Sunday, May 31, 2009

Stockmarket Education: How do you buy shares?

Like a piece I wrote a few days ago called Stockmarket Education: What is a Share? the following was inspired by a Google search that reached this blog "How to buy Shares?"

Another bloody good question.

Well, unfortunately one of the first things you will need to do is get yourself a stockbroker.(I say unfortunately because I don't particularly have a high opinion of them) The most popular ways of getting yourself access to one these days is online. One can do this either by hooking up with a dedicated broker that just deals in sharetrading or through your own bank, which in most cases in New Zealand and other countries has a broker service attached to it.

These online brokers, some of which also have telephone services, offer either a "self service" level of brokerage where you do all the research, and selection of shares and execute the buy or sell yourself ranging to a "full service" broker that will do all of the above for you and more if you trade enough!

Beware, and it is only my personal opinion and experience here, full service brokers will try and push their favourite shares on you and their research is more than often than not biased and sometimes suspect in its accuracy and/or knowledge of business or the company being researched. Their loyalties lie with the brokerage company first, not you.

That is why I prefer to use an online broker and do the rest myself. Pick the level of service that is right for you.

The only extra services that I get with my online broker, ASB Securities are:

1. A website with a portfolio and watchlist function.

2. Live share prices with limited market depth - a list of buyers and sellers and the prices being offered and asked.

3. Brief bios of the NZSX companies listed on the NZX - financial ratios, broker ratings.

4. A link to a cash management account through ASB Bank that makes it easy to transfer funds to facilitate share purchases.

When making a buy or sell of a share online you can either sell "at market" (what buyers or sellers on the open market are prepared to pay or sell for) or a pre-determined share price set by you.

The best part of buying online and doing it yourself is that you can do the research at your leisure and set a a buy or sell in off-market hours and the trade will then be made at the price you requested.

The cost for the self service online level of brokerage varies from broker to broker but trading using my online broker, is around NZ$30.00 for a trade of up to NZ$10,000 and at a level of 0.3% brokerage over that. Large trades can be negotiated.

You can find a list of Australian brokers here and New Zealand ones here.

Good luck!

Stockmarket Education

Stockmarket Dictionary
Stockbrokers: What you should know before choosing one
10 Basic questions to ask before investing
How the Stockmarket works
Understanding Risk
Watch Your Risk Tolerance
Stockmarket Education: What is a Share?
What Moves the Stockmarket?
7 Signs of Shareholder Friendly Management
Financial Media For Investors
Dividends in detail

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Friday, May 29, 2009

Analysis - Mainfreight Ltd: FY Profit to 31/03/09

Mainfreight Ltd [MFT.NZ] FY 2009 profit out today confirmed a slowdown in sales for the company and highlighted a tough environment for the coming 12 months. Having said that the current result was a good one.

Key Points:

1. Revenue increase of 39% to a record $NZ 1.27 billion (excluding forex gains up 28%)

2. Net surplus before abnormals of $NZ 40 million, on par with the prior year.

3. First half of year good growth, second very poor, indicating the full impact of the global slowdown, with a marked downturn in the last quarter.

4. A focus on cutting operating costs over the period of downturn in the business/economy.

5. A hat-tip to carbon emissions, noting they must take them into account because of political interference in this area of their business, but it is costing them.

6. Cashflow up strongly.

7. Debt increased significantly from $79.89 to $115.28 million.

The outlook for the company is uncertain and given poor economic indicators and a continued slowing performance in the latest quarter of business, profit is going to be down for the 2009/10 year.

They say this will be ameliorated somewhat by focusing on cost cutting, delaying capital expenditure and growing the business organically where they can - very sensible.

Given that the logistics business is one sector of the economy that is often badly affected during a recession, management at Mainfreight seemed to have managed the business well considering the slowdown in consumer demand world-wide and the resultant drop in export/import and local logistics being used in their operations worldwide.

8.5 out of 10 for me.

The stockmarket however has reacted negatively to this result, marking shares down 39c or 6.33% to NZ$4.59 at market close today.

Disclosure: I own MFT shares in the Share Investor Portfolio.

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Thursday, May 28, 2009

Stockmarket Education: What is a Share?

This little piece originated from a search that found its way to this blog; "What is a share?"

I sort of take this for granted and cant really remember asking this question because I think I already knew what a share was and perhaps that the word was self explanatory of its meaning.

It isn't dumb question though.

Lets see it we can give this question a reasonably intelligent answer because it is important that beginners in the stockmarket know and those that think we know(like yours truly)might find out something we don't.

This is how I would describe a share to a beginner.

Basically when you buy a shares (or stock, security, equity) in a company, in our example a listed company on a stock exchange, your shares get you ownership of a small part of that company and some of the attendant rights of an owner of that company.

Some of these are:

1. A share of profits -through provision of dividends distributed to shareholders.

2. Voting rights on remuneration for management and fees for directors.

3. Votes on selected business associated with areas of the company.

There are also responsibilities.

