

So I'll make a deal with you Macdunk.   If you can show me an NZ 
income investment with 
1/a better yield than WRI 
2/and which is complementary to my other income shares 
(CEN,SKC,RBD and LPC) and not a property investment

then I will sell WRI and swap across.  But I've had a look and I can't 
find anything better than WRI to fit the bill.

>The exit strategy Is equally as Important as
> the buying strategy probably more so, for the simple 
> reason we make wrong calls the lot of us      

Sure, so not being an expert on biotechnology, I'll let Allan Freeth 
decide when to quit the WRI Genesis holding for me.

>Why should we tie our money up for
> years trying to prove to ourselves we were right In the first place? 

To earn a rate of return that would beat 80% of the NZ share fund 
managers over a few years, or double the return of a term deposit, 
that's why.

> The moment I think the cycle Is over I get out, regardless of how
> good the company Is.         Classic example
> Incomes  [ high dollar farm dropping].
>  I sold wri at $1.30 bought poa for the Americas cup, and
> made another thirty pc.    I made another thirty pc since then with
> the same money on hqp.           

Yes, and what is your strategy from here on in?

>ps Any large buyer with anything up top would never pay $1.45 for
> wri  they only have to wait. $ 1.00 looming.

The market price is the point at which the most distressed seller meets 
the most optimistic buyer.   *We* might be able to trade on the margins 
but Norgate is a big fish.    If you want to buy a large stake ( as 20% of 
the company is) you always have to pay a premium.


discl: hold WRI

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

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