Tuesday, December 2, 2008

OCR cut puts pressure on investors seeking better returns

The OCR rate cut coming this Thursday varies from 1-1.5% depending on which financial media commentator you are following but what is clear is that this cut isn't going to immediately stimulate any sector of the economy because most people have put their wallet away thinking there are cheaper bargains to be had.

What it will do is put pressure on many who have money to invest to go out and find a better return than the gross 6% (and dropping) interest rate they maybe getting for a term investment and the meager real returns still to be found in residential real estate for rentals-values for that sector still have a long way to fall and then will become more attractive return-wise.

I would contend that there are many good stocks on New Zealand's NZX that will find an attractive home for the vast amount of billions currently tied up in term investments in our three major banks.

With a 1.5% point cut on December 4 the OCR rate would be 5% and another likely cut early in 2009 would see our OCR fall below 5% putting pressure on investors coming back from holiday to go hunting for better returns in the stockmarket.

Look for higher yielding and safer large capital stocks to benefit from rate cuts.

A dozen or more Kiwi stocks are paying more than a 10% gross yield and companies like Telecom NZ [TEL.NZ] should do well from those bailing out of banks.

Eventually the rate cuts will work to stimulate our economy, just as tax cuts do.

I am hoping against hope that since the previous Government has guaranteed finance companies that no more term deposit money goes after their higher rates.



Related Share Investor reading

Time for OCR intervention by Dr Cullen
Alan Bollard's indecision over OCR a worry to NZ INC
Bollard sits on his hands

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Interest.co.nz


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Monday, December 1, 2008

Dominos poised for another slice of Pizza Hut

With the latest push by Domino's Australia [DMP.AX] for more market share released today it might well be worth another look at the hapless Pizza Hut.

Restaurant Brands [RBD.NZ] the operator of the Pizza Hut Brand in New Zealand, must be wondering what they can do next to stem the flow of customers from their doors to that of their main competitor Domino's Australia which operates 76 stores in New Zealand.

Their American style advertising, where they compare the size of a large Domino's pizza to theirs(see below) smacks of a little desperation and,well, it isn't working. Domino's are still kicking Pizza Huts oily little backside in the food quality, service and price areas of the pizza business.

Customers simply like the way Domino's does its business and they are voting with their feet.

This leaves Pizza Hut management with a big problem.

What do they do next to regain their lost sales?

I doubt whether management have the answer, for they have been trying to regain their lost mojo since Domino's entered the New Zealand market in 2003 and started getting a big slice of the action from the get-go.

I do recall a rather blase' reaction to Domino's arrival along the lines that Pizza Hut was such a dominant and strong player any new entrant was going to find things very difficult in "their" market.

This has been the hallmark of their reaction to competition until very recently and it seems it has been increasingly hard to shake that complacency.







Restaurant Brands @ Share Investor


Domino's Australia Dominant in Australasia
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Restaurant Brand's Pizza Hut faces increasing competition
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c Share Investor 2008

NZX Hangover from 1999 possible



Looking at charts for the beginning my Long vs Short series I got a bit sidetracked-but still related- as you can on the internet and found to my horror that the chart for the NZSX50 index for the last 10 years(above) looks like the kind of chart that would plot the course of the Hindenburg shortly before it crashed.

To be fair the New Zealand stockmarket pretty much reflects the sad performance of the Dow Jones index when you compare the 5 year chart (below) but when you look back a further 5 years that is when things look as ugly as Paris Hilton having it off with her shih tzu.

The NZSX50 is currently at early 2005 levels and only has 800 points further to fall to get back to 1999 levels. It has lost 750 points in the last 3 months, so it is not beyond the bounds that our index will be having a flashback hangover early 2009 inspired by New Years Eve 1999.

Time to resurrect Prince.


Chart for <span class=



Related Links

NZX50
NZX 15
NZX 50 Portfolio
NZX SmallCap
NZX MidCap
NZX Blog

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c Share Investor 2008












Long vs Short: Mainfreight Ltd

Chart forMainfreight Ltd (MFT.NZ)

In the first of a series of 17, I am going to take look at the chart comparisons for stocks from the Share Investor Portfolio when comparing the 10 year return (above) to the turmoil of the last year with a 1 year return chart (bottom of post).

In this series I want to show the merits of investing, using charts, for the long-term vs short term gains or losses. I will use the longest available data to me for the long-term view and will compare against the NZX50.

The first stock we will look at is Mainfreight Ltd [MFT.NZ] the global logistics company.

As one can see from the two large comparison charts if you have been a Mainfreight stockholder for 10 years your return has been over 300%. A magnificent return by anyone's standards.

Conversely if you look at the one year chart and bought Mainfreight a year ago your return is negative 30%.


Symbol
Price
Value
Earned
$4.80
$15000

$-7218.75
You own 3125 [MFT.NZ] shares
purchased at $7.11 [$22218.75]













I have held Mainfreight shares for 2 years and as you can see from the chart above my 2 year return is around negative 33%.

Clearly the long-term view is the winner here and I would contend that if I hold for another 8 years the opportunity to gain similar returns to the last ten remains only if I continue to remain a shareholder.

I will also guess at this point that the next 16 posts in this series will show a similar story.

Keep checking back to see if my hunch is wrong!




Related Share Investor Reading

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


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c Share Investor 2008