Sunday, June 22, 2008

New Zealand Stockmarket gurus needed, please


Warren Buffett is one of the most Googgled names on the internet when it comes to financial related web searches, but even more so when the economic crap hits the fan, and for good reason.

Buffett is one of the worlds preeminent long term investors with a penchant for big deals and eccentric behavior-crazy if you earn less than $1,000,000.00 PA-and at the moment he is involved, through a major stake in Anheuser Busch, the US maker of Budweiser Beer, in that company's possible marriage to Inbev, the large European Brewer.

Buffett was also at the centre of the merger of Mars and Wrigley's and has bought larger stakes in many of his current portfolio positions.

This spending has also led the Sage of Omaha on a recent tour of Europe to look for businesses to buy.

All this interest in buying assets, on the backdrop of a credit crunch and its associated fallout, when everyone else seems to be selling.

If one follows Buffett's investing style, one will know why he is buying at this time. Turbulent times can make for good bargain buying opportunities.

If we relate this back to New Zealand and our investment and economic background, local investors would have to ask themselves, where is our Warren Buffett?

New Zealand has its fair share of wealthy individuals, comparatively speaking of course, but if we look at listed stocks on our NZX bourse, the amount of buying currently by high net worth individuals is quite scarce.

The only bargain seeking done recently by my recollection is from Rod Duke, the major shareholder in the Bricoes Group [BGR] who just last month added to another purchase of Pumpkin Patch [PPL] made a few months before. This takes his holding in the children's clothing retailer and manufacturer to just under 10%. Duke's reasons for buying was that it was a cheap buy and that the company had "good long-term prospects". Something that Warren Buffett would probably agree with, if he knew that New Zealand had a stockmarket!

Savvy family investment vehicle Masthead, run by the Stewart family, are busy snapping up listed hospital provider Wakefield Health[WFD] and their move right now will turn out to be a timely one in years to come.

We have also seen the like of Graig Norgate, from PPG Wrightsons [PGW] farm group who has been buying assets recently, but his buying has been done overseas in Uruguay.

Mainfreight [MFT] and Freightways [FRE] have also recently bought assets in Australia.

Now I'm not suggesting at all that investors should blindly follow these large investors when they make a purchase, do your own research, but you have to ask yourself, they didn't get wealthy in the first place by being stupid with their money.

Perhaps the reason most of our wealthy kiwi investors are shunning the local stockmarket is that there are not enough quality companies to choose from. Probably an element of truth there, but we do have some well run and managed listed vehicles that truly represent value at the moment.

The likes of Mainfreight, Pumpkin Patch and Hallensteins Glassons[HLG] today represent good value for the investor buck.

Low trading volumes over the last few months, and especially the last week, might suggest that mum and dad investors are running for the hills and that bigger foreign investors are standing on the sidelines because they know things could get alot worse, in regards to the local and global economies.

What Warren Buffett does through his recent investing activity, is signal to other less savvy investors, like yours truly, that now is a good time to be buying. In other words, be greedy when others are fearful and fearful when others are greedy.

The confidence that Buffett's buying brings to the US market is lacking in New Zealand and that lack of confidence would be somewhat eschewed if we had our own guru like pied piper to follow.

This lack of confidence is reflected in the lack of depth of IPOs so far this year, with the notable exception of Pike River Coal[PRC] and without interest from those seeking capital to expand, it is doubtful we investors will be interested as well. Good start up companies however will always do well.

While having wealthy net worth New Zealanders investing in the New Zealand stockmarket isn't necessarily crucial, it is nonetheless desirable for that to be the case, especially during hard economic times.

It gives a positive direction for other investors to follow, instead of following brokers to the next "hot thing", that is bound to blow up in the investor's face.

Warren Buffett does that for millions of American investors, can we have a candidate for us down here please?

Disclosure: I own MFT, PPL, and Freightways shares


c Share Investor 2008