Monday, June 30, 2008

BRUCE SHEPPARD: Recession, how deep? How ugly?

A very interesting blog post from Bruce Sheppard's Stirring the Pot I missed it in all my travels recently but it discusses the subject of our failing economy and where Bruce sees things going.

He is very pessimistic but elements of his post ring with clarity for me.

If things do descend into chaos there is no doubt the economy will face very tough times.

This post is essential reading for those who like to get all sides of the economic story.



Bruce Sheppard in Stirring the Pot | 2:08 pm 8 May 2008

For two years now I have been predicting the collapse of the finance sector and the result will also be a collapse of the domestic economy. It will not be isolated as Reserve Bank governor Alan Bollard thinks.

Let us start by joining the factual dots to date.

• New Zealand households are seriously screwed. Over the last 5 years they have binged on debt and consistently spent $1.20 for every dollar they earned, on average. What this means is that the bottom end of the economy probably spent $1.50, the median household spent $1, and the top end spent maybe 75c.

For households to do this they had to have access to debt, either in the form of credit card, finance companies or mortgage top ups. For banks to do this they had to have access to cheap offshore funds, largely funded via the carry trade that has held up our currency, and screwed our exporters.

• Then 12 months ago the sub prime bubble started to burst and progressively the merchant banks in the middle of all this hype have haemorrhaged value, destroying the savings of Cullen & Clarkmiddle and upper income households globally. NZ is not immune, a number of managed funds have now suspended redemptions.

• Finance companies to the extent they have survived are struggling to maintain liquidity, so they are not lending. The banks are now also faced with increasing defaults on the back of a property melt down, so they have now got an increasing incidence of asset impairment, so they too will now struggle to maintain liquidity. This means they will be exceedingly unlikely to top up homeowners for consumption expenditure.

Now, the next predictable outcomes of all of this that are now being borne out by some statistics:

The net effect of all this is the bottom end is going to be forced to live within their means and reduce expenditure. The middle sector will find that they too need to borrow to maintain their lifestyle and may well be disinclined to do so.

The top end has already seen significant wealth elimination. Falling share markets, falling property prices, finance company defaults and investment scams like Blue Chip. Thus they feel poorer. When the relatively wealthy feel poorer they simply spend less and save more. Not a single sector of the economy is consuming at the levels they were 12 months ago.

In October last year I was quoted in the media as saying we would be in recession by Christmas. And that the Christmas of 2007 would be the worst for retailers for a decade, that NZ has to forget all the talk of a soft landing, and even for that matter hard landing. This recession is going to be a crash landing. Briscoe managing director Rod Duke at the time commented that he thought this was unlikely. Now his group turnover is down 10 per cent on a year ago and he is blaming the Government and rightly so.

He should have been yelling a year ago. My advise to Rod at the time, was forget his mantra of “stack em high and watch them fly” and instead adopt a mantra of “stack em low and don’t let them grow”.

Was this avoidable 2 or 3 years ago? The simple answer is yes. Did I nag Finance Minister Michael Cullen and Bollard? Yes. What needed to be done?

• The OCR had to fall, and more or less we had to adopt a monetary policy on interest rates that reflected that of our major trading partners. If we had done that we would have an OCR of around 4 per cent and a currency to the US dollar of around 60 cents, most likely. The export sector would then be viable, thus providing an employment balance for the inevitable correction in the domestic economy.

• To correct the property market bubble Cullen had to effectively ring fence rental losses, and he could have done that by treating all investment income (including rental) as a separate tax base and capping the tax on rental income at, say 30 per cent, the same rate as Portfolio Investment Entities (PIEs), but only allowing investment losses to be offset with investment gains. A sizable incentive to save, which could have been increased even further by lowing the tax rate on investment income to, say 20 per cent. And we needed to save.

• To correct the consumption bubble the regulation of credit creation by banks and finance companies could have been redressed by simply increasing the level of equity and near cash holdings as a percentage of lending. I.E. a reversion to, or a tightening of, the reserve asset ratio regime.

credit cardThe lower OCR would have significantly reduced the carry trade and the domestic credit expansion that fuelled the property boom.

All of these points are covered in my submission to the Finance and Expenditure Select committee in September last year. Six months on still no action. Useless leadership again.

It is now too late for any of that. So what might the next twelve months look like?

Everything I say about what might come next is conjecture.

• Domestic expenditure will shrink as will the domestic economy over the next 12 months. It will take down retailers, importers, and manufactures that are dependant on the domestic economy with it.

Unemployment will rise strongly, maybe to depression levels.

