Thursday, May 29, 2008

Peter Marshall deserves longer sentence

The sentencing of Peter Marshall, former head of the failed online broker, Access Brokerage, to 3 years jail today surprised me.

I was expecting a far lesser sentence and perhaps even home detention for a fraud Marshall perpetrated on small shareholder/customers, when he was CEO of the brokerage and it collapsed owing millions at the end of 2004.

Marshall's plea for leniency because of "poor health" showed all the hallmarks of fraud cases heard in the US several years ago over accounting fraud and dubious businesses practices but Judge Bruce Davidson wasn't having a bar of it.

Marshall really didn't deserve the courts leniency anyway as he pleaded not guilty and his defence argued his innocence all the way:

The Crown maintained the offending was significant and "took issue" with any suggestion of real remorse, as Marshall maintained he had done nothing wrong.

While I was expecting a lesser sentence, I personally don't think 3 years is long enough. Marshall's lack of remorse clearly shows he hasn't learnt anything from his experience and for this reason alone the sentence should have started at 5 years.

We don't have to look much further than collapsing finance companies, and their advisors and
Money Managers advocating their clients to invest in dodgy companies to see that financial markets in New Zealand are still largely the domain of the wild west.

We need a few more sheriffs (and judges) in this town to send the message, and make an example of those who would wish to part you with your hard earned moola in nefarious ways.

Related Share Investor reading

Blue Chip's Mark Bryers at top of shaky pyramid
Money Managers Saga-3 story wrap
Money Manager's First Step gives investors the middle finger

c Share Investor 2008

Tuesday, May 27, 2008

Be an active investor

Reading the news today about 94 New Zealand Housing Corporation employees ensconced at a luxury resort in Tongariro at taxpayer expense, got me thinking about accountability of management amongst our listed companies and shareholder involvement or lack thereof in the businesses that they have invested in.

Even before investing in a listed company, you would do well, as part of your research to get in touch with the management of the company and have a chat. You maybe surprised who you might get hold of and you could even find yourself talking to the CEO, or the company secretary at the very least. They can only say no. I myself have talked to several leaders of the companies I own a part of and you can glean quite alot from a quick chat.

Of course if you do business or become a paying customer at one of the businesses you have a shareholding in, it doesn't hurt to give your feedback, positive of negative, about your experience. How the employee/manager at the end of the phone or across the desk deals with your feedback can say alot about the company you are invested in.

Shareholders should at the very least tick all the boxes in the forms that they get in the post come annual general meeting time. The form that you get will allow you to vote on remuneration, cast your ballot for directors and vote on any extraordinary decision the board may put to shareholders in a particular year, amongst other things.

These kinds of votes become even more important when your company has a takeover or merger offer made. Don't ignore these requests for your input. They are important, even though you might think you have only one vote, you do have ownership of a part of the company-exercise that ownership.

Go to annual meetings. You don't have to be a Bruce Sheppard, the head of the NZ Share Holders Association, but listening to the other shareholders ask questions, the ability for you to give your point of view on company direction is going to be a benefit to your decision to hold or fold.

Sadly in the 10 years I have held shares I have never been to a meeting, they are always on in the middle of the day when I am busy but that dear readers is another column.

New Zealanders are a passive bunch at the best of times. Foreign shareholders are far more involved and tend to have more say in the company's' that they own.

Remember, it is your money invested and you do have a say in your part share of the listed company that you own. It doesn't have to be a completely hands off experience and getting involved makes that investment a more exciting prospect that a certificate in the top drawer or an electronic company code on your computer screen.

Related Share Investor reading

Stick to what you know
Investors can learn from my stupidity

From Amazon

The Development of Equity Capital Markets in Transition Economies: Privatization and Shareholders Rights (Contributions to Economics)

The Development of Equity Capital Markets in Transition Economies: Privatization and Shareholders Rights (Contributions to Economics) by Dirk Willer

c Share Investor 2008

Sunday, May 25, 2008

NZ Stockmarket set for discontent Winter and Summer

Pressure on the New Zealand stockmarket has been coming from the global credit squeeze and the subsequent fallout from that but negative influence from the local economy has also held sway.

We have seen over 10 finance companies collapse over the last 2 years and the local real estate bubble has started to deflate. A record number of people losing their jobs in the last quarter, negative consumer spending, the lowest ever business confidence index and pressure from ever higher food prices, sustained high mortgage rates, record oil prices and continued reckless government spending forecast in the 2008 Budget don't make for a pretty picture at all.

The New Zealand stockmarket has held up reasonably well to this news over recent months but these economic influences are going to impact on real company results come next reporting season.

We have already seen retailers report their latest profits for the March year and few did well, clearly things look even worse for these retailers come October.

Discretionary retail spending is one thing but impacts are going to be felt in every sector of the market; building, real estate,infrastructure and agriculture, but a few. The only listed companies unlikely to be affected at all are our electricity energy retailers and generators-we still need to heat our homes as we hunker down for this winter of discontent.

