Wednesday, January 30, 2008

Warehouse Appeal: From stuff.co.nz

Warehouse sale delay costing shareholders and public

By NICK CHURCHOUSE - The Dominion Post | Wednesday, 30 January 2008


Woolworths says every month the Commerce Commission holds up a prospective purchase of The Warehouse is costing shareholders in the red sheds $5 million.

The High Court in Wellington heard the commission's argument for leave to appeal against a November High Court decision that overturned its ruling stopping Woolworths and Foodstuffs - New Zealand's two main supermarket companies - bidding.

Commission lawyer Stephen Kos QC told Justice Jillian Mallon the commission had a public responsibility to appeal if it thought a takeover would bring substantial lessening of competition in the supermarket industry.

The case relates to The Warehouse Group's foray into the supermarket game with its Warehouse Extra stores.

Mr Kos cited examples from Australia and Britain where competition regulators had questioned the competitive practices of supermarkets, saying the industry was a matter of concern worldwide - and in countries with more competition than New Zealand.

"The commission clearly has a responsibility to represent the public interest for the benefit of consumers," Mr Kos said.

But Woolworths lawyer David Goddard QC said the commission was doing the opposite. With every month a takeover bid did not eventuate, shareholders and the general public were out of pocket.

Mr Goddard estimated each Warehouse share would earn a $2 premium on face value from a hypothetical Woolworths buy-out, and with 300 million shares that meant they were missing out on $600 million.

Adding interest earnings to the guesswork numbers, he said every month without an offer on The Warehouse was $5 million lost.

Warehouse shares closed down 3 cents at $5.70 last night.

The delay, more than a year since the commission first blocked takeover moves, also left Warehouse employees in limbo and robbed consumers of benefiting from synergies and savings through adding The Warehouse to the Woolworths stable, Mr Goddard said.

Mr Kos, also seeking a stay on attempted acquisition by the supermarket companies till the matter could be heard in the Court of Appeal, said they could not expect the commission not to appeal because of commercial inconvenience.

"Unless [Woolworths and Foodstuffs] can show the commission is doomed to failure then there is an appeal to be heard."

He said the case was arguable and the stakes were significant so they should be allowed to appeal.

Foodstuffs and Warehouse lawyers also opposed the commission's applications.

Warehouse counsel Matthew Dunning said the "Damocles' sword" the commission had was creating uncertainty for The Warehouse.

Justice Mallon reserved her decision.

Disclosure: I own WHS shares

Essential related Share Investor reading

Commerce Commission impacts on the Warehouse bottom line

The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Links c Share Investor 2007,2008



Tuesday, January 29, 2008

Goodman Fielder a hedge against an economic slump

Chart for Goodman Fielder Limited Ordinar (GFF.NZ)

Consumers still eat, even during economic downturns. Goodman Fielder is well
placed to weather the storm.




A stock likely to do well over an economic slump, a slump looking more likely than not, is the Australasian food giant Goodman Fielder (GFF).

With operations in Australia, New Zealand and throughout the Pacific Islands, Goodman has a business with food staples such as bread, milk, butter, flour, and highly branded packaged and processed foods for breakfast, lunch and dinner, and the snacks in between.


http://hsc.csu.edu.au/food_technology/industry/research/wondwite.jpg
Wonder White, a strong
Australian brand.



Consumers are loyal to their brands and tend to stay true even when prices rise. Having said that there have been some large price increases of their products on the retail floor because of higher commodity prices, like wheat and sugar and increased labour, packaging and energy costs.

Unlike other companies, in less consumer essential businesses, Goodman Fielder has been able to pass on much of their increased business costs, so margins havent been affected on the downside too much.

Margins have been under pressure though and prospective buyers must be aware of this caveat.

Goodman does have competition, although Goodman does tend to dominate allot of food staples and brands: Vogels bread, Tararua, Kiwi, Edmonds, Meadowlea, Quality bakers, Irvines, anchor and a whole host of other recognised brands.

Goodman's share price has suffered of late, down to a low of NZ$ 1.78 last week from a high of $3.20 at the end of last year and finishing up 3c at $1.93 today.


Related Share Investor reading

Contact Energy looks bright during dark times
Goodman Fielder 2007 full year profit

Disclosure: I own GFF shares


C Share Investor 2008

Monday, January 28, 2008

Second stab at Burger Fuel denied

Chart for Burger Fuel Worldwide Limited O (BFW.NZ)

Trading in Burger Fuel shares has been spasmodic at best, since listing on the NZAX
on July 17 2007. They hit a low of 29c earlier this year.



