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.


Related Share Investor Reading

Why did you buy that stock?[Pumpkin Patch Ltd]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Michael Hill International]


Share Investor's Annual Stock Picks

Share Investor's 2011 Stock Picks: Looking Back
Share Investor's 2011 Stock Picks
Share Investor's 2010 Stock Picks
Share Investor's 2009 Stock Picks
Share Investor's 2008 Stock Picks

Brokers 2011 Stock Picks




c Share Investor 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

Good opportunities exist for buying in current stockmarket

Everyday my portfolio takes another downwards trajectory. How about yours? Economic conditions in New Zealand and globally don't look good for the short to medium term.

There are more losses to hit markets in relation to the Sub Prime fallout, that initially revealed itself almost a year ago and the losses that have been crystalized in balance sheets around the world have had the consequent affect on credit markets, economic confidence and outlook. Future sub-prime losses will clearly continue this trend.

The added pressure of spiraling oil, food prices and every other good and service has left consumers pockets closed for business and those businesses are going to suffer as we all continue to prune costs.

Share prices have been reflecting this for more than six months but now we are set for more stockmarket revaluations as the economic gloom prepares to make itself at home.

Never fear though!

If like me you have been prepared for this you would have been squirreling away money while you could in anticipation of harder times then great. Some of our listed companies have hopefully been doing the same, unlike our present administration, and this is going to put you and them in good stead for a slow down.

It looks very likely that our stockmarket will be breaching the 3000 mark sometime this year and with that comes opportunity for buying.

The biggest opportunity for good wealth creation in the long term I would think would be US dollar sensitive stocks, all of which have been hammered over the last year because of the relative weakness of the US dollar.

It looks like the tide has turned for our dollar, with mutterings from Allan Bollard of interest rate cuts later in 2008 and the Fed talking up US interest rates.

Rakon[RAK.NZ], Fisher and Paykel Healthcare Ltd [FPH.NZ], Mainfreight Ltd[MFT.NZ], Sanford Ltd[SAN.NZ], Delegats Ltd[DLG.NZ], Pumpkin Patch Ltd[PPL.NZ] and Fletcher Building Ltd[FBU.NZ] will all benefit from the falling exchange rate while many of these companies are ready benefiting from the lower NZ/AU dollar cross, joined by the likes of Sky City Entertainment Group Ltd[SKC.NZ], Telecom NZ Ltd[TEL.NZ] and Michael Hill International[MHI.NZ] which have substantial operations in the West Island, Australia.

The biggest star that will benefit from this, which I conveniently hold, is Fisher and Paykel Health.

The company has profit sensitivity of approximately NZ$2.5 million, per one percentage point change in the value of the NZ dollar and as our exchange rate is off its recent high of .82c and is currently less than .76c then there is significant upside as the dollar retreats towards its historical levels of below 60c to the US dollar.

Its sales are also increasing strongly, so its upside in the medium to long term looks very good.

Apart from the opportunities related to a falling NZ currency there are also some very good companies ripe for bargain hunters flush with cash from better days and investors would be mad not to do some spending instead of getting those brokers and financial advisors wealthier by selling stocks and getting into gold, commodities, fixed interest, cash or some other over valued asset class.

Disc I own MFT, FPH, SKC, MHI, PPL, and FBU shares in the Share Investor Portfolio


Related Share Investor Reading

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Toughen Up - Fishpond.co.nz



c Share Investor 2008

Why did you buy that Stock? [Pumpkin Patch]

Pumpkin Patch Ltd [PPL.NZ] was one of my long term growth investments because I saw its potential for future growth to be exceptional but still some time off.

Pumpkin Patch and sell trendy kids clothing in 4 different markets and currently have over 200 stores.


Why did you buy that stock?

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]
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]


The brand recognition is very strong and customers are very loyal to that brand. This is one of the main reasons why I purchased shares in the company. That is, while many retailers of children's clothing sell nice clothes at reasonable prices Pumpkin Patch clothing sells at a premium because of its branding.

Pumpkin Patch designers have also enabled the brand to continually be reinforced by constantly releasing new clothing designs and therefore keeping that competitive edge in the markets they enter.