Long overdue tax cuts come October 1 are too small to stimulate our economy very much, and perhaps the only thing they will stimulate is inflation and therefore mortgage rates because the tax cuts don't come hand in hand with government cost cutting-very important when you have tight economic times.

I don't pick market bottoms, it is almost impossible to do and it can get awfully smelly if gotten wrong, but hopefully if you have picked your portfolio well and add to it as the bargains come then you will be well positioned when the upswing comes.

Mine is still around NZ$25,000.00 in the green but I'm still prepared to get into the red when the proverbial really hits the fan.

Lets hope the spray back doesn't hit a full blown gale!

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Share Investor Business News- Get more business news
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c Share Investor 2008

Thursday, May 22, 2008

Commodities bubble set to burst

Jed Clampett struck crude in his backyard while a hunt'n and he ended up living the high life in Beverly Hills and lived a very happy life with Jethro and the whole clan. He would have been even wealthier today.

As we speak, the price of Nymex crude futures is US $134.40 a BBL, LME copper futures are US$8299 a metric tonne, wheat futures US $787 a bushel and a whole host of the worlds other commodities: gold, steel, aluminum etc are at record prices and show little sign of slowing down their upwards trajectory.

Sure, much of the reason why these commodities keep climbing are because of unprecedented demand from the likes of China and India and the use of soy, maize and other food crops to make Bio-fuel, are having an impact on food prices but one cant underestimate the effect speculators and traders are having on commodity prices.

At just shy of US$135 bucks the oil price has far outstripped the upward pressure that pure demand would put on it and just like any other bubble, the commodity bubble is inevitably going to burst.

When is not clear but just like the stock booms of the past, the tech bubble of 2000 and the current real estate collapse, what goes up inevitably comes down. It would simply defy history for this not to happen.

So what is the problem? you might ask. Well the big headache will be that this sector of the investing market is now getting manifold increases in money being invested; by individuals, hedge funds, banks, pension funds and all the other derivative, bond holding, debt laden fund raising schemes(that I don't completely understand) that were involved in the Sub-Prime mortgage sector.

This wouldn't be so bad if the direct investors were the only ones burned when things go pear shaped but as we know these things have a tendency to effect the real economy and therefore the average man on the street.

These speculators have bailed from the stockmarket and real estate and are now creating another bubble that will burst like Elle May Clampet out of her gingham top.

The consequences of a commodity bubble bursting though will be a whole lot less attractive than Elle May's d├ęcolletage.

Share Investor Sites

Share Investor Business News- Get more business news
Share Investor Stockmarket forum -Discuss this topic further
Share Investor Forum's new member GIVEAWAY!!

c Share Investor 2008

Monday, May 19, 2008

Why did you buy that stock? [Ryman Healthcare]

With Ryman Healthcare [RYM.NZ] announcing its annual results for the year ending 31 March 2008 to the market on Thursday 22 May 2008, I thought I would elaborate on some of the reasons why I bought the stock in this latest of a series of columns.

Ryman, the operator of approx 3000 retirement units,
up from 900 eight years ago, increased profit by approx 20% in November 2007 and has future plans to grow at a similar rate in the medium term.

Why did you buy that stock?

Why did you buy that stock? [Kiwi Income Property]
Why did you buy that stock? [Hallenstein Glasson]
Why did you buy that stock? [Briscoe Group]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Pumpkin Patch Ltd]
Why did you buy that stock? [Michael Hill International]
Why did you buy that stock? [Mainfreight]
Why did you buy that stock? [The Warehouse]
Why did you buy that stock? [Goodman Fielder]
Why did you buy that stock? [Auckland Airport]
Why did you buy that stock? [Sky City Entertainment]

Share Investor Stockmarket forum -Discuss this topic further

The historical aspect of company performance initially attracted me and once again that has got to be down to good management. The company has managed to grow in spectacular fashion without asking shareholders for additional funds and has positioned itself well for the future.

Now there are quite a few different companies that will give you exposure to the New Zealand listed property market and one other listed retirement village operator, Metlifecare [MET.NZ] but I chose Ryman over Metlife because of the size of its current land bank for future use, approx enough for 2000 units.

Although currently the real estate market and property values are suffering from a downturn and that should be reflected in the announcement on Thursday(although having said that shares were up by more than 4% on good volume today possibly indicating something good on Thursday) , the other reason I like Ryman is that its revenue streams are multiple and set to grow dramatically as we all grow older and wish to stay in the more independent villages that the likes of Ryman and Metlife offer.

The first revenue stream is income derived from developing and selling the units, continuing revenue to take care of residents and property and another cut when the unit is on-sold.

This provides a good cashflow for the company to function well and during the tougher times, this makes it easier for the company to sustain their business model.