The Burger Fuel(BFW) chart tells a horrible story.

Down 18% today to NZ 42 cents and testing its all time low of 29c.

No operating news yet but sales and profit figures will be coming up in the next month or so.

Some news just at the end of last year though that a Wellington Burger Fuel store was extensively damaged. That would take out a fair amount of revenue.

My efforts to get BF shares have again come to a greasy end.

I tried to put a bid in today at 25 c but was refused by ASB Securities because "it was too low"

The "5% rule" applies, where you cant bid below 5% of what the last sell price was.

That is, even though a bid of 29c was on a buy order a few weeks back and the last sell was above 60c the buy order was allowed to be placed.

The ASB broker told me "someone at the NZX put it through".

I still cant figure out how I'm supposed to get my bid in, for what I think the company is worth, in such an illiquid stock if I'm not allowed to put my bid in how I see fit.

Time may take care of the share price though.


Related reading on the Share Investor Blog

NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary


C Share Investor 2008

What happened to risk?

What happened to risk?

A question no doubt in some of my readers minds.

In relation to financial markets, investing and business it seems to be an archaic concept only seen as a entry in the Oxford dictionary.

The market turmoil that started with the Sub Prime fallout and associated credit crunch, several months ago, has highlighted what has been going on for many years, those that take risks in business and investing no longer seem to suffer consequences when the risk that they took doesn't quite give the expected payoff.

After global State bailouts of banks with "liquidity" problems and talk of sub prime borrowers being bailed out or their bad decisions to buy houses they could ill afford, the latest avoidance of risk involves the insurance companies that insured sub prime bonds against collapse.

For goodness sake you want to remove risk from insurance?

Let me borrow and modify a classic Tom Cruise flick, insurance is risky business!! Please don't sue me Tom.

The talk of a bailout last week led to US markets doing a Lazarus and finishing up by around 2.5%.

It ain't a positive investors, its a pure unadulterated negative.

The investing world isn't the only place risk and consequences has been removed from life, Governments worldwide have been trying to do this for years.

In New Zealand Helen Clark, and her merry bunch of Labour Party socialist risk aversionists have recently passed a law to allow citizens to easily declare bankruptcy and come out of it without paying back debtors. This is linked to student loans that don't attract interest and therefore students have no incentive to pay them back.

All risk taken and no consequences for that risk.

Over the last 9 years Aunty Helen has bubbled wrapped an entire nation so much so that the risk that she talked about when she gave a eulogy at Sir Edmund Hillary's Funeral has almost been completely removed.

When we remove consequences for risk though, we increase the risk that mistakes will continue to occur.

Those in the financial industry being bailed out, institutionally and individually are simply going to continue to do what they have done if there are no brakes on their behaviour.

The looming danger is ironically low interest rates, what led us into the whole sub prime fallout and reckless borrowing and lending in the first place.

Record low rates after 9-11 led to a frenzy of cheap credit and with similar low rates coming down the pipeline one doesn't have to be a Warren Buffett to figure out that this is not such a good thing at all.


Related Share Investor Blog Reading

Leaders must come clean over losses
Credit Crunch a blessing in disguise
Global Credit Squeeze: There is no free lunch


Related Political Animal Blog Reading

Labour's Socialist Peril



C Share Investor 2008

Friday, January 25, 2008

Warehouse Court of Appeal case could be dismissed next week

http://www.smh.com.au/ffximage/2006/09/27/woolworths_wideweb__470x313,0.jpg
The Commerce Commission will need new evidence to
prove their claims of lessened competition in supermarkets
in the Court of Appeal.



Foodstuffs, the owner of the Pak 'n Save Supermarket chain, has just been given approval to open an outlet on Auckland's North Shore after 17 years of trying. Opposition to the company's plans were put up by Woolworths Australia [WOW.ASX] Foodstuffs opposition in New Zealand.

The battle by Foodstuffs to get this market up and running has been intense, sometimes underhanded and cruel. It has cost Foodstuffs and the North Shore millions of dollars in lost revenue and wages from the 300 hundred jobs that the supermarket will bring to the shore.

Woolworths as a foe has been a hard nut right to the end.

Foodstuffs and Woolworths are currently in a fight to win control of The Warehouse Group [WHS.NZ] and the High Court in November overturned a ruling by the Commerce Commission which prevented Woolworths and Foodstuffs bidding for The Warehouse.

The court will hold a hearing on Jan. 29 to decide whether the regulator is allowed to challenge the ruling in the Court of Appeal.

The obvious link to the two battles is clear.

None of these two retail chains are going to give up the fight for the Warehouse until all resources are exhausted.

