10 Basic Buffett questions to ask before investing

In this time of market turmoil, an official bear market, and probable global recession, it is worth turning to someone with a bit of sage advice before one plunks down those hard earned dollars. Warren Buffett has been buying up stakes in large companies of late, the Mars-Wrigley merger and the recently announced funding of a large purchase by Dow Chemical Co. No doubt he has been using some or all of his own techniques.

You and I can too.

The comments by Warren Buffet and analysis by Buffett writers suggest that, at the very least, Warren Buffett looks at the following aspects of a business and its day to day running. These "Buffett criteria" for buying a business, or any investment for that matter, can be put in the form of questions. Questions that any sensible investor should ask before considering a stock investment.

The Basic questions

1. Does the company sell brand name products that are likely to endure?
2. Is the business of the company easily understood?
3. Does the company invest in and operate businesses within its area of expertise or does it have sound management?
4. Does the company have the ability to maintain or increase profitability by raising prices?
5. Is the company, looking at both long-term debt, and the current position, conservatively financed?
6. Does the company show consistently high returns on equity and capital?
7. Have the earnings per share and sales per share of the company shown consistent growth above market averages over a period of at least five years?
8. Has the company been buying back its shares, and if so, has it bought them responsibly?
9. Has management wisely used retained earnings to increase the rate of return to shareholders?
10. Is the company going to regularly require large capital sums to ensure continuing profitability?
See case studies.
This should be the first stage of the process. The next, and most important question, is determining the price that an investor such as Warren Buffet would pay for the stock, allowing for the margin of safety, which Buffett often talks about.

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c Share Investor 2008

Email excerpt condemning Winston Peters as a Liar

It just gets worse for Winston Peters. Conformation in the email below that Peters has lied to the media over the secret donations made by Owen Glenn to his NZ First Party surely must mean he should step down from his role as part of the minority Labour Government.

Like the Labour Party, Peters wanted the Glenn donations kept secret for some reason and he lied to the public to maintain that secrecy.

I guess the old adage is true, you lie down with dogs and you get fleas.

5:00AM Saturday July 12, 2008
By Audrey Young

Photo / Mark Mitchell

Controversy over secret political funding is likely to be reignited by private emails that suggest Labour's biggest donor also gave money to NZ First.

The emails suggest repeated denials by Foreign Minister Winston Peters that his New Zealand First Party received a donation from businessman Owen Glenn appear to be incorrect.

A private email from Mr Glenn to his public relations man in New Zealand says he did give the party a donation.

Mr Peters was last night sticking by his story, saying through a spokesman that Mr Glenn had not given the party money - "he did not" - but he refused any other comment.

The conflicting stories raise credibility issues, as Mr Peters produced a large "NO" sign at a press conference soon after questions of a donation to his party arose.

Prime Minister Helen Clark refused to comment last night.

While she has sacked ministers for incorrect comments, they have been Labour ministers. She runs a minority Government, relying on New Zealand First in confidence and supply votes. With an election less than five months away, she would want to avoid any conflict with Mr Peters.

The email exchange between Mr Glenn and PR man Steve Fisher, managing director of Baldwin Boyle, occurred in February this year when the Monaco-based businessman was visiting New Zealand to open the Owen G. Glenn building at the Auckland University Business School.

Mr Fisher emailed Mr Glenn on February 21 about a Herald story on the businessman's donations to political parties. He was concerned that Mr Glenn and Mr Peters continued to give the same story.

Mr Glenn, in his reply to Mr Fisher, disclosed that he gave to the party.

Steve Fisher: Our plan worked well. There is nothing new about you in here Owen. Note that Winston says you have never made a donation to NZ First, so at all costs you must stick to that line. It was definitely the right thing to do to deny the Maori party offer as well.

Owen Glenn: Steve - are you saying I should deny giving a donation to NZ First?? When I did?

Steve Fisher: No, just stick to the line of referring stuff to NZ First. What I'm saying is we don't want to contradict Winston.

Last night, Mr Glenn was in Monaco, and when asked why he had not said in February that he gave money, he said: "I made a decision not to say anything to anybody because there was so much controversy about everything. I was just there to open the business school so I just didn't want to get caught up in anything ... I elected not to say anything."

He also expressed disappointment at the fuss made over his political donations, saying: "I just don't find New Zealand a very friendly place and it's unlikely I will go back."

When Mr Glenn was in New Zealand in February, he also said he was hoping to be appointed the country's honorary consul in Monaco - a decision that would have been made by Mr Peters as Foreign Minister.