Another easy to understand business, this encouraged me to buy and its ability to differentiate itself from other single property residences in the form of a strong brand of villages countrywide help keep the competition at bay.

I have held the company for around 3 years and it has cost me approx $1.75 per share. I would purchase more at lower than cost levels, given the ability of my wallet to allow it.

Related Share Investor reading

Stocks on my Watchlist: Metlifecare Ltd
Time for retirement?

Related links

Ryman Healthcare Financial data

Related Amazon Reading

The Motley Fools Rule Breakers Rule Makers : The Foolish Guide To Picking Stocks
The Motley Fools Rule Breakers Rule Makers : The Foolish Guide To Picking Stocks by David Gardner
Buy new: $12.35 / Used from: $0.01
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c Share Investor 2008

Sunday, May 18, 2008

Restaurant Brand's gives KFC a push

It will seem strange to regular readers of this blog for me to be praising Restaurant Brand's [RBD] management but after some reasonable on site research of one of the company's brands, KFC, I do believe they might have got one aspect of the company almost right.

Restaurant Brands is the franchisee operator of KFC, Pizza Hut and Starbucks and has had a very chequered operating past since listing in 1997. Sales have been declining, levels of service poor and menu and food quality dubious at the best of times. Profit and revenue have also consistently fallen in the last decade as a result of the poor management.

There has been a 2 year focus on KFC to resurrect the company's only profit maker. Millions have been spent to remodel the 89 store chain with new menu items to give the image of KFC and the Colonel's old deep fried chicken a healthier look and judging by my own survey of a couple of Auckland's North Shore stores, Takapuna and Browns Bay, the extensive rejig of the menu seems to be keeping declining customer numbers at an even keel.

The choice of salads, burger meals, various new types of snack foods and smaller chicken pieces from the old KFC menu make for more choices for customers but management risk diversifying too much and alienating their core customer (thats me folks) who still comes for the fried chicken, if they go further.

Stick to what you know guys and don't try to reinvent too much. McDonalds have just successfully redefined their menu in a healthier way, while adding a large chicken menu to their roster and too many similarities between the 2 chains chicken products should be avoided at all costs. KFC's main point of difference, and it has been that way for nearly 40 years in New Zealand, is their 11 herbs and spices recipe. Don't kill the very chicken that lays the golden stuff !

Related Share Investor reading

McDonalds playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

Russel Creedy, who was appointed as CEO in September 2007, has made some good moves since his appointment and the continued development of KFC from previous management head Vicki Salmon has stemmed the previous hemorrhaging of the KFC unit.

What Creedy must do now though is consolidate his relative success at KFC and sell the loss making Pizza Hut New Zealand while there is someone willing to buy it.

Starbucks, while still growing revenue, mostly from inflation, is nonetheless still losing money overall and a sale back to the franchisor would be the best for all participants.

RBD management don't have the depth of expertise to manage 3 brands to the maximum benefit of their shareholders, and as proven ever so slightly so far, their concentration of efforts seems to be paying off at KFC.

Related links

RBD New Zealand
Yum ! RBD's franchisor

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Share Investor Business News- Get more business news
Share Investor Stockmarket forum -Discuss this topic further

c Share Investor 2008

Wednesday, May 14, 2008

Stick to what you know

One thing alot of people do in life,especially when they get bored, are particularly ambitious(or turn 40!) is to go outside one's comfort zone to challenge their personal or professional skills, this can be quite rewarding in many ways, a sense of achievement comes from trying new things and the risk of failure can often be forgotten in the heat of excitement.

While this approach to life in general is much to be admired, this sort of approach to investing is probably one of the easiest ways to lose your hard earned bucks.

When deciding to buy a business or part of a business, as stocks are, one of the most important aspects you must consider is if you understand what it is the company does and how it does it.

Look for either a good business that you yourself may have industry experience in or is simple enough to understand with a minimum of interpretation of company reports.

Food companies, retailing, steel making and strong brands like, Coca Cola and McDonald's are easily understood even by the most green of investors.

This basic investment tenant can also be applied to the management of any business or enterprise. Watch closely at management of any company who also want to go out of their comfort zone or level of experience and therefore competence.

A successful toilet paper company that suddenly decides to use their excellent profits to expand into the new car business is one that you don't want to invest in and if you are already invested you should roll yourself right out of there.

Coca Cola tried to mess with the formula to their main product in 1985, they didn't need to, they were still number one, but the CEO decided to go outside his level of expertise and change their simple successful 100 year old product. It would have meant the end of the company had the decision to recall the old formula not been made.

The formula of sticking to what you know clearly goes across all asset classes as well.

Be it bonds, of either the Sub-prime or "prime" variety, stocks, real estate, gold, oil, pork bellies or carbon trading, you must stick to what you know first. If you want to get into something you don't know, either you don't, or you do your homework and become as competent as you can.