I wanted to purchase shares in the IPO a few years back but waited to see a few years of results before jumping in. Of course profit has slowed over the last 12 months or so, most retailers have suffered from a global slowdown but growth for the company over the last 4 years has been good and entry has been made into Britain and America since their listing.

The expansion management impressed me and those that run the company have been doing a fine job taking the company to the world. America has been a tough nut to crack so far but it seems the slow roll out of stores in Texas and California has been managed well if store level results are any indication.

So good management, as it should be always, is another overriding factor in my purchase decision. They do the selling of kids clothing better than any other retailer in the world that I have seen and this is where I see the growth.

One thing I haven't covered in much detail in any of this series before, with the exception of Mainfreight Ltd[MFT.NZ] I think, is company culture.

Like Mainfreight, company culture at Pumpkin Patch is brilliant, you can see it in the way you are treated when you walk into a store and that culture is bred from management down. If a business has a great company culture its employees are happier, and that leads to better sales and an increased bottom line-you cant go past that when looking at a reason to buy a company's shares.

Another small reason to purchase, my wife loves the clothing and we are trying for a baby and she can shop for Africa!

Now I have held Pumpkin for about 2 years and at an average purchase price of about NZ$3.70, so at a current market price of less than half that, it hasn't been good in the short term but I am a long term man so wouldn't be adverse to buying more should my dividend account have some money in it.

Disclosure I own PPL shares in the Share Investor Portfolio.


Pumpkin Patch @ Share Investor

Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum

Download PPL Company Reports

Buy Pumpkin Patch Clothing

From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2008

Rod Duke's Pumpkin Patch gets bigger

Further to my idle speculation about who it was who bought the 6 million shares in Pumpkin Patch Ltd [PPL.NZ] yesterday. I clearly got it wrong, Jan Cameron, ex Kathmandu and Carmel Fisher, from Fisher Funds were not buyers.

Who would have thought, Rod Duke, the owner of listed retailer Briscoe Group Ltd [BGR.NZ], picked up enough shares to take his total holding to 8.4 % of the company. He wont rule out buying more in the future.

He bought his shares as a personal holding not linked to Briscoes and sees the company one of the best in the game at what they do. I would have to agree of course.

It is good to see one of our leading retailers recognising quality and getting in behind this Kiwi icon with his big fat wallet.

As a matter of interest, there was some moving of the deck chairs at Fisher Funds. Their PPL holdings since 24.01.08 were transferred to other holders or nominees on and off market and they purchased 430,000 shares since that same date up until 21.o2.08. The share price at that time was substantially higher than the last weeks 1.50-1.62 range.

Clearly, given global market conditions, the share price has still got room to move.

Downwards.

Disclosure I own PPL in the Share Investor Portfolio.


Pumpkin Patch @ Share Investor

Share Investor Q & A: Briscoe Group CEO Rod Duke
Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum

Download PPL Company Reports

Buy Pumpkin Patch Clothing

From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz





c Share Investor 2008

Buyer of large piece Pumpkin Patch a mystery

A sizable chunk of Pumpkin Patch
was traded today, leading to speculation
as to who the purchaser might be and why.


Like other global markets New Zealand's NZX rallied today(19 March NZ time) by 1.4%.

Not as spectacular as the Dow's 400 plus points or Asian markets 3% plus rises but many of our stocks did well.

There are more months of bad news to come so don't forget what happened earlier this week please.

I must point out to readers of Share Investor that I noticed a stock that finally got bought in serious volumes today after being beaten down to its IPO price earlier this week.

Pumpkin Patch Ltd [PPL.NZ], the children's clothing retailer and manufacturer, hit $NZ1.5o yesterday and one or several sizable players got some serious action in the company to the tune of over 6.7 million shares. A very large daily amount for this company and the current thin liquidity of trading in NZX stocks in general at present.

Who the buyer was can only be speculation at present but there are several I'm willing have a stab at.

My first pick would be Carmel Fisher's Fisher Funds, who already have a sizable chunk north of 5% of the company and would clearly see the company as a steal considering the current price and the price they paid for the bulk of their chunk in the company.