• As unemployment rises mortgage and credit card defaults will accelerate. More finance companies will fall over. It won’t be a matter of how few fall over it will be a matter of how few are left.

• As the default rate on mortgages climb, banks will scramble for liquidity. And will press good customers to repay. I am already seeing this happening.

• The property market tumble will accelerate, but most likely the banks won’t bother mortgagee selling much as there won’t be any buyers. Bankruptcy will rise.

• Bollard will lower interest rates, first cut will be a full 1 per cent and my guess is as early as July. It won’t make any difference; the banks will increase their spread to pay for the bad debts that will be mounting. Bollard will cut each month thereafter through to Xmas, until the OCR is around 3.5 per cent and still it will make no difference. He will then have to request the Government to regulate bank spreads so that mortgage rates fall.

• While all this is happening the carry trade will reverse with a vengeance. The balance of payments will go to hell in a handcart, all on invisibles and capital account. We will have a reasonable balance of trade surplus, but the currency will haemorrhage. We will fall against the USD to mid 40 to 50c, and against the Australian dollar to high 60’s.

• Petrol will hit $3 per litre by Xmas and inflation will be running in the high teens, a regular stagflation depression.

Now, how will our people react to this, will we just hunker down and accept a significantly diminished lifestyle, or……. might it be really ugly and if it is how will we as a nation deal with that?

By the election we may have a rising level of civil unrest. The public marches against the Electoral Finance Bill will be nothing compared to the turn out for the “decent life” marches. They might even turn into riots, and then the demoralised police, will have to turn on the public to restore order.

There is a chance, remote admittedly, that they won’t have the stomach for the task. I doubt you would have a police force that is prepared to deal with Springbok rugby tour level civil unrest in the same forceful manner today. The army then might have to be called in, but we don’t have one. In a worst case scenario the poor who have been used to spending $1.50 and now being forced to live on a third less might just decide to take what they can’t buy. In short anarchy.

RiotCould this really happen? Maybe. The poor today are not the poor of the 1930’s. A substantial minority of our population have been brought up with an expectation of being able to pull money out of an ATM machine without doing anything to put it in, in the first place. Our grandparents expected nothing but the right to work.

I am not sure who would want to win such an election.

But whoever wins the election this year will have a number of unpleasant tasks to complete.

The first might be to restore order. This means the usual unpleasant stuff; expect that they might hire overseas mercenaries for the task.

Then they have to stabilise the haemorrhaging dollar. This means the Reserve Bank will have to support it and they will need crown funds to do it. The chance of taking it out of taxes is nil. So crown assets will be sold out of necessity, which in reality is what Roger Douglas and David Lange confronted in 1984, but way worse.

Then they will have to restore middle NZ households’ spending capacity. Maybe there will be debt moratoriums including a regulated inability to charge interest on household debt. Savers confronted with high inflation and low interest will then have no choice but to buy property and shares to preserve their wealth and so the cycle will begin to reverse.

To stimulate employment employers will be offered subsidies and benefits will be reduced. Universal national super will be abolished with all crown benefits means tested.

The lower dollar won’t be enough to get the value add labour employing sector going again. So expect research and development incentives to be increased further, corporate tax rates cut further to attract inbound foreign investment and a return to export incentives.

The free trade agreement with China will die a natural death as will our involvement in the Kyoto Protocol.

These tough moves should within 3 years turn the asset deflationary cycle around, employment levels will rise, the tax base will increase and we should be through the worst in 3 years.

But we are dealing with politicians and MMP so don’t expect any of these tough decisions to be made. As a result we will languish in a recession much longer until eventually Australia makes us an offer we can’t refuse, and Tasmania gets a promotion.

Friday, June 27, 2008

Accountability: It's such a lonely word

Accountability, a simple word, meaning basically taking responsibility for your actions or lack of or in this case having responsibility forced on you by means of law or by a third party.

The meaning of accountability though seems to have gone over the heads of those at the Institute of Chartered Accountants, when Bruce Arnold Mincham and Michael Derek Wood, directors at Queen St accountants O'Halloran HMT, were censured and ordered to pay costs of $133,347.18 over their involvement in the collapse of National Finance 2000.

Mincham and Wood breached some basic accountancy rules. They failed to report in writing to the Covenant Trustee Company of breaches to the trust deed and neglected to ascertain sufficiently, National Finance's claim that advances made to motor vehicle dealers were secured over the trading assets of the companies and by personal guarantees.

At the very least these two accountants should have been struck off as Chartered Accountants, for life.