It is very easy to look at glowing company reports, prospectus' or advisor recommendations of companies but when those businesses are more complex than a real estate agent's patter on explaining why the view in the advertising looks nothing like the view from the house itself, don't go along with the hype.

K.I.S.S. keep it simple stupid!

Who in their right mind would get into a company like Blue Chip New Zealand, their company was structured like a pyramid within a maze, but people looked past the complexity and "invested" anyway.

While of course good management, good company history and growing revenue and profit are also essential ingredients in the investing cake, removing complexity from the mix is going to make one's decision a more profitable one in the long run.

Understanding a business or investment is a really good start along the road of success and the new challenges will lie in continuing to keep the business/investment simple. Keep the challenges for the weekend and bungee jumping in Queenstown.

Share Investor Sites

Share Investor Business News- Get more business news
Share Investor Stockmarket forum -Discuss this topic further

c Share Investor 2008

Monday, May 12, 2008

History of Warehouse takeover players indicates a long winding road

With The Warehouse Group [WHS.NZX] shares taking a dive over the last week or so because of their weak sales data and grim outlook in the medium term, the attractiveness to speculators wanting to get an even better slice of the company and flog it off to Woolworths Australia [WOW:ASX]-I don't think Foodstuffs are in the game because of their shallow pockets-is an opportunity going begging for.

Given that the Overseas Investment Office has already given its approval for Woolworths OZ to acquire the owner of the Red Sheds the only stumbling block for the big W will be for them to lose their defence of an appeal by the seriously malfeasant Commerce Commission(CC), who want to put the brakes on any possible deal to stitch up The Warehouse with Foodstuffs or Woolworths OZ.

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

Much of the Commission's case relies on the potential of The Warehouse Extra to provide competition to the current "duopoly", stunningly a duopoly that the Commerce Commission itself voted for when it initially allowed Progressive to merge Foodtown's brands with Woolworths NZ in 2002. Woolworths Australia then bought that merged entity in 2005.

Dr Farmer said the High Court at Wellington was wrong in fact when it concluded it was unlikely the Extra store concept would be expanded and even if it did succeed it was unlikely to exert competitive pressure.

"It would be ironic that the firm, which has the potential to expand and which is already exerting pressure on the incumbents, should be able to be the subject of acquisition by one or other of those incumbents, thereby subjecting consumers once again to the duopoly," Dr Farmer said.

James Farmer QC April 30 2008.

Ironic indeed Dr Farmer, have you read your client's former cases that initially advocated a duopoly in 2002?

The Warehouse itself has stated that the Extra format hasn't achieved the potential that they thought it would and it seems unlikely that they will expand the current 3 stores to the 15 planned ones.

Farmer then spent much time grasping at straws by arguing over what the term"likely"might mean.

There is fierce competition for market share in the supermarket sector though and if you look at the trail of litigation over the Progressive/NZ Woolworths merger of 2002, where an appeal was taken all the way to the Privy Council by Foodstuffs, lost, and then writs and a judicial review taken regarding the Overseas Investment Commission and their decision to allow the merger. The whole process began in May 2001 and was only rectified towards the end of 2002.

As I have indicated in earlier columns, even if the appeal to the High Court is lost by the CC, and I think they will lose-they lost their 2002 case after changing their initial positive stance to allow a merger, due to a small change in competition law- they can still put their tail between their legs and run off to the Supreme Court in Wellington and start yet another appeal. The history of these supermarket players and the Commerce Commission would indicate that the Supreme court is the most likely scenario. In which case any decision, either way, will be closer to the end of 2008.

The Warehouse shares were down 2.8% to NZ$5.20 or 15c on over 1 million shares traded today and any further weakness in share price is an opportunity for a good short to medium term play.

Related Reading

Warehouse takeover battle in court TVNZ
NZ retail duopoly court case begins The Australian
Woolworths still keen on NZ's Warehouse - report Reuters

Related Links

The Warehouse Financial Data

Related Amazon reading

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c Share Investor 2008 & 2009

Sunday, May 11, 2008

Share Investor News

I am pleased to announce another website from the Share Investor stable.

At Share Investor News ,investors can keep themselves up to date with investment and finance news from the likes of Reuters, BBC Business video, Forbes, and more, with much more content to come.

It is all updated live via RSS feeds and of course available from the Share Investor sites links to the left column of this page or by typing into your browser.

The news site is part of the coming new permanent home for the Share Investor Forum,, where investors can discuss the minutia of investing to their hearts content.

I hope you find the new news site useful and if you have any suggestions or comment please contact Darren.

c Share Investor 2008

Why did you buy that stock? [Michael Hill International]

I initially resisted buying shares in Michael Hill International, [MHI] the operator of approximately 200 Jewelry stores in New Zealand, Australia and Canada because the dividend wasn't big enough.

Buying Michael Hill shares would be contrary to my investing belief that an investment should pay good returns, right from the beginning, when you plunk down those hard earned sheckels.