A close second horse would be Jan Cameron, the former owner of the high fallootin outdoor lifestyle retailer Kathmandu and a recent large purchaser of shares in Postie Plus Group(PPG), another more "down market" New Zealand retailer.

Pumpkin Patch, like Kathmandu, is a strong, high margin, brand in its market/s and it would fit her investing profile for good companies bought at excellent prices.

Of course another outside guess would be an as yet unknown player getting a foothold in the company to launch some sort of bid for the retailer. I hope not.

3.6% of the company's shares were traded and the buyer got their stake at NZ$1.60.

The shares were up by 11c to $1.61.


Disclosure I own PPL shares in the Share Investor Portfolio.


Pumpkin Patch @ Share Investor

Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum

Download PPL Company Reports

Buy Pumpkin Patch Clothing

From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz




c Share Investor 2008

Monday Gossip: Carmel Fisher lands a big one

In the wake of the very successful Fisher Funds(MLN) Investment management company's well telegraphed losses from holdings in credit company, Credit Corp and an investment in the crumbling ABC learning centres and consequent share price drops for the company's investment vehicles. Carmel and Hugh Fisher have splashed out on this NZ$8 million plus cliff top house in an exclusive street in Takapuna, so it ain't all that bad.

Investors in Fisher Funds had done well up until recently but credit crunches and stifled lending has had a big impact on Fishers growth funds especially.

Pumpkin Patch Ltd(PPL) in which Fisher has a sizable stake in, is worth way less than half it was just several months ago, similarly Rakon(RAK), the chip manufacturer, and many of the company's holdings have a horrible story to tell.

In what could be a sign of the pear shaped nature of the investment business at the moment chief investment officer Warren Couillault left the company last week and quit his shareholding at the same time.

The final announcement of his departure was made after weeks of speculation as to why he was leaving and came after were told by Fisher management not to accept deals on Fisher Fund's behalf.

Now I don't want to poke the boney finger just for the hell of it but Couillault should take some of the blame for getting into some of the risky investments that he did.

"The currency is pretty hard to tread water against,'' Couillault said about results from Rakon a few weeks back. Investors have been aware of this for some time but Fisher's ploughed more money into the stock as it got "cheaper".

At head office though, just around the corner from their new house, management are playing a blame game of their own. Blaming everyone else but themselves for the poor performance from their investment picks. Pointing the finger at the currency and "market conditions" for their investment woes.

Now I previously picked this company as one of the best in the business, in terms of results by comparison to other fund managers, and the professional way the company was run. Laying the blame at anyone but yourself is a recipe for long term disaster when it comes to business and investing.

We are all subject to the current "market conditions" but Fisher Funds and their managers were instructed to invest allot of clients funds in "high growth" and smaller cap companies. Having said that, things will work themselves out in the long run but management need to take the short term flak.

These companies are riskier even in good times but the economic slowdown we are facing makes investing in them a far bigger risk. With that sort of strategy when the shite does hit the fan one can only blame oneself for making that choice.

Bad managers blame everyone but themselves, good managers take the rap and move on.

Carmel should well remember that when she looks out at Rangitoto tonight.


Share Investor Friday Free for all: Edition 8 - Scroll down to end for related story






c Share Investor 2008

Broker downgrades of Pumpkin Patch lack long term vision

Pumpkin Patch, a children's wear
company with more than 200 stores
in four countries, will open a
6,095-square- foot store at Columbia Mall,
in Baltimore, in the mall's lower level,
near Lord & Taylor, on March 25.
New collections, designed by an in-house
team, are introduced throughout the season.



Broker downgrades on Pumpkin Patch Ltd [PPL.NZX] sent the share price down 9% today, NZ.19c down to a multi year low of $1.97.

Broker ABN Amro has this to say:


... its forecasts for the company's first-half earnings, due out next week, this time by a whopping 19 per cent and down to $NZ12.6 million ($11 million).