Dail Jones, NZ First party president at the time and now a list MP, fuelled speculation of a donation to his party when he told the Herald during Mr Glenn's visit that a large anonymous donation - "closer to $100,000" than $10,000 - had appeared in the party's accounts last December. condemning

But Mr Peters said the money was an aggregation of smaller donations.

Related Political Animal reading

Winston Peters got secret donations from Owen Glenn
Snouts in the trough bent out of shape
The Owen Glenn story: Singing the same tune but hitting a bum note
Labour Party Election funding murky at best

c Political Animal 2008

Winston Peters got secret donations from Owen Glenn

Ahh, Tony Veitch has had his 15 minutes of fame and now its back to politics for Journos at the NZ Herald.

Winston "Baubles" Peters has probably been caught our lying, again. When evidence uncovered in emails from John Glenn suggest that Peters got secret donations from him. This was in addition to hushed donations made by Glenn to the Labour Party before and after the 2005 election.

Peter's denials of such donations previously were strident and to the point. NO he didn't get money from Glenn.

Controversy over theft 0f $158,000 of taxpayers money still surrounds Peters and his party. He still refuses to pay it back from where it came. The taxpayer.

Ahh, come back Tony all is forgiven.

5:00AM Saturday July 12, 2008
By Audrey Young

Photo / Mark Mitchell

Controversy over secret political funding is likely to be reignited by private emails that suggest Labour's biggest donor also gave money to NZ First.

The emails suggest repeated denials by Foreign Minister Winston Peters that his New Zealand First Party received a donation from businessman Owen Glenn appear to be incorrect.

A private email from Mr Glenn to his public relations man in New Zealand says he did give the party a donation.

Mr Peters was last night sticking by his story, saying through a spokesman that Mr Glenn had not given the party money - "he did not" - but he refused any other comment.

The conflicting stories raise credibility issues, as Mr Peters produced a large "NO" sign at a press conference soon after questions of a donation to his party arose.

Continued

Related Political Animal reading

Snouts in the trough bent out of shape
The Owen Glenn story: Singing the same tune but hitting a bum note
Labour Party Election funding murky at best

c Political Animal 2008

Tony Veitch and Fox stories cunning diversions

Although muck raking by the Labour Party has become something of an art form of late, and will no doubt become something of a masterpiece as the 2008 Election draws nearer, the distribution of news of the latest "wife-beating" scandal to hit New Zealand, Derek "The Muss" Fox, after Tony"left handed" Veitch, by a Labour staffer seems more of an inside job within the racist Maori Party, rather than another hole being dug by Ms Clark and her minions.

Besides the bloated porker Parekura "I want another sandwich" Horomia being threatened by Derek "I hate whitey" Fox and his running against Labour's Horomia, Labour has little else to gain by making this sort of move.

I could be wrong though, Labour have been on a suicide mission recently with bad news coming out every day from gaffs by ministers and bureaucrats. Only the Tony Veitch and Derek Fox stories have taken Ms Clark's crumbling goverment off the headlines as mainstream media "journalists" scramble for the salacious stuff.

These stories are indeed well timed and if one were a conspiracy nutbag, one might think of other motivations for people currently in power to leak these kinds of headline grabbing sagas.

It is classic Labour Party stuff.

The polls toll for Labour
Lets take a break
Is a coup against Helen Clark's leadership likely?

c Political Animal 2008

Why did you buy that stock? [Hallenstein Glasson]

A 30% drop in profit forecast for the full year to August 1, put Hallenstein Glasson [HLG] in the business papers today but the company has been through bad economic times before and weathered them well.

In this Why did you buy that stock? we will first look at what management do to navigate their business through the rocky waters of the recession New Zealand is now facing.


Why did you buy that stock?

Why did you buy that stock? [Briscoe Group]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Pumpkin Patch Ltd]
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 company's ability to maintain appropriate stock levels is one of the keys to retailing in general and Hallenstein Glasson do this better than probably any other New Zealand retailer.

Their focus on cost control has been one of the hallmarks of Hallensteins for the 6 years that I have been following the company and one of the main reasons for my recent purchase of the stock.

Their clothing is something my wife and I both purchase, it is generally well made, designed and fits its customer demographic year after year. Not as easy as it sounds but it requires the chain's buyers to keep abreast of changing trends and plan ahead well in advance.

Their marketing also impresses me. It is clever, witty and once again fits its customers well. It has developed its branding to perfection and management clearly know their customer and what they want. A basic for any business but in clothing retailing this is a more crucial talent to have because fashion trends change constantly.

Lets take a look at basic returns. Hallenstein Glasson have managed to pay one of the better dividends to investors of NZX listed stocks and before today's announcement the gross div was returning more than 18%. One now might expect around a 12% gross return at current share prices and that is still a considerable return given around a 9% rate for term investments.

