Tuesday, June 7, 2011

I'm Buying: Fisher & Paykel Healthcare Ltd

This is a post made to answer a reader who phoned me the other day in relation to Fisher & Paykel Healthcare Ltd [FPH.NZX] and to explain to readers what I am looking at using the dividends provided to me from the Share Investor Portfolio over the last 3 reporting periods.

It just so happens that the readers phone call came at the same time I was considering buying FPH for the portfolio. I already have 5000 shares but would like to buy perhaps 10000 more for a long-term investment. My reader wanted to know if he should buy at its current price for a shorter term profit.

The case for buying shares in the company has been made many times by me (see links below)and perhaps the best indication of how good the company is as an investment can be found at the post Long Term View: Fisher & Paykel Healthcare which maps out what returns investors have had in the past and what they could expect in the future.

FPH is a well managed company with a good history of increasing profits and revenue based on their manufacture and sale of high end, well sought after medical products that have high margins and a reputation for cutting edge technology which more often than not beats its competition.

The only problem, if there is one, is that much of their business is done in US dollars and due to a weak US buck profits repatriated back to head office in New Zealand have been mostly static over the last 2 years.

This is where my readers request to ask if he might buy shares in the company and my perusing the company and its annual reports over the last 6 months has collided.

I have been watching the share price since I last bought shares in this company in June 2009 at $2.35 (see 3 year chart above) and have been a patient church mouse ever since for an opportunity to get back in.

The share price has taken a bit of a hit over the last 2 months (see 2 month chart below)due to the weak US dollar and over the last two weeks weakened further when their 2011 FY profit showed impacts from the dollar dragging on the bottomline.

Revenue and profits have grown over the years and their new products, especially their sleep apnea range has a good foot in the door in an ever increasing American market with overweight patients knocking on their doctors doors for help. This will clearly increase revenues in the future.

The currency affect will always be there so investors just have to deal with this. The company have forward hedging in place and next year expect a currency gain to the bottomline of NZ$14 million.

Now is a good opportunity to start looking at buying. The share is currently being buoyed by a 7c dividend which investors are eligible for until June 24, so one might be wise to wait until after that date to see what happens.

For investors like my phone caller wanting to take the dividend here and sell the stock if the share price stays level of rises just beware that because of that aforementioned currency negativity in the market this may not be wise.

For long term investors anything under 3 bucks is a good buy but I am going to keep waiting because I see an opportunity to get in at a far lower price. I will let you know what that is after I make my move.

For short term investors my advice is the same, be patient you can get this share for less.

Disc I own FPH in the Share Investor Portfolio

Fisher & Paykel Healthcare @ Share Investor

Share Investor's Total Returns: Fisher & Paykel Healthcare Ltd
Share Investor's 2011 Stock Picks
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Fisher & Paykel Healthcare: 2010 Full Year Profit rests on Foreign exchange movement
Long Term View: Fisher & Paykel Healthcare
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Analysis - Fisher & Paykel Healthcare: FY Profit to 31/03/09
Schroder Investment Management takes big Fisher & Paykel Healthcare stake
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Share Investor's 2008 stock picks
Fisher & Paykel: A tale of two companies
FPH downgrade masks good performance

Discuss FPH @ Share Investor Forum
Download FPH Company Reports

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c Share Investor 2011