Pumpkin Patch's problems centre on the poor prospects for its stores in Britain and the US - the latter no real surprise given the growing likelihood of a recession there. Its many Australian outlets are, by contrast, doing well, thanks to the hot economy, with earnings growth hitting 23 per cent.

However, says the ABN analyst Carolyn Holmes, that won't be enough to offset the declines abroad, which is why she has cut her target price for the NZ-listed shares from $NZ3.13 to $NZ2.53.

It is not clear from analyst Carolyn Holmes how she arrived at her downgrade or the reasons for them but I am going to take an educated stab at it.

Clearly the weak US dollar and stronger Kiwi is affecting repatriated profit back to New Zealand.

Nothing Pumpkin Patch management can do about that and not overly material to the day to day short/medium term running of the company. It is something that could get worse before it gets better.

"...poor prospects for its stores in Britain and the US...", well, I wouldn't go that far, clearly not as good as the long established New Zealand and Australian arms but the bulk of the US stores are trading profitably after a very short time opened and the UK unit has been trading profitably for a couple of years.

When establishing a new retail chain, initial loses are to be expected, due to set up costs and until economy of scale is reached and one would expect those stores that are already operating profitably to pick up margin wise once established for a longer period.

The time frame for analysis of a company by broking houses is notoriously short term and while short term indicators are of definite interest to gauge company health on a half year to 12 month basis, it is the long term prospects for a company that should be the primary interest to an investor. Especially when it is a growth company like Pumpkin Patch.

Directors of Pumpkin Patch commented on their business outlook and strategy when reporting the Full year NZ$27.6 Million 2007 profit last August, down from 28.5 million from 2006:

While interest, store opening costs and local market development costs would continue to have an impact on financial results in the short term the directors and management team were confident current strategies would the best long term financial outcomes...

Something I would concur with.

All listed companies with substantial overseas profit and revenues have been marked down over the last 6 months or so. Two other such notables are Fisher & Paykel Healthcare Ltd [FPH.NZX] and Fisher & Paykel Appliances [FPA.NZX]

Both of these companies are well run and Fisher Health has excellent long term prospects, but their market caps have taken a beating of late.

Pumpkin Patch is currently facing toughish times during a strong growth period but it isn't going to last. How long it will last is hard to say but things are not as bleak as some brokers might have you believe.

ABN Amro and other New Zealand brokers who downgraded Pumpkin Patch today all have shareholdings in the New Zealand Stock exchange and ABN recommended NZX as a "buy" today.

I wonder if they are short on Pumpkin Patch?


Disc I own PPL shares in the Share Investor Portfolio


Pumpkin Patch @ Share Investor

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Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum
Download PPL Company Reports

Buy Pumpkin Patch Clothing

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c Share Investor 20o8

Share Investor's 2008 Stock Picks

As the price of gas to starts to reach for the stars, fixed mortgage interest rates look like they are ready to go double figures, a continuation of the 2007 finance company meltdown set to drag on, and Helen Clark and her merry bunch set to plunder taxpayer wallets again in 2008, this writer is still in a holiday frame of mind.

On that light note then id like to offer my completely unbiased opinion (yeah right) on what my picks are in 2008 for stocks to watch for.

Keep in mind that global stock markets this year are going to get a beating from the aforementioned and a probable recession in the US, and my picks are going to reflect the actual prospects of the companies and not the wider short term global influences mentioned.

My picks are long term, with a bare minimum of 5 years, and have an emphasis on companies with good long term prospects.

Without further ado and out clauses, here are my picks.

Like a lot of other stock pickers poking their heads above the parapet in 2008 I am going to put Fisher and Paykel Healthcare[FPH] at the top of my list.

Unlike its cousin Fisher and Paykel Appliances, FPH has good long term prospects and that is driven mainly by an R and D department that keeps coming up with cutting edge products with good margins that keep the revenues coming in.

Recent positive developments in the USA over increased health provider payments for FPH's sleep apnea products in-home mean this area is a driving force for profit and as new products are developed for the at home market profit looks set to rise.

The only negative is the weak US dollar, which is something quite frankly the company and analysts need to get over.