I myself like good dividends, and only Sky City Entertainment Group [SKC], with a gross dividend, for my holding, of nearly 20%, makes HLG a good fit in the Share Investor Portfolio.

Many Kiwi retailers have made moves across the ditch to Australia and failed miserably. HLG has a small presence there, and while not proven a spectacular success their attempts at growth have been deliberate and cautious, rather than growth for the sake of it. A sign of good management and able planning. The addition earlier this year of Australian retailing queen Chief executive Shayne Quanchi, will help company plans in Australia.

Given current market conditions and an economy in dire straits, the excellent communication that management have had in the past with its shareholders, puts them clearly in the picture every time.

Well known for under promising and over delivering, management have always been upfront when it comes to relaying simple straightforward information about company progress.

Uncomplicated communication is a sign of clear management direction and even more important during the inevitable company hard times.

Finally the test I must take on whether I would continue to buy this stock. Since I only just purchased weeks ago that is probably already answering that test but I will be buying more, funds allowing, if the stock becomes cheaper.


Related Share Investor reading

Retailers are having a Christmas sale
NZ retailers ring up costs not tills


Related Links

Hallenstein Glasson- Corporate
Annual Reports
Stock Exchange Releases
Share Investor Forum - discuss HLG here



c Share Investor 2008

Lets take a break

The latest attack by Helen Clark on John Key has focused the spotlight on Key and Bill English and the holidays they took earlier this week.Clark said that she worked harder than the duo and was surprised they took holidays at the same time.

Key and English were on holiday with their families and were taking time out with them during school holidays, as families do.

It isn't a good look for our Prime Minister to have a go at a man for wanting to spend time with his family.

What other way are the public supposed to look at it?

It was a silly thing for Ms Clark to say, politically damaging, and shows the increasing pressure she is facing under a polling rort, a disintegrating government bureaucracy, protests and a series of gaffs by her and Ministers that have shown she isn't the Teflon Jane that everyone thought she was.

It is wonderful to watch.

By TRACY WATKINS - The Dominion Post | Thursday, 10 July 2008

The air above Parliament is becoming increasingly toxic as the leaders of Labour and National trade blows over the hours they work.

John Key has hit back at Prime Minister Helen Clark's suggestion that National MPs worked "short weeks" and labelled it an attack on his decision to spend time with his two children during the school holidays.

He said yesterday he made no apologies for being a family man.

That had Labour in turn privately accusing Mr Key of "dog whistle" politics by jumping on Miss Clark's remark to remind voters she had no children.

Dog whistling is a term used to refer to comments which send a coded message to your own supporters. Continued

Desperation by Labour Backfires
Pointing fingers in the playground
Retreat while you are behind
Ian Wishart's Absolute Power
Phil Goff on Alt TV

c Political Animal 2008

Anti smacking law a resounding success

Hasn't the removal of section 59 or the anti smacking law been a resounding success?

Over the last week two children have died after being beaten to a pulp and one in in critical care with life-threatening injuries that include internal bleeding, head injuries and several pelvic fractures.

Sue Bradford, Helen Clark , Cindy Kiro and the law's supporters have thanked State agencies for executing the new law with such success over the last year.

7 children have been killed in the year since the law was passed and many more have been seriously injured:

• Remuera 16 month old Sachin Dhani June 2007
• a 28-year-old woman charged with murdering a newborn baby found dead in the backyard of a Te Mome Road property in Alicetown June 2007
• Tokoroa 22-month-old Tyla-Maree Darryl Flynn June 2007
• Rotorua 3 year old Nia Glassie July 2007
• Manurewa ten-month-old Jyniah Mary Te Awa September 2007
• Otahuhu two-month-old Tahani Mahomed December 2007

The law's supporters have all come out and strongly spoken out against the killings and additional severe beatings, and cite the removal of section 59 as the impetus for further good results in 2009.

"Our kids can can be thankful for this kind of considerate, sensible, compassionate and effective law and we are very proud to have passed it".

After all it is about the safety of children.

5:00AM Tuesday July 08, 2008
By Elizabeth Binning

A 39-year-old woman has been charged over an assault that left an Avondale toddler fighting for his life.

Itupa Julie Mikaio appeared in the Auckland District Court yesterday charged with assaulting Benjamin Mikaio, 3, on or about June 27.

The defendant, who comes from Samoa and is unemployed, did not enter a plea. She was given bail.

Police say they are still considering whether other charges will be laid.