The battle for control or to buy the Warehouse has been going for almost 2 years. There have been endless appeals by the two companies (as well as the Warehouse itself) and a denial by the Commerce Commission for a deal to go ahead. There will be more legal challenges if there is first a Court of Appeal case after the Jan 29 decision, and these will go as far as New Zealand's new Supreme Court, if the two appellants don't get their way and are not allowed to bid for The Warehouse.

In order for the Appeal Court to accept the Appeal by the Commerce Commission, they will have to furnish new information to the case to prove their point that if either of the two supermarket companies buy the Warehouse, competition or potential competition in the supermarket sector will be severely diminished.

This was the CC argument in the High Court and they lost on that point, so on that basis alone the Court of Appeal shouldn't hear the case.

If a case is to be heard with new evidence furnished, I cant figure out what that evidence could possibly be.

Given the preponderance of fact that seems to be on the side of the defendants, at this stage, I don't see the Court of Appeal giving approval for a hearing before their court on Jan 29.


Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


Related Links

The Warehouse Financial Data

Related Amazon reading


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c Share Investor 2008 & 2009

Thursday, January 24, 2008

Mr Market gets his Groove on

I have commented over the last week or so on the irrational selling of most of the stocks on global sharemarkets. Stocks have gotten cheaper and yet people still continue to dump good stocks for no other reason than because others have sold and presumably because they might be lonely so they join the flock.

I found this reasoning strange. Why would you sell a company that was providing a good financial return, cheaply simply because your neighbour was selling his?

Dumb right?!

I would have to answer yes and then add further elucidation regarding the "spectacular" 180 degree turn in the US markets Wednesday 23 and say that I find the US market rise and frenzied buying as even more bizarre than the selling frenzy of the weeks and days before.

Why would you buy today as stocks are going up in price, while you were selling yesterday as stock prices slumped?

What has actually changed in one day to turn the market around?

Nothing folks!!

The reason the Dow did an impression of a roller coaster was simply talk of a bailout of US sub prime bond insurers, nothing really material at all except on the negative side.

With this latest depression and irrational exuberance of global markets I am reminded instantly of Benjamin Graham's "Mr Market" parable:

Think of yourself as owning a share in a business in partners with others. One of your partners, say Mr Market, is somewhat of a neurotic who on any given day will offer to buy your share or sell you his at a specific price. His moods can fluctuate anywhere between incredible optimism and overwhelming depression. One day he will nominate a higher price to buy or sell, the next day he might increase it, lower it, or even appear uninterested in whether he buys or sells.

Ben Graham, The Intelligent Investor

The point that Graham makes is that Mr Market’s judgment is formed more by mood swings that by rational thought and that this gives the wise investor buying and selling opportunities. If Mr Market’s price is unreasonably high, then wise investors have the opportunity to sell. On the other hand, if it is unreasonably low, then they have the opportunity to buy.

Right now Mr Market is in a schizophrenic mood and his intentions are not necessarily to be trusted. The important thing is that a successful and careful investor makes her or his own decision, based on their own ideas of the worth of the investment.

I'm still amazed at the utter stupidity of some people who ignore what they have bought when they buy a share in a company. You are buying part or a business, that you own.

You don't buy and sell your business on a day to day basis otherwise you would drive yourself mental and you certainly don't sell it because there are outside negative influences (like the subprime mess and associated credit crunch) that are beyond your control and wont impact on the business to any large effect.

It is time to start thinking clearly before pushing that button.


Related Share Investor Reading

"Mr Market" gets his groove on
A sensible approach to global market volatility
Global Market's dropping and your portfolio
Research, research, research
Watch for dead cats bouncing

From Fishpond.co.nz - Buy Toughen Up: What I've Learned About Surviving Tough Times

Toughen Up: What I've Learned About Surviving Tough Times

Toughen Up - Fishpond.co.nz


c
Share Investor 2008

Tuesday, January 22, 2008

Market Meltdown: I can smell the fear from here

An irrational smell is permeating global sharemarkets at present and it is the bitter smell of fear.

http://z.about.com/d/beginnersinvest/1/0/A/G/buffett1.jpg
The "Sage of Omaha" Warren Buffett, is a popular
Google search in times of volatile markets, from people
seeking his advice.



Hits today(like they always do on days like these)on the Share Investor Blog are at an all time record and they are mostly from America and they are googling such things like "what would Warren Buffett do?" and lots of related Buffett searches, "market crash", "market meltdown" and "market volatility".

People are seeking reassurance as to what they should do with their stock holdings.