Pumpkin Patch Ltd[PPL]is on my buying list again for 2008. I have already picked up increased quantities of this 2007 beaten down stock and the short term punishment from slightly weaker global profit margins due to higher living costs means this stock will pick up when these pressures disappear.

Its strong global brand awareness and loyalty to that brand also helps during downturns.

Another retailer suffering from a mammoth stock slide in 2007, Hallenstein Glasson [HLG] is a pick for 2008.

A very well run company that shares the same reasons for its downturn with the likes of Pumpkin Patch and all other retailers.

Already retracing some of its 2007 slide, the stock price will be downwards volatile in the first part of the year and add some value as we come out to Christmas 2008.

Burger Fuel Worldwide[BFW] has heated up the Google box in 2007 and may gain interest as it expands in Australasia in 2008.

An indicator of what the share price will do will be sales figures from the Kings Cross Burger Fuel opened towards the end of 2007.

Indicators are that sales are good.

Like Pumpkin Patch, its strong brand awareness and loyalty will help it prosper long term. Although profit isn’t going to come in 2008.

I’m picking Burger Fuel as my wild card and recommend buying in the 20-30c range.

Mainfreight is another company that I have a shareholding in, and far be it from me to pick yet another already in the Share Investor Portfolio but I wouldn’t have picked it in the first place if it didn’t rate a mention in my 2008 picks.

Mainfreight[MFT]is a very well run company and perhaps more than any other listed on the NZX, management have set it up to succeed long term.

Everything has been set up with company long term sustainability and success in mind, and the pressures that Mainfreight will come under in 2008: increased fuel, wage, and interest rates, will be largely ameliorated because of careful forward planning.

The share price has been beaten down to around NZ$6.50 from a 2007 high of over 8 bucks, so the upside is obvious.

Other 2008 notables for me are:

Sky City Entertainment[SKC] if it isn’t sold it ain’t the end of the world and its new head that starts soon looks promising and has a track record of reorganizing casinos and making them tick.

Telecom New Zealand[TEL] if its new leader can change the whacked out culture of its workers and respond to its current and new customers in a preemptive instead of a reactive way then they have a good shot.

Serious money must be spent on infrastructure in 2008 to move Telecom’s technology into the 21^st century.

If Michael Hill International [MHI] can build on its 2007 success, with good indicators for sales in Canada and material efforts to expand into Mainland USA, then the after 10 for 1 split share price of just over NZ$1.10, looks set to hit record highs in 2008.

Rakon’s [RAK] share price was slaughtered from highs over 5 dollars in 2007 and there were a few teething and integration of new business problems that put the foot on the brakes.

Higher than usual Kiwi dollar crosses wiped some profit off the balance sheet but management should focus on the business first before worrying about things they cant control.

A great long term prospect.

Two US stocks that I'm picking for 2008 are Yum Brands [YUM]and Starbucks [SBUX] I like Yum because of its potential for expansion of its operations in China and India and Starbucks for the same reason.

Yum's KFC operation seems to be the star of the show, especially in China, as increasingly wealthy Chinese get the taste for western protein such as chicken and the number of possible units there would dwarf the US store count.

Starbucks had a rough year in 2007 but this former bull star has room left to run in 2008 as its stock price was given a good frothing due to its slowing sales and profit and Asian expansion could put some cream on the lattes as 2008 goes forward.

2008 is going to be a tough year for investors but with the right research and focus on how the business you are going to invest in works, you are going to set yourself up well in the long term.

Like any picks from people like myself, they must be taken with caution and may not be the right ones for you.

My picks come from my own research and I have backed them mostly by plunking down hard earned cash, with the exception of Burger Fuel, Rakon , Telecom and Hallenstein Glasson.

Burger Fuel and Hallensteins are on my radar to add to my portfolio in 2008.

Happy investing for 2008!

Disclosure: I own Sky City, Mainfreight, Michael Hill, Hallenstein Glasson, Pumpkin Patch and Fisher & Paykel Shares.

Share Investor's Annual Stock Picks

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c Share Investor 2008

Retailers are having a Christmas sale

New Zealand Retail stocks are getting a real bashing at the moment and it seems the market sentiment for this is a lot of media attention about "price slashing" sales before Christmas.