Why did you buy that stock?

Why did you buy that stock? [Mainfreight]
Why did you buy that stock? [The Warehouse]
Why did you buy that stock? [Goodman Fielder]
Why did you buy that stock? [Auckland Airport]
Why did you buy that stock? [Sky City Entertainment]

I then watched over the years as MHI management continued to have a sustained success in their business and have 20 plus years of good revenue and profit growth behind them.

I then re thunk my position on dividends and returns and decided to look longer term, where I thought Michael Hill's main prospects lie.

Therefore the main reason I bought MHI shares was in the company and its good long-term prospects, 5 years and up. Granted, it is doing well currently but its big future lies in the long-term management and progress of the company for even better investor returns.

Its position in my high dividend portfolio as a "growth stock" marks it out only with Pumpkin Patch Ltd [PPL] in that respect. My portfolio was previously lacking in such growth stocks and it is probably prudent for investors to have one or two in their portfolios.

Good management marks this company out from many others listed on the NZX and as you might know, as a seasoned investor, good management of a company is the most crucial part of a business, save the product or service being sold. Management for me is another key reason for picking Michael Hill. This is embodied in Michael Hill, the man himself, and he has provided a culture where his other managers are able to run the company the way he would want and therefore the transition to another CEO in the future will be relatively easy-another good long-term indicator.

Once again, and it seems to be a recurrant theme that runs through the businesses that I pick to invest in, they are easy to understand. Like the other retailers in my portfolio, Pumpkin Patch Ltd [PPL] Postie Plus Group [PPG] and The Warehouse [WHS] they simply sell goods to the public. Easy peasy.

For me, having Michael Hill has part of my portfolio provides an opportunity for me to participate in a growing business in which the full benefits of that growth, in terms of larger profit , a bigger company and revenue are still many years down the track. Along with excellent management and and easy to understand business any significant dips in share price would be a good opportunity for me to acquire a much larger stake than my current 1000 share holding and I wouldn't hesitate to take that opportunity.

Essential Links

Investor Information

Related articles from Share Investor

MHI has defined growth strategy
MHI profit sparkles

Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions)

Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions) by Benjamin Graham
Buy new: $41.77 / Used from: $32.40
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c Share Investor 2008

Wednesday, May 7, 2008

Burger Fuel management cagey over company progress

Further to the story about Burger Fuel Worldwide[BFW] signing a master franchise deal with a business in Dubai, I mentioned I was going to ask Josef Roberts, Executive director of the company a couple of questions to flesh out the details of the deal to the market and his investors.

He was very accommodating before the July IPO, granting me an email interview about where the company was going, in some detail.

Here were the questions I put to him yesterday:

Hi Josef, I hope you are well.

Interesting announcement today re the Dubai franchise deal. It took me by surprise.

On that note, I wonder if you could inform my readers as to some of the finer points of the deal and some of the reasons why you took the business across the other side of the planet.

Assuming you could answer some questions because the market is speculating.

1: why are you going to develop a new overseas market before establishing the current Australian one?

2: Did the Dubai company approach BF or you them?

3: Are the terms of the master franchise similar to that of individual franchisee agreements in New Zealand?

4: What number of outlets do you see in Dubai?

5: Are customers likely to be locals or expat kiwis/Aussies/Brits etc?

6: How will the BF menu be different in such a unique country?

7: What experience does the Dubai company have being a food franchisor?

8 How is Burger Fuel Worldwide going in terms of revenue created for the Franchise company as a whole and are you on track?

9: How has your experience of your company now differ from what you thought it would be when you initially planned this listed franchising model, have things changed considerably?

10: Is Australia proving difficult to crack, given the amount of competition in Sydney?

11: How has the current credit crises affected your business expansion, if at all, and is the associated economic slow down having any affect on store sales?

12: Finally, where do you see Burger Fuel being in 12 months?

I would appreciate your assistance in informing my readers. There is much google interest on our blog every time you guys have a press release and we have had a handful of Dubai hits today, just as a matter of interest.

Regards, Darren

Josef's answer to my questions:

Hello Darren

To paraphrase your own comments about BurgerFuel and me – “Go Figure”.

All the best.

All I can say is it would have been nice to hear some detail about the Dubai deal and where his company might be heading and how it was doing.

My questions were really stimulated by the company and its big leap right across to the other side of the world before being properly established outside New Zealand, in their first overseas market, Australia.

I felt that his investors might like to know the finer points of this move.

As I said above, Josef was very accommodating before the Burger Fuel IPO and I was expecting the same sort of candidness as the company progressed.

I realise his curt response maybe motivated by some of my criticism but after all it is only my opinion and therefore his side of the story would at least balance things.

Nevertheless I still wish him and his company well and hope his lovely burgers(minus the bacon) take off in Dubai.