As much as I like to get new readers I'm a bit concerned that this frenzy is gaining a momentum that the current state of global economic growth doesn't deserve.

Now I'm not the right individual to ask when the "bottom" is going to be reached, because I simply don't know but what I do know is people are selling irrationally and they are going to regret it months and years from now.

Allot of the current sell offs are being triggered by margin calls and by traders shorting stocks, that is, betting that share prices will fall, and it has had a momentous snowball effect so far and will probably continue until the buyers come out of the woodwork for some bargain stocks.

Few of the New Zealand companies beaten down so far are in danger of serious real business difficulties and so too global companies, so the disconnect between reality, and the psychological schizophrenia that mums and dads are facing by selling their company holdings at a serious discount is a big one, and only getting bigger as stocks tumble like dominoes.

Don't take this as an endorsement to go out and start buying but I have $NZ50000.00 ready to spend on top ups to my portfolio and I'm feeling like my wife when she goes to the Thanksgiving day dress sales in Dallas Texas, very excited!

So lock up the razor blades, tip the sleeping pills down the drain and use that rope to tie up the bear outside, 'cause its goin' to get turbulent.


Related Share Investor reading

Warren Buffett's The Intelligent Investor
Global Market's dropping and your portfolio
Global Market Meltdown: What is Warren Buffett doing?
A sensible approach to global market volatility

Shareinvestorforum.com - Discuss this topic


Related Amazon reading

The Origin of Financial Crises: Central Banks, Credit Bubbles, and the Efficient Market Fallacy (Vintage)

The Origin of Financial Crises: Central Banks, Credit Bubbles, and the Efficient Market Fallacy (Vintage) by George Cooper
Buy new: $10.36 / Used from: $7.46
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c Share Investor 2008

Monday, January 21, 2008

Google as a research tool

http://images.businessweek.com/ss/06/07/top_brands/image/google.jpg
The power of search engines used for "research" can be
overrated without proper, old fashioned hands-on research
to back it up.




Just a throwaway post for what it is worth, but have you ever been so bored or curious that you Googled your own name?

On the Share Investor Blog almost everyone who has had a piece written about them has checked out that piece and their competition has also done similar.

The public relations departments of companies clearly have people who do this, should I be worried?!

I'm not about to tell you here who is Googling themselves(sorry about that, and it gives me an investing advantage) because these shy folk want to keep their anonymity, and that is fair enough, but there are also a number of brokers and serious heavyweight financial institutions who get their info from Google and that has got me wondering about the credibility of the information and expertise that they in turn pass on to their clients.

I would like to think that financial institutions or brokers making decisions with their clients money might like to actually visit the institutions they have been Googling from time to time to get the full picture, and I'm sure that most do but there is a tendency with human nature when a search engine is at your fingertips, to get lazy. I'm guilty of that as I'm sure some of my readers are.

So, you know important companies are listening and reading what we all say about them online so give them a chance to hear what you have to say and it might just make a difference somewhere along the line.

You can do that on the Share Investor Blog by either using the social network sites like Digg and Stumble Upon and spreading links from this site and others. Links for most of these sites are located at the bottom of each article or make a comment on this site itself where it says "comment", again at the bottom of each article. Its really easy.

For those of you who have commented, thanks, and for those of you who would like to, I would love to hear your feedback and suggestions, positive or negative.


Related reading from Share Investor

Google: Has it lived up to the hype?


C Share Investor 2008

Sunday, January 20, 2008

Michael Hill Jeweller has a defined growth strategy

[MHI]  Michael Hill International Ltd the Queensland based jeweller, with around 200 stores at present is a growth company and has been doing so since Hill himself opened the first store in Whangerei, New Zealand, in 1979.



Michael Hill International <span class=

Michael Hill Jeweller Ltd share price, like most NZX listed
stocks, has taken a beating so far in 2008 but opportunities
are there to grab the stock when it is down.



It listed in 1987 when it had ten stores and also expanded into Queensland with one store in that year.

The expansion has been expertly crafted under Hill's steady lead and is aspirations to become a "global jeweller" with 1000 stores in the next 20 years, look to be well on track.

A small foothold in Canada has slowly improved since the companies entry there and there have been rumours of a push into the USA and the United Kingdom.

The focus on steady growth is the key to success here.

Michael Hill hasn't expanded in Starbuck style but growth has been targeted, measured researched and focused.

The jewellers brand has been a key to its success, most people who know about the company associate it with certain traits; good friendly service, frequent sales and advertising and catering to the middle of the road customer with a mass manufactured quality product.

Its brand has been changing over the years though and has moved from being a mass discounter to making more expensive rocks cheaper for the average customer.

