Share Investor: VCT

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Monday, December 12, 2011

Share Investor's 2012 Stock Picks

2011 has been a hard year on the stockmarket but lets forget about all the drama the PIIGs, Greek meltdowns, American deficits and massive bloated debt that threatens to strangle all before it and reinstate the stock picking monkey to pick stocks for 2012 .

It is the 5th edition this year and promises to be one of the most interesting if only for the possibility that 2012 will be a worse year for stocks than 2011.

In the face of a continued global recession, an uncertain economic future that had a big impact at the end of 2008 and continues today 2012 will be harder to pick than 2011.

Please keep in mind dear readers that the picks are my own and they reflect my investment philosophy and not necessarily anyone else's.

My picks are primarily based on a long-term view, regardless of the current short to medium term market turmoil and economic uncertainty.

NB: Since I think most of my portfolio consist of the best stocks on the New Zealand market, I found it difficult to pick stocks outside my realm of self interest.

NB 2: Stock prices quoted range from Dec 1-10.

Share Investor's 2012 Stock Picks

Picks from the NZX

Sky City Entertainment Group Ltd
[SKC.NZX]

http://chart.bigcharts.com/custom/fairfax-com-nz/summary-chart.img?symb=NZ:cen

Contact Energy has had a tough 2011 with stagnant profits and falling customer numbers but 2012 is shaping up to be a better year for the company.

Drought conditions experienced now and forecast to continue across Summer are going to benefit a generator like Contact considerably and this will go straight to the bottom-line. Customer numbers have stopped falling and have showed some small gains over the last 3 months.

The are also persistent rumours that majority owner of the company origin Energy Ltd[ORG.NZX] are still interested in taking full control at some stage.

The share price started the year at just under 6 bucks and has traded the year below that price for the majority of 2011 and even hitting the mid $4.70 mark in August and at the current price of $5.52 is still looking a buy

I bought some at $5.34 in July and I think investors have bailed too early considering things are finally starting to go their way. Look to buy before Winter 2012 because I am picking a good one for the company because of what I have outlined above.

A good defensive stock in times of economic uncertainty as 2012 will no doubt be.

Disc I own CEN shares in the Share Investor 2 Portfolio

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Download CEN Company Reports

TradeMe Ltd
[TME.NZX]

While only just listed at the time of writing, TradeMe could be one of those company's that continue to do well in 2012 despite global economic uncertainty. A good defensive monopoly stock in these terms as they tend to do even better during the hard times. TradeMe has a good track record and should do well in the medium term.

Plenty of demand for the IPO should see an improvement in share price.

The company is looking for a Pro-forma $65 million profit for the 12 months to June 30 2012, down from $69.8 million in 2011, so a reasonably steady bottom-line should be good for a reasonable dividend payout through 2012 and beyond.

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Sky Network Television Ltd
[SKT.NZX]

Sky Television is a company that has done well over 2011. A 2011 full year profit up by nearly 17% on revenue up just 7.4%, the company has benefited by increased customers, the switch of present customers to premium digital services and the 2011 Rugby World Cup.

2012 will see the company consolidate this growth with the continuation of the digital switch, a move towards internet TV and the 2012 Olympic Games. All good revenue earners.

Another good defensive monopoly (like all the companies listed above this stock pick), SKT is insulated somewhat from the global economic crises more than other stocks because it gets its revenue from inside New Zealand.

At its current share price of $5.35 it is close to 12 months lows of $5.25, so at this price it makes a good net return of around 6%.

Sky Network Television @ Share Investor

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Trustpower Ltd
[TPW.NZX]

Trustpower had a 2012 first half year result up nearly 20% on the previous year and is a well run company with a good track record. With 220,000 customers this generator and retailer is around half the size of Contact Energy but shows a more consistently even return on investment.

The areas that it services are geographically spread but mostly in rural areas where business is still strong and servicing a large number of dairy farms that are still doing good business and are likely to need a growing energy demand as 2012 rolls on.

With a gross dividend yield of just over 7% this beats Contact's yield by around 1.5% and that figure alone is a good reason to buy this stock at or near these prices levels in these high inflationary times.

The stock is currently trading at its 12 month lows.