At the upper end of the scale, striking off and a much larger fine would probably have been more appropriate. In this way the pair may have been able to have more sympathy for some of those small investors that lost their life savings with National Finance 2000, losses that were aided and abetted by the slackness and lack of care for their profession.

Small investors placed their faith in these accountants that the company they were doing the accounts for was operating in a safe and professional way and it was partially their responsibly to let the appropriate powers that be know that something was going wrong.

The Institute of Chartered Accountants, like the Real Estate Institute, Registered Master Builders Federation and others have always been backward when coming forward when it comes to censuring their members and the IOCA should be ashamed of their slap on the hand with a wet bus ticket attitude to their two highly tarnished members.

These two will only be the tip of the iceberg when it comes to the last two years and the 24 finance company collapses that have so far occurred. The IOCA decision could have been the start of something positive-responsibility for actions taken and a promise of more to come. Instead, with so far over 2 billion dollars at risk, zero people have been held to account, be they accountants, financial advisers or finance company directors.

This area of investing, like much of the investing and finance industry in New Zealand seems highly protected, incestuous and highly cosseted by those on the inside. Not on this blog though.

There appears to be at least one other finance company ready to do a belly flop next week, according to Leighton Smith this week on Newstalk ZB, and risks to even some of the bigger more respected ones also look to be growing.

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c Share Investor 2008

MarketWatch: The Warehouse Group (UPDATE)

Time to poke a few investors pockets out there. If you are not already aware, The Warehouse Group [WHS.NZX] shares have taken a beating over the last few weeks and were at lows of NZ$4.19, down 32c at close of trading today.

The slide was on thin volume of just over 400,000 shares.

Today's share price slide was due to a profit downgrade and new guidance to the 27 July of a 10% drop in earnings to between NZ$84-88 million.

If you are a regular reader of this blog you will already know that The Warehouse is currently suspended in the throes of a possible buyout, with a bidding war from 2 prospective buyers on the cards, should an Appeal Court decision currently pending fall in favour of selling the company and its assets to a new owner- in this case Foodstuffs or Woolworth's Australia. [WOW:ASX]

To those who don't know, check out this blog and its further reading on the subject and make your mind up yourself.

There is talk of 8 bucks or more per share and there is clear serious short to medium money to be made and in the current market that is not to be passed up.

I know I usually witter on about long term portfolio purchases but I am not adverse to stocking up if there is a quick buck to be made as well.



Disclosure: I own WHS shares



The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
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The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
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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


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NZX WHS profit downgrade announcement

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c Share Investor 2008 & 2009

Thursday, June 26, 2008

Im buying

“Be fearful when others are greedy and greedy when others are fearful” - Warren Buffett


I'm like my wife at the annual Smith and Caughey sales at the moment. Last week I picked up some more Fisher and Paykel Healthcare Ltd [FPH.NZX] and Michael Hill International Ltd [MHI.NZX] and today I added 2000 more shares of Pumpkin Patch Ltd [PPL.NZX] @ NZ$1.53 and included a new addition to the Share Investor Portfolio by adding 3000 Briscoe Group Ltd [BGR.NZX] shares @ 99c each.

I'm really liking retailers at the moment and am taking my opportunity to buy while others are selling. The downturn isn't going to last forever and those daring to be contrary now will be rewarded well in the future.

I vowed I wouldn't add any extra funds to the portfolio but it is only a small purchase and I am going to pay it back from the $10000.00 in dividends coming around September.

I would however like to get my hands on Hallenstein Glasson Holdings Ltd [HLG.NZX], another good retailer which is now paying an excellent gross dividend of around 18% based on current profit figures and an historically very low share price.

Now clearly stocks could get cheaper before they recover, but I bought today at a price that I am happy with and what I consider will add value long term to my investment stock portfolio.

The Share Investor Portfolio is still well in positive territory when imputation credits and dividends are factored in but down around 4% when the tax credits are excluded.

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c Share Investor 2008




Kevin's Blog

I like the the photo of Kevin Podmore on his blog but am confused as to why there is no mention that the company was going to collapse less than one month after this relatively upbeat commentary.

The blog is 2 months old.

Kevin and his directors would have known the company was facing difficulties but just like other finance companies that have collapsed, St Laurence continued to borrow money from investors.

But it’s also good to see that even in the current environment where lending hasn’t prospered investors have benefited overall from the diversified business model that St Laurence has. Losses from the lending business have been more than offset in other areas and as a consequence our profit is just $2.1 million less than last year. We think its not a bad result.

Investors have benefited overall from diversification?

Kevin, come on! you knew this wasn't truthful when you wrote it didn't you?

What allowed to to risk investors money by continuing to borrow their money while all along knowing they were not going to get it back?