Whether it be Michael Hill's customers becoming more sophisticated and or the company itself promoting higher priced and larger diamonds to them, the move towards higher margin more expensive product is only going to be good for the bottom line.

http://www.nme.co.nz/images/auckland/recent/MichaelHill.jpg
A typical Michael Hill mall store

Like any company in expansion mode though there are obvious risks involved.

The company face competition from the huge James Pascoe Ltd in Australasia, with a range of branded stores and North American Jewellers will no doubt respond with intense competition when they see the presence of an upstart in their own market.

Recent gold price spikes also wont be good for margins short to medium term.

The company know their markets though.

Extensive research is done into local buying habits and these can vary from state to state and city to city and even unique tastes abound suburb to suburb.

With a long relationship with Westfield in New Zealand and Australia, coveted good positions in Westfield's USA malls maybe easier to get than without that relationship and location of a retailers store can often be a make or break situation.

Michael Hill has got where it has today by careful planning and the ability to use that planning to sell product to consumers that they want. As long as that careful planning continues the company's push to become a truly global jewellery player looks to be an attainable goal.



Disc: I own MHI shares in the Share Investor Portfolio


Michael Hill International @ Share Investor 

Share Investor's Total Returns: Michael Hill International Ltd
Michael Hill International: "Takeover" Undervalues the Company
Share Investor's 2011 Stock Picks
October 2010 Top Stock: Michael Hill International Ltd
Michael Hill International: Is Kim Kardashian the right fit?
Michael Hill International: Tall Tales & Rumours
Hill Family makes Claytons Takeover bid for Michael Hill International
Michael Hill International Ltd: 2010 Full Year Profit Analysis
Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum
Download MHI Company Reports



Recommended Amazon Reading

The Intelligent Investor: The Definitive Book on Value Investing. A    Book of Practical Counsel (Revised Edition)
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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Share Investor 2008

Wednesday, January 16, 2008

Contact Energy looks bright during dark times

Electric companies are good
buys during times of turbulence.

With most media talking about the NZX and global indices's taking a bath since 2008 began, I thought I would take the initiative to write about business rather than the headless chooks that are dumping their stock, even though I have commented on the sad state of affairs of the current market tumbles.

Given that most stocks on the NZX have been routed recently there are some relative "bargains" worth a second look.

One that springs to mind given the very hot weather we have had in the North Island and the relative dry that the South Island has been experiencing is Contact Energy[CEN].

Contact's share price has been dropping from its high of NZ$9.70 towards the end of last year down to $7.97 today and is somewhat of a hedge against the turbulent times that we are currently experiencing.

Its profits will not be as negative as other consumer stocks in an economic downturn because people will still be using power and Contact is well placed in this respect.

It posted a full year profit to June 30 of NZ$239.6 million and is expected to report a net profit of NZ$220.8 million in the current fiscal year according to Reuters.

As I mentioned earlier, the extreme hot weather in the North Island, specifically in Auckland, where Contact has a large number of customers among its 650,000 odd, the air conditioning is bound to be running at full tilt.

Coupled with this, the dry Otago weather is good for Contact as Hydro power, which is the benchmark for power prices, will be more expensive to produce and cost consumers more but Contact has the edge because it has a large number of non hydro power stations, most notably their Otahuhu gas fired power station, and its geothermal belt around the centre of the North Island.

While there are a number of negatives the company faces, increasing gas prices and availability and the shut down of their New Plymouth power station, costing Contact $25 million in lost profit for the full 2008 year, the positives distinctly outweigh these negatives.

The probability that Contact's majority Australian owner, Origin Energy, will make another bid for the company is also another reason to pick up some of this stock because they would have to pay well north of 9 bucks to get it.

The sureness of a continued good cash flow and profit during uncertain economic times makes Contact worth a second look and the share price is at a more reasonable level for investors to make a good long term profit once some certainty returns to global sharemarkets.


Hopefully that will be soon.


Essential Links

Contact Energy Investor Centre
Origin Energy Corporate Website


Related Amazon Reading

Service Opportunities for Electric Utilities: Creating Differentiated Products (Topics in Regulatory Economics and Policy)

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c Share Investor 2008

Monday, January 14, 2008

A sensible approach to global market volatility

Sell, sell, sell!!


Global Indices

The NZSX 50 was down 48 points today and is at its

lowest point since November 2006. Other global indexes
have also been markedly negative since Jan 1.




New Zealand and global sharemarket investors seem to be telling their brokers right now.

Global indexes have suffered from a New Year hangover that has seen values drop by an average of around 5% since January 1.