Some of these are:

1. The company may ask shareholders for additional capital from time to time to help run the business.

2. Keep an eye on the health of the company by reading company reports and third party research written.

The shares in the company that you have part-ownership in have a monetary value and that value can differ from day to day, week to week and year to year and you can add to your ownership or dispense with that ownership at any time but at different values depending on the time you sell-just like any business you might have full ownership over.

Shares are bought and sold using a stockbroker or sharebroker or through issues of company capital through IPOs and various other ways.

What you have if you own shares in a company then are certain rights and responsibilities, much like those that the sole owner of a business but as a part shareholder some of the rights that a majority owner has over the running of a business do not apply to you.

1. You do not have a say in the day to day running of the business.

2. Your vote in any proposition put to shareholders can be voted down if the majority don't fall your way

3. Your shareholding can be sold against your will if there is a takeover or merger that the majority of shareholders vote for, even if you vote not to sell.

Some people don't look at a share as owning a part of a business, just some sort of esoteric measurement of how much a company might be worth on a day to day basis but I and many others do, for that is exactly what a share is.

You are part owner of a business and your shares make you a business owner.

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"Climate Change" theory hits business bottom line

From the Mainfreight Ltd [MFT.NZ] 2009 FY profit announcement today comes a management commentary piece about Government red tape and its associated cost.

Don Braid usually has a well placed go at Government bureaucracy when it comes to profit season and his target this time is "climate change" and carbon emissions and it is one of the largest pieces of commentary in the profit release on one subject:

Mainfreight has always attempted to reduce the environmental impact of its operations. Our sustainability initiatives have often resulted in reduced costs; so the bottom line and the environment are both winners.

Real or not, climate change is fast becoming a core strategic issue for businesses everywhere. For Mainfreight, it begins with accepting that our business is based on an activity that generates carbon emissions and then taking responsibility to reduce those emissions over time; without negatively impacting on our competitiveness.

Last year we commenced a programme of measuring the carbon emissions in our business in New Zealand with a view to extending this measurement to other countries where we have a presence, and to reducing our emissions per tonne of freight moved. We made this information available to the public through our annual report and other avenues.

This year however, we have been faced with significantly increased costs and bureaucracy from the Government departments which oversee carbon emissions, and while as a business we will continue our programme of measurement and reduction to support our long-held policies of environmental responsibility, we have chosen not to incur the substantial costs involved in the audit and certification processes that are now demanded. We believe that incurring these costs would not provide a measurable benefit and therefore would not be in the best interests of our shareholders.

Don Braid, Mainfreight Managing Director

It is good to see the middle finger being extended to the bureaucracy and cost associated with it but what is clear from Bruce's revelation is that the "climate change" zealots in our midst are costing businesses millions and this will be the same with any other business, be it a logistics company which would be heavily impacted by "climate change" red tape to a business such as Sky City Entertainment [SKC.NZ] while less severely impacted would be impacted nonetheless.

All because of a mythical theory that the planet is warming.

It would be interesting to get comments by management from other CEOs of listed New Zealand companies to see how much it is costing their businesses. I have yet to see such comment from anyone, which is odd considering the substantial tax on company profits.

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c Share Investor 2009

Tuesday, May 26, 2009

Analysis - Fisher & Paykel Healthcare: FY Profit to 31/03/09

Lets take a quick look at today's profit announcement for Fisher & Paykel Healthcare Ltd [FPH.NZ]

Key Points:

1. Real revenue growth up by 10% to US$299.3 million.

2. Profit up over 70% and revenue up 28% is an excellent result- In New Zealand dollar terms.

3. A big contribution from a favourable exchange rate.

4. Nice contribution from the sleep apnea products.

5. Steady DIV of 7 cents - a DIV re-investment plan to be initiated.

6. Outlook positive for 2009-2010.

The stockmarket has reacted negatively to this result, marking shares down 20c at time of writing because profit guidance by management for the next year is lower than expected by analysts.

On first glance this might frighten the unwary FPH shareholder but if you have been watching the US/NZ dollar exchange rate you will know that this had favoured the company in a major way over the last year and as revenue is reported in kiwi dollars this has had the effect of boosting revenue higher than real revenue growth from increased sales.

This favourable boost to company revenue through exchange rate crosses is not going to continue over the coming year and may in fact negatively impact the bottom line, as it has done in the past.

These facts are already known by the market and there should be no surprise to anyone about the exchange rate factor and its effect on company profit. Shareholders shouldn't expect the same "windfall" profits next year.

All I can say is the analysts put the anal in their name -try looking outside the office next time you quote forward profit projections.

Of course the material sales revenue figures are the all important ones and must be the main stress in this profit report and that has increased 10% to US$299.3 million-mostly on the back of their sleep sector products.

Shareholders should take note that the company is still growing, and your focus needs to be on the bottom line health of the business and not on exchange rate fluctuations which will occur regardless of what the company does.

The company like the name, is in good health.

You can find the full Fisher & Paykel Healthcare FY 2009 profit announcement here .

Disclosure I own FPH shares in the Share Investor Portfolio

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Monday, May 25, 2009

Stock of the Week: Fisher & Paykel Appliances Ltd

This is the beginning of a new a column. A regular outing, I will pick one stock that may have been in the news - good or bad-or one that simply takes my fancy and recommend that investors might like to take another look at it to see if it fits their investment profile.