Trustpower @ Share Investor

Long Term View: Trustpower Ltd

Discuss TPW @ Share Investor Forum
Download TPW Company Reports

Vector Ltd
[VCT.NZX]

Vector is the last electricity company included in the 2012 picks and it has been picked principally because of its high gross return of nearly 8%, its defensive nature as an essential utility and a reasonable if unexciting long-term investment.

Vector achieved a 2011 full year profit of just over $200 million, an increase of 4% on 2010. Management expect 2012 EBITDA to be up slightly so just watch the share price which is currently tracking at $2.47 for any pull-backs as the stock is trading close to its 12 months highs of $2.65.

Vector @ Share Investor

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Download VCT Company Reports

Fisher & Paykel Healthcare Ltd
[FPH.NZX]

I have included Fisher & Paykel Healthcare in 2012 because I still consider will be one of the big successes of the next 5-10 years and one I included in the 2008, 2009 ,2010 and 2011 Share Investor stock picks,.

It is not only a company with good long-term prospects but a company that is another good hedge against the current global turmoil. Despite the grim economic conditions over the last few years it has managed to grow revenue well and only suffering slightly with a decreased profit because of the weak US dollar. Their products will still sell well despite a possible downturn in other business sectors.

Its share price has done nothing over the last 12 months but as I said above economic conditions have failed to dent its prospects and 2012 looks to show more of the same.

With a 2012 half year profit and revenue up strongly on 2011 2012 looks to be an even better year than 2011 in terms or business operations.

Its share price has suffered since I picked it at around $3.10 12 months ago, so this of course makes it an even better pick than 2011 when you consider at the current price of $2.40 the stock is returning a healthy 7 % plus gross dividend.

FPH shares have been at a low of $2.13 in September due to currency weakness in the US dollar (It gets the bulk of its revenues in US dollars but does have hedging) so when making your pick next year tend to make your play when the US dollar is under pressure.

Disc I own FPH shares in the Share Investor Portfolio

Fisher & Paykel Healthcare @ Share Investor

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Ebos Ltd[EBO.NZX]

Ebos Ltd is another company that should withstand the economic rigours of 2012. 2011 saw them produce a full year 2011 profit up nearly 19% on 2010 on revenue up by 200 million.

EBOS is a leading supplier and distributor of both specialty and generic medical and pharmaceutical products to the New Zealand, Australian and Pacific Islands public and private healthcare sectors and is, like Fisher & Paykel Healthcare, somewhat insulated from the macro conditions that usually influence other companies.

The company has doubled profit over the last 4 years and has a good track record historically.

The share price is off its 12 month highs of over $7.50 and at its current share price of $6.10 is paying a healthy dividend of over 7% gross. The company has a history of increasing dividend payouts.

The company is very positive for growth in 2012 and have lowered debt considerably over the last few years.

EBO @ Share Investor

Long Term View: EBOS Group Ltd

Discuss EBO @ Share Investor Forum
Download EBO Company Reports

Mainfreight Ltd
[MFT.NZ]

I am picking Mainfreight for 2012 after leaving it out for my 2011 picks because it had gained 30% in value after I picked it in 2010 and I considered it overvalued at just under 8 bucks.

At just under $10 at time of writing and after reaching an all-time high of $10.72 in July 2011, the share price now is 20% higher than what it was at the end of 2010 when I picked it, you might be wondering why I am picking MFT for 2012.

Well, you will already know why if you are a regular reader of this blog that I think Mainfreight is a company that is the best managed company and with the best prospects on the NZX.

Mainfreight is a dominant player in the logistics sector in Australasia and has businesses in North America, Asia and now Europe with the acquisition in mid 2011 of the Wim Bosman Group. It has designs on becoming a global logistics player, has surpassed 1.2 billion in revenue in 2011 and has a stated aim of doubling in size over the next 3-5 years.

Mainfreight has had a great 2011, with 2012 first half result profit significantly up and its share price has picked up as a result and long-term their lengthy track record of success looks likely to continue.

Having been glowing about its prospects long-term, 2012 could be a bad year for the company as global trade looks set for a downturn as the European debt crises bites on their economy hard and the outlook for the global economy is more than a little negative.

Logistics companies are one of the first sectors to feel the impact of economic downturns and I think this might be a good opportunity to buy on weakness in the share price in 2012.

Buy below 6 bucks with a view to hold a minimum of 5 years for superior returns.