For sure there are underlying issues surrounding sub prime loans affecting credit flow and therefore investment, high inflation and oil prices but hang on a second, is that the end of the world?

Investors have to ask themselves why they bought their stocks in the first place and if the only criteria that has changed are the current macro conditions that currently exist and they will have no direct, disastrous affect on the fortunes of the company you have plunked money into, then following the sheep to your broker's door is only going to make him richer in the long run.

Why don't you follow your own research and perhaps stock up on companies that you already have shareholdings in?

Most serious wealth is created for investors when they buy assets during down periods such as the present one.

The worlds most successful investor, Warren Buffett, uses this very approach to add to his ever increasing large holdings and enter new businesses and it is one backbone to his investing style that has done him well.

The tricky part is of course choosing the right time to buy in a declining market and that is probably the hardest part of "picking a bargain", because the share price could be even cheaper next week, month or even year but if you can get shares in a good company that you already own cheaper than your initial purchase then you are doing well.

If you are feeling nervous at all about current market volatility on the downside and you are so worried that you cant sleep because your portfolio is losing value, then you should either stop checking stock prices every minute or simply get out of the stockmarket, because it isn't for you.

The market is risky and continued stock price increases are not going to be the status quo and if you have a short term view of investing then you are going to be continually disappointed and worried!

I think global markets are set for continued negativity for 2008 and a slow recovery in 2009, until we see the full exposure of the sub prime fallout mid year.

Until then just hang on and maybe even get the checkbook out little bears.



Related reading from Share Investor

Research, research, research
Current Credit Crunch a blessing in disguise
Leaders must come clean to restore trust in credit market
Fear and Greed are lovely things
What is Warren Buffett doing?
Global credit squeeze: There is no free lunch
Panic! Wot Me?
Global Markets dropping and your portfolio
Watch for dead cats bouncing




C Share Investor 2008

Tuesday, January 8, 2008

Sky City Entertainment share price drop

The share price of Sky City Entertainment has had its own run of bad luck over the last few days.

While the NZX as a whole has been very weak on low holiday volume today, the SKC share price was down 9c to finish on its days low of NZ$ 4.33 on 3 million plus shares, excellent turnover for this stock on any day.



Sky City Entertainment Group Li (SKC.NZ)


This 5 day chart from Yahoo tells the grim story and is clearly an indicator of something material at play.

The clear winner is that nobody is going to buy the casino company. The market knows that the prospect of this has been tenuous at best anyway, however insiders might know this as a certainty and are dumping holdings.

The other possibility is that a sale has been made of their cinema division and the price is low or bids are low, or management haven't found a buyer and are left with a small white elephant.

Another dreary thought is that half year profit, to be announced around the 20th of February 2008, is going to be lower than forecast, first half 2008 ended 31 December 2007. The market would have to know if profit is going to be materially lower though.

Either way insiders are selling down and bad news looks to be on the cards.

Blackjack anyone?

Disclosure: I own SKC shares


Share Investor articles on Sky City:

New Broom at Sky City set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns

Sky City Casino: Underperforming
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit


C Share Investor 2007,2008




Sunday, January 6, 2008

Share Investor's 2008 Stock Picks

As the price of gas to starts to reach for the stars, fixed mortgage interest rates look like they are ready to go double figures, a continuation of the 2007 finance company meltdown set to drag on, and Helen Clark and her merry bunch set to plunder taxpayer wallets again in 2008, this writer is still in a holiday frame of mind.

Shareinvestorforum.com- Discuss this Share Investor Post


On that light note then id like to offer my completely unbiased opinion (yeah right) on what my picks are in 2008 for stocks to watch for.

Keep in mind that global stockmarkets this year are going to get a beating from the aforementioned and a probable recession in the US, and my picks are going to reflect the actual prospects of the companies and not the wider short term global influences mentioned.

My picks are long term, with a bare minimum of 5 years, and have an emphasis on companies with good long term prospects.

Without further ado and out clauses, here are my picks.

Like a lot of other stock pickers poking their heads above the parapet in 2008 I am going to put Fisher and Paykel Healthcare[FPH] at the top of my list.

Unlike its cousin Fisher and Paykel Appliances, FPH has good long term prospects and that is driven mainly by an R and D department that keeps coming up with cutting edge products with good margins that keep the revenues coming in.

Recent positive developments in the USA over increased health provider payments for FPH's sleep apnea products in-home mean this area is a driving force for profit and as new products are developed for the at home market profit looks set to rise.

The only negative is the weak US dollar, which is something quite frankly the company and analysts need to get over.