Of course there is good reason to believe that margins will be affected because of discounts. Couple that with the high interest rates, a low US dollar impacting on NZ retailers with an international presence, uncertain seasons driving apparel retailers crazy and gas prices that have had a negative impact on sales through 2007 and you are going to see downward share price movements.

A Hallenstein's store interior

2008 probably isn't going to be much better, with more of the same experience from 2007, so you could see retail share prices continue to go south.

In my opinion though the market has overreacted to the negative news and there are some bargains to be had in retailing stocks.

Hallensteins Glassons, which I'm thinking of adding to my portfolio and has a dividend of over 10% net, hit a low today of NZ$3.84 after hitting the mid 5 bucks earlier this year, while Pumpkin Patch has sunk to $2.60 after almost reaching the magic $5.00 mark only months ago.

Before the High Court dismissal of the Commerce Commission decision to reject two prospective buyers of The Warehouse, its share price was drifting below 5 bucks and that companies sales have slowed and margins contacted and 2008 looks flat to ordinary.

Postie Plus made a loss earlier in the first half of this year and directors are pessimistic for the festive season, while Briscoe Group took a hit to their profit with a 15% dip in recent earnings.

The pressure hasn't hurt the likes of Michael Hill or Restaurant Brand's share prices too much in comparison to others, in fact RBD share prices has gone up while MHI share price has come off recent highs even though profit is up for the year.

That surely shows that market sentiment is punishing retailing stocks down too far.

Like every other sector of the economy retailing has its ups and downs and it is flat to negative at the moment but it wont last. Just like the sales that the retailers are having now and will have over the summer period, retail stocks are having their own sale.

Its up to you which retailer you are going to buy but it really makes sense to add to the long term portfolio when there is a sale happening.

Disclosure: I own Micheal Hill, Warehouse, Postie Plus and Pumpkin Patch shares


Related Share Investor reading

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c Share Investor 2007

Pumpkin's expansion comes at a cost

The mood at today's Pumpkin Patch Ltd [PPL.NZX] AGM seemed a little dire.

Talk of extra expenses due to expansion seemed the main theme of the day and a weaker US dollar and stronger Kiwi having a big impact on profit repatriated back to New Zealand.

The "Patch" is expecting earnings growth to come from local markets, increased interest charges, store opening costs and market development costs in the USA and UK continue to have an impact the on the company's results short to medium term.

Like Burger Fuel Worldwide Ltd [BFW.NZX] the initial costs of establishing a sustainable global brand are a necessary evil and in my opinion will increase before they start to decline. If you are invested in Pumpkin Patch to make a buck short term unfortunately the big bucks for this investment are more likely to be realised long term.


A 3,200 ft² shop at 77 Clarence Street, Kingston, UK
leased to Pumpkin Patch Ltd on a new 10 year lease
at a headline rental of £333,330 p.a.x.


If you unhappy with that as an investor then clearly you should have your money elsewhere.

Quite often, when establishing a brand such as this, companies make losses, so it is to the credit of the management of Pumpkin Patch that as yet this hasn't been the case.

Carefully building up a profitable Australasian business before moving to new overseas markets has put the company in a great position to use cash flow to allow them to borrow to grow their new business.

Michael Hill International Ltd [MHI.NZX] has used the same strategy in building their brand in Canada and like PPL they are still running at a loss there.

Store numbers are now at 200 and management look to add around 20 new stores this financial year, down from last years 35 stores, so associated costs should be ameliorated.

The only real threat seems to be from the currency swap from the strong Kiwi dollar if it continues long term but it is something management will have to deal with if it stays strong, perhaps make it a side issue and not give it the significance they seem to every reporting season, simply because there is nothing they can do about it.

Short to medium term though shareholders like me could be in for a bumpy ride.

The market punished the gloomy outlook by cutting the share price by 16c to NZ$2.72 on good volume.


Disc I own PPL shares in the Share Investor Portfolio




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Discuss PPL @ Share Investor Forum




c Share Investor 2007