Was it greed, embarrassment, shame, what?

Be honest Kevin Podmore, why didnt you give investors in St Laurence fair warning months ago that their money was at risk?

That warning should have been on your blog somewhere.

I couldn't find it.

c Share Investor 2008


NZ Herald Feature:

Finance companies in freefall


Kevin Podmore.

22 May

Posted by Kevin at 10:10 am

We have just released our year end results and investors will have noticed a few changes this year. As well as increased underlying earnings, the main difference is the increase in loan provisioning.

In simple terms, a loan provision is an expense set aside as an allowance for doubtful loans in cases where the amount owed may not be fully collectable and/or delayed. Under the new NZ IFRS accounting standards, ‘general’ provisioning (of a set percentage of the loan book) has now been replaced with ‘specific’ provisioning against individual loans that are impaired.

IFRS requires a discounted cash flow (DCF) methodology for provisioning, a more accurate measure I believe which requires companies to assess the level and timing of future payments (both principal and interest) and discount those payments into today’s dollars.

I’d like to emphasise though that provisioning is not a write-off of the loan; it is an allowance against a company’s future ability to collect that loan in its entirety. Provisioning impacts on the current year’s profit rather than delaying the impact to future years’ earnings, but it also means that the closer the loan gets to its collection date, there is a recovery of the discounted value of that money.

Higher levels of provisioning shouldn’t be a surprise given the tighter market conditions - the banks have included billions of dollars of provisions in their recently announced results. As turmoil in global markets and the slowing of the US economy plays out, and the New Zealand economy slows due to tighter monetary policy and credit conditions, we are seeing a change in the credit cycle and I think our approach with regards to provisioning will stand us in good stead going forward.

But it’s also good to see that even in the current environment where lending hasn’t prospered investors have benefited overall from the diversified business model that St Laurence has. Losses from the lending business have been more than offset in other areas and as a consequence our profit is just $2.1 million less than last year. We think its not a bad result.


Check out more of Kevin's Blog here

Sunday, June 22, 2008

New Zealand Stockmarket gurus needed, please


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Disclosure: I own MFT, PPL, and Freightways shares


c Share Investor 2008

Thursday, June 19, 2008

Restaurant Brands consider slicing off Pizza Hut

With a certain sense of satisfaction, the fact that Restaurant Brands [RBD] would consider putting up their loss making Pizza Hut Franchise up for sale is great news for shareholders.

I have been banging on for years about management cutting their ties because of the clear implications of what keeping the brand means for the company as a whole-certain death.

The only mystery to me is that is took Ted Van Arkel, the chairman of RBD so long to even consider making this announcement to the market.

While they are at it they might also like to consider ditching the loss making Starbucks as well. It isn't as bad as Pizza Hut but is doesn't make money!

KFC is the relative star of the show and that is where management and their energies should be concentrated on because I think they lack the management depth to successfully run two major fast food brands.


RBD prepared to quit Pizza Hut

1:30PM
Thursday June 19, 2008, NZPA


The Pizza Hut New Zealand chain could be put up for sale if owner Restaurant Brands is unable to turn it around.

Describing Pizza Hut as his company's "Achilles' heel", Restaurant Brands chairman Ted van Arkel today said the board would consider any actions that might end the drain by Pizza Hut on company profits.

That would include its sale if a turnaround was not forthcoming. In the meantime, the company was redoubling its marketing efforts to hold the line in the current economic climate, Mr van Arkel told Restaurant Brands' annual meeting.

He also said Pizza Hut was in a better position than its competitors.

"The pizza market is crowded and price sensitive. Our competitors, all single-brand operators, are also hurting," he said.

"We are increasingly seeing our competitors' pizza franchises on the market, desperately looking for buyers. Several have already gone to the wall."

Pizza Hut, on the other hand, had the backing of Restaurant Brands, which had demonstrated that it could manage brands successfully over the longer term, Mr van Arkel said.

Restaurant Brands, which also has brands KFC and Starbucks Coffee, was in a strong position to weather an economic shakeout and continue to build its brand presence, but many individual operators of single-brand franchises were not.

"With lower levels of disposable income among consumers, all three of our brands remain very competitive and offer good value for money to the increasingly selective consumer dollar," he said.

"We see the economy in the next 12 months as being challenging but not dire."

Restaurant Brands' flatter first quarter for 2008/09 was evidence of the more difficult trading conditions all retailers were facing and second quarter sales to date looked to be slightly behind last year.

"However, we do expect our reliable earners, KFC and Starbucks, to buck the national trend, even if sales do ease."