Benjamin was rushed to the Starship hospital three days after the attack - on the advice of extended family members - with life-threatening injuries that included internal bleeding, head injuries and several pelvic fractures. Continued

Related Political Animal reading

Police called as toddler fights for life
Sascha Cobern's letter to the Editor of the NZ Herald
Anti-smacking petition a slap in the face for out of touch Politicians
Sign the Anti Anti smacking petition
Cindy Kiro gets violent

c Political Animal 2008

Dont let the farce get you !

When I was 10 Star Wars had just come out, Labour was in power in New Zealand, and the peanut farmer Jimmy Carter was causing havoc as US president. Raquel Welsh was still hot.

Helen Clark was at Auckland University, involved deeply in the communist movement on campus, not shaving her pits, burning her bra, trying to organise things and people and probably unsuccessfully trying to get some.

Star Wars was the first movie to come out with dozens of different products you could buy with ties to a movie and its promotion.

One of these products was an ice cream on a stick that sold for 10c . Along with the multi coloured ice cream came a sticker of a scene from the movie. One ice cream, one sticker.

I remember buying as many ice creams as my meagre budget from collecting coke bottles would allow. I ate quite a few. I was a child of average weight and there were few fat kids at our school, in fact only a handful. I remember them all.

My parents wouldn't buy these ice creams for me and I'm glad they didn't.

I was also limited by the fact my mum would probably have scolded or possibly smacked me for eating too many and that it was wasteful. She would have been correct!!

A little break here for some Duran Duran from the 80s and Nirvana from the 90s.

Skip forward to July 2008 and I read today that the Health Department, or the food police, as they are more commonly known, have had a complaint by them to the PC Advertising Standards board upheld over a Bluebird chips All Black cards promotion, where every pack of chips held a card of an All Black , there were 50 different ones and that this encouraged "unhealthy eating".

Am I missing something?

Where are the parents in this equation?

This silly little wasteful exercise by the Clark government is nothing more than the Nanny State overreaching their boundaries and levels of expertise.

If this sort of Leninist stuff works, then how come there are more fat kids today than there were 30 years ago when you could count them on one hand?

The answer is of course is that it only makes things worse. Removing parental responsibility from the eating equation by having food Nazis telling us what to eat isn't a good way to teach children what to eat.

10 year olds will know where their boundaries are when their parents tell them what they are NOT the State. That is not the the State's job.

I am waiting for a knock on my door in 2009 if Labour should overcome humongous odds and win the 2008 election, the Food Police will kick in my door while I'm watching the Special Edition of Star wars on DVD, with guns drawn and confiscate my extra large KFC Quarter Pack because I have reached by fat quota for the month.

It could happen, Helen Clark became Prime Minister, anything could happen.

Related Political Animal Reading

Labour's Socialist Peril
Labour's State Control out of Control
What happened to risk?
Helen Clark's words ring hollow

c Political Animal 2008

Pumpkin Patch ripe for the picking

Recent purchases of beaten down Pumpkin Patch Ltd [PPL.NZ] stock by Jan Cameron, the former owner of the Kathmandu Ltd [KMD.NZ] outdoor chain and Rod Duke, the majority owner of retailer Briscoe Group have got me to the point of more than idle speculation.

At the risk of getting the borax poked at myself, here goes.

If an individual is going to make a takeover play for an asset of any class, when is the best time to buy?

When nobody else is interested and when the asset is selling below its usual market price or true value.

I would argue that the little Pumpkin is well undervalued, to the extent that I bought some more recently at NZ$1.53.

Its potential is huge and its value lies in its so far proven record and its very strong brand and the ability to exploit that brand for growth and customer loyalty.

In the good times last year the schizo "Mr Market" valued the company at almost 5 bucks per share but as of today the share price is below $1.50.

Cameron and Duke both recently bought the bulk of their holdings at around the $1.50 mark. Duke holds almost 10% and Cameron just over 6%.

At today's share price the approx 166 million shares in PPL could be purchased for around $250 million dollars. A very high premium would be needed for a full bid because many investors have bought shares at well above $1.50 and Maurice Prendergast, the CEO and Sally Synnott, the founder together own 20 million shares and they have a long term view of their company.

But everyone has their price.

Both Duke and Jan Cameron certainly have the means to be able to afford such a purchase.Duke, supposedly worth a minimum of NZ$254 million and Cameron thought to be worth around $300 million.

Given this recent flurry of buying activity by both these high profile retail identities and the current low share price of Pumpkin Patch, if the company was going to be a target for a takeover, now is the most likely time for that to happen.





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

Stock's I'd buy, at a price: Burger Fuel

Now I have given Burger Fuel Worldwide [BFW] a LOT of stick over the last year or so about some of their decisions and their initial IPO being way overpriced.

