Stock Guru: Warehouse popular with gurus

In the last month, The Warehouse shares have plummeted from $5.45 to below $4, firstly because although the company reported a solid 14.3% rise in second quarter sales to $741.2 million in early February, it warned that aggressive pricing and intense competition had taken their toll of profit margins.

The second blow came towards the end of February when the company asked for trading in its shares to be halted. That was ahead of its announcement that net profit for the six months ended February 1 had fallen 4.7% to $55.5 million and it slashed its forecast for the full-year result by more than 20%.

That was entirely due to its Australian problem child which the company is now expecting to turn in a loss at the earnings before interest, tax and amortisation (EBITA) level between $A30 million and $A40 million, up from a loss of $A11.9 million last year.

The Warehouse was the second most popular stock in the inaugural game.

The second most popular stock this time is life insurer Tower, chosen by 85 contestants. Telecom, the most popular stock in the first game, having been chosen by 114 of the 358 contestants, is only the seventh most popular stock this time with 45 contestants including it in their portfolios.

Tower is also suffering from Australian woes which were responsible for its loss in the latest year widening to almost $150 million from $75 million in the previous year.

At the annual meeting last month, chairman Olaf O'Duill was able to assure shareholders that the first quarter this year produced a profit in line with budget and that Tower Australian had returned to profit.

Noticeable in the second game is how many more contestants chose to include relatively obscure stocks in their portfolios. Indeed, some appear to be firm followers of the rear vision principle, focusing on the winning stocks chosen by the first game’s winner, WN. The number including Pure New Zealand in their portfolios jumped from eight in the first game to 18 this time, while those chosing Retail-X rose from five to 10.

WN, though, chose to exclude these two stocks from their portfolio this month and noteably decided to stick with one of last month’s losers, retailer Brisco Group. WN’s other choices this month are Apple Fields, Renaissance, Summit Resources and Williams & Kettle.

Other contestants seemed to be also following the rear vision principle: while 46 contestants chose Hirequip, to their cost, in the first game, only 25 remain true believers in the second game. Those chosing Certified Organics fell from 28 to 17 while those choosing Sealegs dropped from 21 to 17.

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