The inaugural Stock of the Week pick is Fisher & Paykel Appliances [FPA.NZ]. Long given a good stiff verbal beating by my good self over many years the main reason why I am picking this stock for closer scrutiny is the ability for you short term investors out there for you to make a quick buck rather than the slow and sometimes painful ones that I make.

Yes, yes, yes you could have bought at NZ 37c a few weeks back but the company's future survival wasn't clear at that point.

The stock closed at 66c on Friday and is on a trading halt until this Wednesday 27 May.

It seems there is to be some material news out this Wednesday in regard to the success or otherwise of its capital raising process.

It seems likely that the news is going be that some kind of finance has been found to keep the company going, at least for the short to medium term, with a 200 million rights issue mooted by BusinessDay over the weekend, the main reason given by FPA management for putting a trading halt on today.

There is some life left in this beast yet, how much we cannot be too sure, but there is short to medium term money to be made if one gets in early on positive news after trading is lifted on Wednesday. The short-term money to be made will be on buying quickly on Wednesday and flicking shares off to those who want to participate in the rumoured capital raising (it could actually be a cornerstone shareholder instead of or as well as) or buying quickly and holding medium to longer term hoping that the company can trade its way out of its current financial, revenue and profit troubles.

It is worth a look at and I will be taking a cursory glance at it on the big day to see if I can gain any benefit from it, as I am not against a short term punt myself.

Good luck.

Stock of the Week Series

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Fisher & Paykel Appliances

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c Share Investor 2009

Sunday, May 24, 2009

Whats on Rod Duke's shopping list?

So Rod Duke and his Briscoe Group [BGR.NZ] have again expressed an interest in buying retailers in New Zealand.

I wrote a few months back about Duke's great pile of cash and it seems he has ideas burning a whole in his wallet as well.

He has been buying up a bigger share of Pumpkin Patch for his personal portfolio over the last year or so as the share price got cheaper but just what the hell has he got his eyes on?

He has NZ$62 million cash to play with.

Let me have a bit of a stab in the dark and tell you why.

Please keep in mind that I own shares in a large number of listed New Zealand retailers!

My Shopping List

Briscoe Group [BGR.NZ] The stock price is low, the company doing well and has no debt. Why wouldn't you buy back shares in your own company while they are low. Pumpkin Patch has been doing just that.

Pumpkin Patch Ltd [PPL.NZ] Duke already has a 10% stake in this company and so does a potential competitor of his for retail buys, Jan Cameron. Nevertheless he has built up his personal stake over time and it would be a coup to be able to manage this prestigious international brand.

Postie Plus Group [PPG.NZ] Struggling a bit in the past, they are doing allot better over recent times with higher sales and better margins. Their very low share price makes them a target for takeover and at less than NZ$15 million market cap Duke could swallow this company whole without batting an eyelid. They have a retail brand in Baby City that would be quite attractive to any retailer. The only major stumbling block is that Jan Cameron, the wiz retailer, who loves to buy distressed retailers owns 15% of the company.

Tasman Pacific Food Group The owner operator of Burger King in New Zealand and Australia, it has been struggling for years under competition from McDonald's and recently sold off its Hell Pizza brand for a loss. Vulnerable to a decent bid.

Burger Fuel WorldWide [BFW.NZ] A gourmet burger maker with 30 or so outlets, its NZ$16 million odd market cap makes it vulnerable. It has never made money and will continue to struggle to do so. Sales are suffering in the current recession. It will need additional capital to continue and a cornerstone shareholder such as Duke would be perfect.

Hallenstein Glasson Group [HLG.NZ] Like any retailer Hallenstein Glasson is suffering lower sales and lower margins. It is doing better than most clothing retailers but is vulnerable over the slow winter sales period.

Michael Hill International [MHI.NZ] This well run jewelry chain with over 200 outlets in 4 different markets is suffering a downturn from shoppers shunning discretionary sales and its share price is vulnerably low. There are many other Jewelry chains of various sizes in New Zealand that are similarly good targets for Duke's cash pot.

The electronics sector is going to consolidate during this year or next. Every retailer in that sector is suffering extremely badly and various chains are going to go to the wall in the next year or two.

Bad retailers who have high debt, high stock levels, poor locations and high operating costs are going to come under pressure the most. Even good retailers will be vulnerable if the retail slowdown continues for any great length.

Duke's advantage now comes because he and his Briscoe Group first had no debt and then reacted to the recession about a year ago by running down inventories and cutting those aforementioned and all important operating costs- it also helps that his stores are not inside Westfield Malls, they charge very high rents!

This gives him a big advantage over retailers like MHI, HLG, The Warehouse Group [WHS.NZ] and many other retailers Duke might have his eyes on because it is a major cost for any retailer and is often the difference between retail life and death.

I cant wait to see what will be in his shopping trolley.

Disc I own BGR, WHS, PPG, PPL, HLG and MHI shares

Briscoe Group @ Share Investor

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c Share Investor 2009