Pumpkin Patch Ltd[PPL]is on my buying list again for 2008. I have already picked up increased quantities of this 2007 beaten down stock and the short term punishment from slightly weaker global profit margins due to higher living costs means this stock will pick up when these pressures disappear.

Its strong global brand awareness and loyalty to that brand also helps during downturns.

Another retailer suffering from a mammoth stock slide in 2007, Hallenstein Glasson [HLG] is a pick for 2008.

A very well run company that shares the same reasons for its downturn with the likes of Pumpkin Patch and all other retailers.

Already retracing some of its 2007 slide, the stock price will be downwards volatile in the first part of the year and add some value as we come out to Christmas 2008.

Burger Fuel Worldwide[BFW] has heated up the Google box in 2007 and may gain interest as it expands in Australasia in 2008.

An indicator of what the share price will do will be sales figures from the Kings Cross Burger Fuel opened towards the end of 2007.

Indicators are that sales are good.

Like Pumpkin Patch, its strong brand awareness and loyalty will help it prosper long term. Although profit isn’t going to come in 2008.

I’m picking Burger Fuel as my wild card and recommend buying in the 20-30c range.

Mainfreight is another company that I have a shareholding in, and far be it from me to pick yet another already in the Share Investor Portfolio but I wouldn’t have picked it in the first place if it didn’t rate a mention in my 2008 picks.

Mainfreight[MFT]is a very well run company and perhaps more than any other listed on the NZX, management have set it up to succeed long term.

Everything has been set up with company long term sustainability and success in mind, and the pressures that Mainfreight will come under in 2008: increased fuel, wage, and interest rates, will be largely ameliorated because of careful forward planning.

The share price has been beaten down to around NZ$6.50 from a 2007 high of over 8 bucks, so the upside is obvious.


Other 2008 notables for me are:

Sky City Entertainment[SKC] if it isn’t sold it ain’t the end of the world and its new head that starts soon looks promising and has a track record of reorganizing casinos and making them tick.

Telecom New Zealand[TEL] if its new leader can change the whacked out culture of its workers and respond to its current and new customers in a preemptive instead of a reactive way then they have a good shot.

Serious money must be spent on infrastructure in 2008 to move Telecom’s technology into the 21st century.

If Michael Hill International [MHI] can build on its 2007 success, with good indicators for sales in Canada and material efforts to expand into Mainland USA, then the after 10 for 1 split share price of just over NZ$1.10, looks set to hit record highs in 2008.

Rakon’s [RAK] share price was slaughtered from highs over 5 dollars in 2007 and there were a few teething and integration of new business problems that put the foot on the brakes.

Higher than usual Kiwi dollar crosses wiped some profit off the balance sheet but management should focus on the business first before worrying about things they cant control.

A great long term prospect.

Two US stocks that I'm picking for 2008 are Yum Brands [YUM]and Starbucks [SBUX] I like Yum because of its potential for expansion of its operations in China and India and Starbucks for the same reason.

Yum's KFC operation seems to be the star of the show, especially in China, as increasingly wealthy Chinese get the taste for western protein such as chicken and the number of possible units there would dwarf the US store count.

Starbucks had a rough year in 2007 but this former bull star has room left to run in 2008 as its stock price was given a good frothing due to its slowing sales and profit and Asian expansion could put some cream on the lattes as 2008 goes forward.

2008 is going to be a tough year for investors but with the right research and focus on how the business you are going to invest in works, you are going to set yourself up well in the long term.

Like any picks from people like myself, they must be taken with caution and may not be the right ones for you.

My picks come from my own research and I have backed them mostly by plunking down hard earned cash, with the exception of Burger Fuel, Rakon , Telecom and Hallenstein Glasson.

Burger Fuel and Hallensteins are on my radar to add to my portfolio in 2008.

Happy investing for 2008!


Disclosure: I own Sky City, Mainfreight, Michael Hill, Hallenstein Glasson, Pumpkin Patch and Fisher & Paykel Shares.


Share Investor's Annual Stock Picks

Share Investor's 2012 Stock Picks
Share Investor's 2011 Stock Picks
Share Investor's 2010 Stock Picks
Share Investor's 2008 stock picks
Share Investor's 2009 Stock Picks: Looking Back


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The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
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c Share Investor 2008






Thursday, January 3, 2008

Carbon Credit trading puts global markets at extreme risk

I'm going to kick 2008 off with a topic that is going to be a constant of mine this year, and in the years to come, because as far as economics, the impact on economies and business, it is going to be one of the biggest negatives we have ever faced.