Related reading on the Share Investor Blog

Burger Fuel cooks up Dubai deal
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

Tuesday, May 6, 2008

Why did you buy that stock? [Mainfreight Ltd]

The series on why I bought a particular stock continues with a big favorite of mine, Mainfreight Ltd [MFT.NZ] .It is a particular fav because I see it as New Zealand's best run listed company. Many would disagree with that statement but I would challenge anyone to tell me why this might be a figment of my imagination or at least partly exaggerated, which I am sometimes prone to do.

Related Share Investor reading

Why did you buy that stock series
Why did you buy that stock? [Fletcher Building Ltd]
Why did you buy that stock? [Freightways Ltd]
Why did you buy that stock? [Kiwi Income Property Trust]
Why did you buy that stock? [Hallenstein Glasson]
Why did you buy that stock? [Briscoe Group]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Pumpkin Patch Ltd]
Why did you buy that stock? [Ryman Healthcare]
Why did you buy that stock? [Michael Hill International]
Why did you buy that stock? [Mainfreight Ltd]
Why did you buy that stock? [The Warehouse Group]
Why did you buy that stock? [Goodman Fielder]Why did you buy that stock? [Auckland Airport]
Why did you buy that stock? [Sky City Entertainment]

If you haven't guessed so far dear reader the main reason I bought this stock was the excellent management of the company. Bruce Plested, Executive chairman, and Don Braid, CEO, are masters of their industry and have a clear plan as to where the company is going and how they are going to get there.

To put it bluntly, communication to their employees, customers and investors is sans any bullshit and I like that. They are clear precise managers who achieve company goals with little fuss and fanfare and no excuses if they fail, which they rarely do.

This management style is copied across the countries in which they operate and local managers are able to make their local operations their own, even though they are part of a much larger exercise. Once again this focus on good management is the main reason for company success and the carrot that got me hooked.

In a related matter, I also like the company "culture" that management have fostered in their employees. Respect for employees by management is clearly apparent and this makes for a happy and more productive workforce.

Mainfreight is another easy to understand business, they are a logistics company, that is, they transport freight . Easy. They have a diversified business but have stayed within their area of expertise even when they have expanded in overseas territories.

Other companies that stray way from their core area of business knowledge always come off second best. Try to avoid buying such a company if you can. The risks to your wallet become much higher.

Mainfreight is the third largest holding in my portfolio, in terms of the purchase price,which I may have initially overpaid for, and I have had ownership in the company for just over 2 years now and am still very happy with company performance. I would buy more today at any share price weakness.

In my humble opinion, I believe that Mainfreight would fit the investment criteria of Warren Buffett and if the share price was cheap enough and he knew or cared where New Zealand was, he would drop his ukulele and snap it up in a heartbeat!

Mainfreight @ Share Investor

Mainfreight Ltd: Full Year 2010 Profit Analysis
Long Term View: Mainfreight Ltd
Share Investor Interview: Mainfreight's MD Don Braid
Stock of the Week: Mainfreight Ltd
Questions to Mainfreight's MD Don Braid
I'm Buying: Mainfreight Management delivers the goods
Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss MFT @ Share Investor Forum

Download Mainfreight 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
Buy new: $14.95 / Used from: $7.50
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Monday, May 5, 2008

Burger Fuel cooks up a Dubai deal

They will be eating Burger Fuel burgers in Dubai soon, thanks to Burger Fuel Worldwide[BFW] management signing a Master franchise agreement with Dubai based Al Khayyat Investment Group Investments LLC - a holding group with diverse business interests ranging from multinational companies, automotive, retail, schooling, leasing and real estate interests.

Related links

Al Khayyat Group
NZX Announcement
NBR: Burger Fuel signs franchise deal in Dubai
YAHOO:Burger Fuel moves to Dubai
Burgerfuel website

It will be interesting to see the terms of the agreement, presumably it will be similar to the individual franchise agreements operated in New Zealand, Burger Fuel's home. If the Arab franchisees plunck their oil money down and really go for it, then possible investors in Burger Fuel here may get a better picture on how successful the Burger Fuel Franchise operator will fare.

Since the listed company will derive its income from ongoing royalties, currently too small to make any profit on overheads, the development of a larger group of stores will be a good indicator of the company and its long term future.

Personally, I'm still a little skeptical as to why Josef Roberts, executive director of Burger Fuel, and his fellow directors may have leaped so far across the world with their concept before developing it more fully and profitably in Australia.

Two company owned stores in Sydney just isn't a good indicator for future success outside the Australasian market.

I have so many questions about this move I have made a request to Josef ,via email , to flesh out some of the detail of today's announcement. I'm curious as to whether the Dubai company made the first move or if it was Burger Fuel's initiative.

I know there is plenty of interest about this company because every bit of news about Burger Fuel is googled incessantly, this site got alot of BF related traffic today, including a handful from Dubai, possibly kiwi ex pats.