The next 12 months would be critical for the national pizza market. At any one time as many as 40 rival franchises were up for sale and Restaurant Brands expected that number to rise as the economy slowed, Mr van Arkel said.

In the chicken market, three competitor stores had already closed in the past six months.

Restaurant Brands' total first quarter sales across its three brands, for the 12 weeks to May 19, were $69.8 million, a decrease of 0.9 per cent on the equivalent period last year, although same-store sales were up 0.4 per cent.

Restaurant Brands shares closed yesterday at 85c, and today Mr van Arkel said the company's directors did not consider that price to reflect intrinsic value.

Broker analysts considered the stock worth buying up to around $1.25.

He also advised shareholders that directors were proposing to ask for an increase in their fees at next year's annual meeting, subject to a satisfactory result for the year.

Directors' fees have not been increased since 1998 and no longer rewarded board members adequately for their input, he said.



Related Share Investor reading

RBD gives KFC a push
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

c Share Investor 2008

Tuesday, June 17, 2008

Why did you buy that stock? [Fisher and Paykel Healthcare]

Considering I took my own advice yesterday to add to my portfolio stocks I already own when they have been beaten down in price I thought I would add Fisher & Paykel Healthcare[FPH.NZ] to this latest in the series of Why did you buy that stock? I am particularly bullish about this stock for a number of reasons.


Why did you buy that stock?

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?[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]
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]

As far as long term possibilities for good sustainable growth (PDF) I would pick this stock to do better than anything else listed on the NZX with the possible exception of Pumpkin Patch Ltd [PPL.NZ] .

The outstanding reason, above all else, why I bought this company is the economic moat that management have carefully built for it over many years. Fisher & Paykel have delivered this moat by spending a large proportion of funds on research and development to keep products like their specialist sleep apnoea technology and other breathing apparatus at the cutting edge and as a result streaks ahead of their competition.

Management have built a solid reputation around the worldwide health care community, especially in the United States, for supplying reliable, easily updated and unique, world beating innovations in health care and hospital buyers around the world automatically think FHP first when they think of breathing products to buy. The amount spent on R & D is important for company future and will help retain that economic moat, where other companies struggle to compete with FPH's products.

Closely related to the ability of the company to build such a strong economic moat, the number two reason for me to buy this stock is the quality of the management.

CEO Michael Daniell and his team have led a company that has maintained excellent revenue growth (DOC) over the years and their focus on management of roll outs of new products and the marketing and selling to clients at health care provider level have been one of the keys to FPH's long term success and will clearly be of importance going forward.

As noted by me already the priority for the company placed upon research and development show that management have grasped the essence of what their company is and how they will maintain their enviable position at the top of their field among their peers. Sadly many New Zealand company managers lose sight of what is important to their company and flounder as a result. Their sister company Fisher and Paykel Appliances[FPA.NZ] could learn a thing or two from them.

Many investors might think that all this innovative,fast changing technology makes for a company that is hard to understand. Well, not really. The company's products may be a little difficult for the lay person to fully comprehend but the main thing the company does is look after people's health care needs in the specific fields that their products specialize in. Nothing Mensa like about that and it is because of this relative simplicity that I plunked down some hard earned shekels.

Personally I like to get involved in the companies that I invest in, in one way or another. For example I own shares in The Warehouse Group[WHS.NZ] and shop there whenever I can, it would be crazy not to because it puts money in my pocket when I do.

With Fisher & Paykel Health I'm quite excited about their disruptive sleep apnoea products. They are especially world leading and it is a fast growing market because of snoring problems caused by overweight and obese patients.

Its latest sleep apnoea product has been given FDA approval to be used in a home setting.

The size of the Sleep apnoea market and the company's products excited me so much because it can help so many people with this condition, including yours truly-that could explain alot to my regular readers.

Having more than a financial interest in your investment
, according to some, could blind you to the financial fundamentals but it doesn't hurt, in my opinion, to have a passion or at least a cringing appreciation for what your company does to make its money.

As I always do in this regular series of columns, I ask myself, if after originally purchasing this share, and I have owned FPH for several years, would I still buy shares today? Well, I more than doubled my holding yesterday and am looking at a possible much larger purchase, probably about 20000 shares, if the price gets lower.

I am very happy with this company as part of my portfolio and see it as a stock I would never sell.


Fisher & Paykel Healthcare @ Share Investor

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Fisher & Paykel Healthcare Links

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Related Amazon reading

The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security
The Big Money: Seven Steps to Picking Great Stocks and Finding Financial Security by Frederick R. Kobrick
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c Share Investor 2008