Disc I own MFT shares in the Share Investor Portfolio

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Xero Ltd
[XRO.NZX]

My final main pick but certainly not the least, is Xero , the online accounting software company. Xero is a niche player in an industry dominated by global players like Quicken and MYOB and it increased its customer base significantly in 2011 and looks set to build on 2011's gains. It has however put the break-even point for the company in terms of net profit off until 2012 - that deadline was supposed to be reached late this year.

It is presently building its customer base to get "critical mass".

The buzz in the tech industry surrounding Xero is reflected in the amount of support the company has from insiders and it could be well a big player in time to come. The company has had some significant financial backers from those who know Xero well but Mums and Dads are still largely absent from the shareholder register.

XRO is a little riskier than most investments and the share price has finished the year off pretty much where it began but took a dip close to 2 bucks in July.

I include Xero this time because even though founder and CEO Rod Drury told me in 2010 that he wasn't going to sell the company and was dedicated to seeing it through to a stage where the company would be a global player, I think that he maybe tempted to take offers going at a time where the company could struggle to maintain revenue growth and therefore gain that critical mass. Xero would be valuable to a Quicken or MYOB as an add-on to their businesses.

Buy on dips below $2.50.

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Other Notable Quotables

Auckland international Airport Ltd [AIA.NZX] A good monopoly at historically cheap prices, doing better in 2012 and set to pick up profit again in 2012.

Fisher & Paykel Appliances Ltd [FPA.NZX] has been beaten down to penny dreadful status and currently trading at 35c but still has brand recognition and could recover in late 2012 somewhat if the Christchurch earthquake rebuild kicks off. An off side chance if you want a punt.

Steel & Tube Ltd [STU.NZX] & Fletcher Building Ltd [FBU.NZX] have both been given a hammering share price wise in 2011 and both will benefit greatly from a Christchurch rebuild supposedly kicking off in late 2012. Watch for share price dips to buy when overall market sentiment is negative.

As you might also think I recommend every stock in the Share Investor Portfolio - except PPG, PPL and GFF. The last 3 are turning into stinkers.

Nasdaq

YUM! Brands Inc
[YUM.NASDAQ]

A pick from 2010 and 2011 Yum ! Brands Inc achieved a target of 10% sales growth for 2011 and with more tasty growth to come in 2012 and beyond from China & India still make this company a Finger Lickin proposition.

ASX

Coca Cola Amatil
[CCL.AX]

Coca Cola Amatil is the dominant player in the carbonated drinks market in Australasia. It sells its iconic Coca Cola brand as well as a large number of other well known brands in New Zealand, Australia, Indonesia, Fiji and a number of other markets in this part of the world. Their 2010 Annual Report shows a record profit of nearly AU$ 500 million on strong revenue growth.

A strong history of profits can be a good sign that there is more to come in the future and the fact that its customers are largely addicted to its products makes this company a great long term bet. I have always liked this company because it keeps managing to grow its business with clever marketing and product placement at sales outlets.

Buy on any weakness for superior long-term returns.

Coca Cola @ Share Investor

Coke is it!

Discuss Coca Cola @ Share Investor Forum

Conclusion & Outlook for 2012

2012 may well be a year of some severe downward corrections on global stockmarkets. As uncertainty surrounds the fragile state of many economies and the precarious state of Europe's debt yoke and more pain and drama to come in the United States as politicians argue over spending cuts to stop the country from defaulting. Gains made on stockmarkets in 2011 could materialize for some as nervousness over the aforementioned leaves them to take cash off the table. It is clear that there is much more bad news in relation to the global economy to come and the consequences of this bad news one can only guess at but it will not be pretty at all.

That aside if you can, some listed companies have done well in 2011 and will continue to do so in 2012 but others will find the going tough as cash flow dries up, debt mounts and interest rates bite.

I have concentrated largely on defensive monopoly type stocks for 2012 with the bulk or all of their revenues coming domestically and picked in 2012 will do comparatively well for that year and should do well over the next 5 years or so as we see these uncertain economic times continue.

If there is no upturn in the economy, stockmarket share price weakness will have me poised to buy further shares in some of the companies I own in the Share Investor Portfolio with surplus cash of over $32,000.00 in dividends and some with borrowed funds if there are some really good bargains to be had. I am looking at buying more Fisher and Paykel Healthcare Ltd [FPH.NZX] shares should the share price fall further with US dollar weakness.