Save for more positive concrete numbers or an indicator that things are improving financially and that the Franchisor business model will work with this type of high end food business, I clearly remain negative on the company when it comes to its present valuation of just under NZ $30 million.

Some questions need to be answered to reassure investors that management are heading in the right direction, given today's surprise announcement.

Hopefully, even though I have been critical of his baby, Josef will return my email. He has been great so far.

Burger Fuel shares were untraded at closing today, which isn't unusual. They last traded April 29 @ 45c.

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c Share Investor 2008

KiwiRail will cost Mainfreight

Micheal Cullen is not Warren Buffett, another individual who has been buying large train sets, like Burlington Northern in the United States. Buffett has bought good assets at rock bottom prices and they are lean and mean operators. This is not likely to happen with the new State run rail company that will no doubt be called KiwiRail.

So ignoring that, and on behalf of the long suffering taxpayer, the Micheal Cullen and Helen Clark twins have just plunked down almost NZ$700 million taxpayer dollars to buy a new train set, with billions more to come to prop up its day to day running, on a business that has never made money.

Govt buys back rail, ferries for $665m
History of NZ railways
$665 million buy back
Rail buy-back condemned as 'reckless'
Blog: Dr Cullen changes trains
Commerce Commission needs to derail KiwiRail owner
Cullen Pays 6-fold more than KiwiRail worth

Apart from the stupidity of the transaction,and over inflated purchase price and the immediate increase of about 2000 in state employees in a new government department, one of Labour's main aims is to "get all those trucks off the road".

Just like Air New Zealand [AIR] before them and government departments like KiwiBank, taxpayer funds will be used to subsidise an inefficient and loss making business to compete with private enterprise, the very people who are paying the tax in the first place!

Like myself, you would have to be concerned if you were a shareholder of a company like Mainfreight[MFT] or the owner of a smaller trucking company, already struggling with high diesel prices and government imposed regulation and cost.

Long haul operators like Mainfreight are going to face intense competition from the new State run rail company. Subsidies to business who need goods hauled will give an unfair advantage to the rail operator when competing for business.

Further government "protection" of a State rail system, in the form of "climate change" regulations and/or taxes can't be discounted with the current administration, who have shown that they are prepared to retrospectively pass laws to fit their socialist agenda, regardless of sensible business practices and outcomes.

While Mainfreight have both long and short haul divisions and operate trucks from seaports, airports and rail hubs and therefore may be able to transform their long haul business and capital expenditure to focus on a possible busier short haul business-Labour have a goal of doubling current freight volumes, the cost to do this is clear. It will be large.

"In summary, we do not have a large enough or vibrant enough business sector in New Zealand. Economically, New Zealand has been on a long slow decline relative to other OECD countries for close to forty years, and this decline has accelerated in recent years. Surely with the benefit of hindsight, New Zealand governments can recognise that our productive sector is not performing to the level necessary to ensure this nation’s future health and prosperity.

Right now we need bold new initiatives and inspirational leadership. Other countries have found ways to reverse economic decline, and that has involved low company tax rates as in Singapore and Ireland and a reduction in the weight of compliance costs.

Whatever the outcome, Mainfreight has a determination to remain a New Zealand owned and operated business while continuing to pursue global aspirations".

More and more the New Zealand economy slides down the OECD economic rankings as we milk our productive sector in the hope of remaining a first world country with taxpayer funded hospitals, education and social welfare.

There needs to be a clear understanding that the productive sector is the only means by which a country can prosper – interesting, challenging enterprises earning profits are the mechanism which creates opportunities for people to do well for themselves, the enterprise, and for mankind".
Bruce Plested, Executive Chairmain, Mainfreight annual report 2007

Now Bruce and his mates at Mainfreight are canny operators in logistics and business in general and will probably manage the increased government interference in their business well, but why should they have to?

The uncertainty that today's decision makes for Mainfreight and other logistics operators is only compounded by a lack of any detailed planning before the purchase of the rail assets from its former Australian owner, Toll New Zealand.

There was no business case done before the purchase by the government, as there was no detail over just how much capital expenditure was to be made to justify such a high purchase price for largely obsolete rolling stock.

Operators of long-haul trucking businesses would do well to lobby their local MPs and hassle them about the cost their decision today will impose on their businesses. Short haul logistics company's, while clearly advantaged, would do well to similarly put their MPs against the wall.

Some forget the reason this turkey was sold in the first place, it was losing $NZ1 million 1994 dollars a day and was costing its clients through slow service, strikes, theft and high prices. Toll have done much better running the business and there is no reason to feel complacent about bureaucrats running the company again.

Regardless of the political implications though, the uncertainty to the logistics industry will cost them millions.

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LIVE BLOG: Warren Buffett news conference

Over at Everything Warren Buffett there is a live blog of a news conference currently being given by the Warren Buffett himself. This is the news conference where the likes of Bloomberg, Reuters and Forbes are getting information to write the current Buffett headlines.