The scourge of the global warming Nazis and their thirst for control, of individuals and nations, through new and increased taxes, in the name of decreasing your "carbon footprint", is going to have far reaching impacts into every aspect of everyday life.

The relevance of this to investing and my interest comes in the form of "carbon trading".

The introduction of a so-called "Carbon Trading" platform by New Zealand's NZX is likely to be the beginning of the end for this country's economy and global economies as we know them and there is a possibility that our sharemarket could be wiped off the face of the earth completely when the carbon trading market inevitably collapses.

Scaremongering and overstating my case to make a point?

I think not.

If we learn anything from history in regards to booms and busts and meaningless frenzies whipped up by market hysteria, we have only to look back to the most recent tech bust of 2000, where there was at least some substance and truth and real profit involved in a handful of tech companies, some of which still survive today.

We can also look back to the Dutch poppy boom around 400 years ago, where "rare" blooms were being traded for outrageous prices, well beyond any intrinsic value and of course just like the tech boom 400 years latter, much wealth was made by those that got in first but eventually things turned pear shaped, and most people lost, collectively, vast sums of money.

If we look at the carbon trading market, one can see the beginnings of a frenzy, one being whipped up by the likes of Al Gore, Hollywood and theorists who base their whole "global warming" theory on failed "science" and outright lies.

Al Gore is one of the leading proponents of carbon credit trading and has a huge financial interest in that market.

These early adopters are set to make billions on carbon trading markets and will be the only ones to profit from it.

The outfall when the latter come investors lose faith from trading "carbon credits", which they will because they are not only worth zero in dollar terms, but are a negative weight on economies and have no intrinsic value in themselves, will cause a crash in multiple markets not seen since 1929 and the 2000 tech plunge.

The trading of good stocks, property, land, businesses, minerals, commodities and the like, that have an actual value, and clearly while the prices of these assets will fluctuate in price, most provide a real income and have value. Carbon credits, which are and will be traded increasingly in the future, have no actual value if you don't believe the flawed concept on which they are actually based.

As most critical thinkers know, the concept of man made "global warming", the basis for it and the reasons it is being raised as a concept or theory, is a highly contentious one and the trading of carbon credits, in order to make money for the savvy, gives it a respectability it really doesn't deserve.

Just like the poppy rush of the 1600s, the great crash of 1929, the market meltdown in 1987 and the tech bust in 2000, the coming carbon credit trading bust shares some of the reasons why markets crashed at these times.

These four market crashes all share an over exuberance and a market frenzy to a point where the value of the assets or shares traded far exceeded their real intrinsic value and these were the main reasons why the markets eventually collapsed.

The poppy trading, tech market boom and carbon credit trading share a similar trait in themselves.

In all three cases the values placed on "goods" traded often had no or little value from the get go.

Poppies traded 400 years ago were wildly inflated in price, the majority of tech company stocks traded had never made a profit, and in the carbon credit trading example not only does the "product" traded have no real value, it is actually of negative value, in a local and global business sense because it adds cost to running a business and will eventually be applied to every product and service that consumers buy and use on a daily basis.

From a carbon tax on gas at the pump, to food you buy in the supermarket, the new carbon taxes will be applied to everything and clearly it will cost us all more, all for no good reason, for that is what taxes do, they constrain business and economies.

So clearly the carbon credit trading part of the equation means you can offset those extra taxes forced on us by the global warming Nazis but the negative value of those so called carbon credits is self evident from my explanation that they are a cost not a productive commodity that is worth anything.

They are worth less than nothing!!!

Politicians and business "leaders" who have jumped on the carbon credit bandwagon, because they can see the dollars to be made and the control of the populace that extra taxes afford, are putting the global economy under threat. Ironic then that this is being led by a failed politician, Al Gore.

The past has left us littered with evidence that getting caught up in such bandwagons only leads to disaster.

To ignore the warning signs of history is to go forward blindfolded, deaf and with ones mouth shut and is clearly moronic to the ultimate degree.

In writing this piece I am constantly reminded by the old adage "...when one ignores history one is bound to repeat the same mistakes..." but we know what has passed and it is more like, "... repeating the same thing over and over and expecting a different result".

Either way the global economy is in for a huge shock when the carbon credit market implodes.

Resist the temptation to get involved this time.


Related Share Investor Reading

Mark Weldon Strikes out on Carbon Trading
Quote of the year
Of Tulip bulbs and Tooth fairies
Global warning: Tax iceberg ahead
Mark Weldon in two minds about carbon trading

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TZ1 Market
Kristen Byrne - 15 year old schoolgirl debunks climate change myth

NZX financial data



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c Share Investor 2007-2009