Remember, the stocks I have picked above are based on my investment criteria and may not fit yours and of course you could have a different opinion. I would love to hear your opinion and any picks you may have.

Have a look at what I have to say, take it on board or not and then do your own research to see if you might agree with me.

Lastly, I wish you all good luck and a prosperous 2012, we are going to need it!

**Just an added footnote. Please feel free to post your own stock picks for 2012. The only requirement is that you say why and declare any financial interest. Post them below at the bottom of this piece or click here .

Disclosure : I own FPH, SKC, CEN, AIA, FBU & MFT shares in the Share Investor Portfolio.

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c Share Investor 2008 - 2012

Friday, March 18, 2011

Whimp Makes share offers you can refuse

If you are an investor, a seasoned one or a beginner, you have probably heard of the balding, mustachioed weasel Bernard Whimp by now.

Mr Whimp is the man who has been making "low ball" offers for NZX listed shares for a number of years and has been quite successful in his pursuit of less than sophisticated investors who have, believe it or not, accepted substantially less than market value for a range of NZX shares.

He has also been known to fail to pay for a number of share trades.

His latest exploits though are even more daring than previous attempts at duping the elderly and bewildered.

From the NBR and related to Vector Ltd [VCT.NZX] shares the latest ruse by Mr Whimp goes something like this:

"Mr Whimp is offering Vector shareholders $3.20 per share, which is above current market price, but the amount is only payable in instalments over a ten year period and all future dividends are foregone from the time the offer is accepted," Mr Stiassny said.

"There is no certainty that the instalments would be paid and shareholders should be aware they would become unsecured creditors in the event Mr Whimp fails to meet his payment obligations."

While Mr Whimp's "high ball" offers might look ridiculous in the extreme to most of us, he will probably get enough bites to make the whole exercise worthwhile.

There is legislation in progress to put a halt to this otherwise legal practice and clearly it isn't a good look for the market as a whole when this sort of nonsense goes on.

Having said that, it appears to me that any seller to Whimp is doing so of their own free will after of course reading all the material supplied to the prospective seller and then making their judgment based on that.

One can only protect investors so much.

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Sunday, November 7, 2010

Vector Ltd: Share Price chasing fibre network success

Vector Ltd [VCT.NZX] is not a sexy stock. It is an electricity lines company run largely by so,so management appointed under a quasi local government regime, with a small public shareholding.

What has been sexy though is the share price rise over the last two months. (see two month chart above) The stock has risen from just over $2.05 back in September to finish at $2.43 at close of business last Friday. Just under 20%.

Its full year result to June 2010 was a good one but the stock price didn't take off until mid September (see 6 month chart below) and it has been going northwards since.

Much speculation has been made as to whether VCTs bid to become a player in the roll-out of a taxpayer funded fast internet fibre laying programme and the management of that network with Vector branded internet customers providing additional income for the company but the jury is still out as to whether the company will be a player and even if they are just how profitable such a network might be for them.

This market speculation, I think, is the reason behind the share price rise. It isn't warranted and even when the facts come out about who the winners and losers will be in the battle for taxpayer moola to install and manage "fast broadband" it will be sometime before we see if it will be a money spinner for anyone.

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Monday, August 23, 2010

Long Term View: Vector Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO. The calculation of returns includes dividends and tax credits.

Vector Ltd [VCT.NZX] has been a poor investment for shareholders since its August 2005 listing at $2.38c per share . With 61c in net dividends and 30% more in tax credits gives (see NZX chart above) VCT a 15% return (see chart below for the share price percentage gain against the average of all NZX indexes - does not include dividends, tax credits and the share split in its calculation) and over the nearly 5 year listing of VCT an annual net return of 3%.

This compares to an annual return from the average of all NZX indexes of minus 2%.

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c Share Investor 2010

Thursday, June 10, 2010

NZX's Top 10 Dividend Returns

It is hard to get good returns from term investments and the property market at the moment with around a 3.5% real return from the former and similarly low results from investment properties, if you bought a house over the last 10 years.

The New Zealand Stockmarket has some good returns on selected stocks many are getting close to a 10% gross return. With this in mind lets take a look at the 10 best dividend players listed on the NZX.