There is nothing like straight from the horses mouth, rather than journalistic interpretation or inaccurate reporting.

This is almost required reading for all investors, especially during these turbulent times, and definitely essential reading for Warren Buffett fans like myself.

Go to Live Blog

Current Berkshire price:

Berkshire Hathaway Inc

133600.0 -300.00 -0.22%

[US;BRK.A 133600.0 -300.00 (-0.22%) ]


Visit Everything Warren Buffett

c Share Investor 2008

Sunday, May 4, 2008

Investors can learn from my stupidity

What was one of those pithy comments that your mum used to make to you when you were growing up?

One of my mum's favourites was "if you don't learn from your mistakes you are doomed to repeat them in the future". To be fair, mum's phraseology contained some four letter words and was knowhere as concise or fluent, but she just might have had something there.

When it comes to investing in shares, my mistakes have taught me not to go there again, even though on occasion I may have made the same boo boo twice, and I thought I might share a few of my investing nightmares with you dear readers, in the hope that you may take something from them, file them away and use them for future reference.

I started investing in shares in 1997, my first purchase being Restaurant Brands [RBD] , the New Zealand fast food operator, the price per share was $NZ 2.20 and I bought 1000 shares.

I purchased initially because I loved KFC and thought the shares were "cheap". I feel dumber than dumb just reading that back.

Little did I know, the company had been performing badly for a number of reasons and I neglected to go further than the glossy prospectus for impartial information.

I bought around 60000 shares up until late 2002 and sold them all at the end of that year for a small profit, around $2000.00-not a good investment.

Two other things I learn't from that sojourn into fast food, don't fall in love with a stock and don't be afraid to cut and run if you know you might have made a clanger in the first place.

The second lesson I learn't, and probably the most cutting for me, is that you shouldn't get greedy, follow the herd mentality and plunge oneself into something one doesn't understand (Warren Buffett would spank you for that).

On Jan 25 2000, I bought shares in a "tech" company called Strathmore. I had no idea what they did who they were and whether they were making a profit. I just bought because I thought I should be in that sector,everyone else was buying, shares were going up and would continue to do so(duh!) and once again the shares were cheap.

I outlayed NZ$3900, plus $24.95 brokerage, for 6500 shares and I think they may have gone up to about 65c at their high. 13 October 2000 I sold 5000 odd at 18c and left the rest in some other company Strathmore had morphed into and lost the rest latter.

The herd mentality struck me again big time on Sept 11 2001. I remember I was in such a frenzy to sell, I spent the morning of the 12th here in New Zealand selling my whole portfolio. After around 1 hour I sold everything! A NZ$80000.00 portfolio gone at crazy prices. I didn't lose alot , if anything at all but current and future gains were erased, as we know that the market rebounded soundly months after that ill fated day.

September11/12 was a turning point for me of sorts, although I was to repeat my stupidity less than a year latter, when markets were nervous about greedy corporate "Gordon Gekko" types fiddling company books, when I sold a very large holding in Sky City Entertainment[SKC] because I thought markets were going to spiral down to nothing. They didn't.

So it has taken me around 5 years to get over my emotional ties to "Mr Market" and in that time I have realised that:

1: One shouldn't listen and act on others advice unless your own research backs up your investment criteria.

2: Greed can be good but is also bad when not practiced without emotion.

3: markets go up and down for no particular reason.

4: do not follow the herd under any circumstances unless you are smart enough to be at the front of the herd and remove yourself from the herd before the bull gores you.

5: do the opposite to everyone else.

6: Don't read the "funny pages" (a great quote from Warren Buffett and a reference to analyst/ brokerage reports and economic forecasters.)

7: Don't listen to the latest tips from friends (cyber or real life)

8: When the taxi driver, dinner party guests and party invitees all start talking about stocks, commodities,real estate or carbon trading as the thing to invest in. Don't.

9: A low share price doesn't make a company cheap. Bad management does.

10: Do your own research until your nose bleeds.

11: A hunch can often be wrong and infrequently right.

12: "Mr Market" and his bad moods can be profited from, but only short term.

13: Don't listen to me, only I know what I am doing.

The five years from 2002 have been far more rewarding financially-even including the current "credit crises" and while I have probably made some small mistakes since, my investment strategy has been honed by the years previous to 2002 and I now approach my investments with a sensible long-term view of my portfolio.

The companies I have invested in, not stocks, are assets which fluctuate daily in price and I will not sell unless there is a very good reason to do so or unless that schizophrenic "Mr Market" offers me a price for my share of a company that I just cant resist.

History is littered with the corpses of those that kept their eyes and ears closed when they were regaled with others past mistakes, but often one can learn more from the stupidity of others than the experience they have within themselves.

I hope my reflective stupidity helps.

My mum, and yours, was right.

Disclosure: I own SKC shares

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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
Buy new: $14.95 / Used from: $6.99
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c Share Investor 2008