Figures are gleaned from the NZX website and are based on figures calculated from market prices as of close of market on 9 June 2010. The gross returns are based on past profit performance.

The Top Ten

Telecom NZ Ltd [TEL.NZ] - 13.26%

Steel & Tube Holdings [STU.NZ] - 11.92%

Kiwi Income Property Ltd [KIP.NZ] - 9.92%

Vector Ltd [VCT.NZ] - 9.35%

Hallenstein Glasson Holdings [HLG.NZ] - 9.22%

Telstra Corp [TLS.NZ] - 9.08%

Freightways Ltd [FRE.NZ] - 8.41%

Air New Zealand [AIR.NZ] - 8.28%

Goodman Fielder Ltd [GFF.NZ] - 7.82%

Restaurant Brands Ltd [RBD.NZ] - 7.76%

While not guaranteed returns - the likes of TEL, TLS, KIP & AIR dividends will be under future pressure - even the minimum return from RBDs 7.76% is nearly twice the return of term investments and investment property.

Good to see I own 5 out of the top 10.

Disclosure I own FRE, GFF, HLG, KIP, STU in the Share Investor Portfolio

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c Share Investor 2010

Monday, April 28, 2008

Vector sale decision hangs on political knife edge

The dilemma I would be facing now if I was a minister in the New Zealand Government is, if I gave to go ahead for the Hong Kong based, Cheung Kong Infrastructure Holdings (CKI) to buy 100% of Vector Vector Ltd [VCT.NZX] lines infrastructure, in the Wellington region, then I would be going against a decision I made just a few weeks ago to refuse the sale of a non-controlling interest in Auckland International Airport[ Ltd [AIA.NZX], to a Canadian pension fund, thereby making me look like an utter plonker.

On the other hand If I turned down the sale of arguably a much more "strategic" asset, again Wellington region power line infrastructure, then I would put the Chinese Government's nose out of joint by reneging on detail of various free trade agreements made only a couple of weeks ago and again look like an utter plonker.

Lets face it, our government is at least consistent in its inconsistency.

The vetoed sale of the airport and Vector's Wellington lines is the same scenario whatever way one cuts the cable.

To say otherwise is to be just ever so slightly more than economical with the truth. For Helen Clark to give the reasons for a go ahead for a Vector sale that "the sale doesn't include any sensitive or strategic land" is a pure unadulterated lie. She made reference to the Airport sale over this "land issue" but that deal wasn't turned down because of "sensitive land", it was turned down for political reasons.

The issue of land rights in the Vector deal may actually be applicable. The power infrastructure and lines that Vector is selling has to have easements over the land they transverse thereby making Helen Clark's claim just a generator or two short of a full load.

It is hard to say what the Labour Government will do in the Vector case, but one can be sure it will be a purely political decision, rather than the financial one it should be, and once again the investing public is unsure about how their investments will be treated by such Governments in future takeovers.

The consistency we investors need, especially during these tough economic times, is found wanting by the very authorities that are supposed to be instilling security and a level hand to one of the backbones of our economy. The stockmarket and the essential funds it provides for investment and economic expansion.

The university trained political plonkers who make these decisions have clearly not woken up to the fact that they are not working in theories anymore and the real world consequences of their ludicrous strokes of the pen is costing us millions.

Vector is going to retire some of its large debt with the proceeds of the sale, ironically established when management went on a buying spree around 5 years ago and borrowed heavily to buy the Networks now up for sale off United Networks.

Worryingly, Micheal Stiassny, Board Chairman and his management are also looking to use proceeds to buy more infrastructure assets, probably "greener" forms of electricity assets, like wind turbines, in which they already have interests in. Stiassny and his crew don't have a good track record in management or the purchasing of assets.

Investors marked VCT shares down 1c to NZ $2.10 on average volume on today's news.

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Vector Ltd @ Share Investor

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c Share Investor 2008

Share Investor

Monday, December 12, 2011

Share Investor's 2012 Stock Picks

Friday, March 18, 2011

Whimp Makes share offers you can refuse

Sunday, November 7, 2010

Vector Ltd: Share Price chasing fibre network success

Monday, August 23, 2010

Long Term View: Vector Ltd

Thursday, June 10, 2010

NZX's Top 10 Dividend Returns

Monday, April 28, 2008

Vector sale decision hangs on political knife edge

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