So much stick in fact that one of the directors that I had a friendly acquaintance with and could contact him about company progress no longer returns my calls.

Tough luck, never mind Mr Rickard, get over it!

Well, I don't really have anything to get over, never had Josef Roberts , I really love the concept, brand and company. I just don't like the value that you place on it.

The initial IPO put the capital value of the company at NZ $60 million, it is now worth less than half that at today's share price. I would personally value it at around $10 million, roughly a third of today's value, as a purely speculative play, rather than a solid business investment.

Sales for the franchisee outlets run at approx $20 million of which BFW, as the franchisor, have around a 10% gross cut of that figure, for royalties, group advertising spend ,management and training and other fees. Around $2 million gross.

Company start up costs and early expansion have chewed up a value meal sized portion of that $2 million plus the same sized portion again, making for a just over $2 million loss.

Theoretically these costs should be proportionally smaller as the company grows and so does revenue but if you were looking at putting a value on the company today, you would have to discount today's capital value down from $30 million to $10 million because of uncertainty over those continued expansion costs.

As an investor you would have to ask yourself how much would I pay to get $2 million of gross revenue per year? Personally I wouldn't pay more than $10 million bucks.

Wheres the present and future value of Burger Fuel though?



Burger Fuel: Yummy Burgers, but a highly
over-valued Brand.

Well. I reckon BF management put most of the value in their company in its brand, which is a strong one, and one that management relied upon to get investors interested in the IPO, but as I have mentioned before I think they put too much value in that brand.

Which leaves me with a more realistic valuation based on a dollar return and high risk, rather than possible worldwide domination of Burger Fuel's fast food outlets.

I'm interested therefore at buying at anything around 17c per share, it is at 40c today and its IPO price last July was $1.

I must note the share price has been down to a low of 11 c.

Are we friends again Josef? I love your Bastard Burger.

Burger Fuel @ Share Investor

Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

c Share Investor 2008

Is a coup against Helen Clark's leadership likely?

There is a rumour floating around Labour circles in Wellington, amongst Labour Party ministers, unions and the usual left rabble, that because of the poor way their Leader, Helen Clark, has been leading the Labour Party over the last year, and especially over the last few weeks, unhappy Labour supporters want her replaced before the 2008 Election.

I cant vouch for the validity of any such rumour from the Capital or the possible replacement for Clark, it could actually have no substance at all, but it is very interesting information given Ms Clark's tenuous grip on what is going on around her.

She is no doubt one of New Zealand's best political operators but fears that she has let her own ego get in the way of making sensible politically good decisions lately has got Labour Party tongues wagging.

There were similar whisperings around the traps spread by Labour last year regarding John Key and the safety of his position at the top but political pundits, polls and the general public all seem to be firmly behind Key and his ideas for the future of New Zealand.

Given the whisperings, does Clark have a future with Labour?

c Political Animal & Cartoon c Stan Blanch 2008

Helen Clark does You Tube

I don't know who does these "mash ups" but this video from You Tube, raps along in a sort of Weird Al Yankovic way to the Eminem tune " "Without Me", you know the one, "guess who's back, guess who's back...and the voice is a clever Helen Clark parody and it is very funny.

Increasingly though, real life, through Labour's polling results, doesn't look that funny at all.

There is also another interesting Video that looks like it is from our own Barnsley Bill

c Political Animal 2008

Helen Clark stares down the barrel and lies

I don't usually post You Tube stuff here but this one is a gem of a home video. From Gyon Espiner from TV One news from last year.

Ms Clark says in similar words that, she would never like to see good parents live in fear of someone knocking on their door should they correct their child by giving them a wee smack.

That to pass a law, such as the anti smacking law, would be "defying human nature", and Labour just would never do such a thing.

She in fact was caught out lying, again, but this time it was on video!

Now we shouldn't be surprised about Ms Clark and her stance on smacking kids for "corrective purposes", because she was part of a government in the 1980s that removed corporal punishment in schools that has led to violence and bullying in schools today and it just keeps getting worse.

Ironically it is one of Clark's poster children for the anti smacking law, Cindy Kiro, that was last week looking into an initiative to "help" curb bullying of teachers and children on Helen's behalf.

I don't care what people say, I still can't fight the feelings against pure logic when one tries to "fix" a problem that one created in the first place.

The repeal of section 59 will have similar consequences that the removal of corporal punishment from schools has.

Frankly, if you don't get that, then you are thicker than Sue Bradford on Mogadon.

Related Political Animal reading

You can take the family out of South Auckland
Sue Bradford strikes out, Again
Helen Clark kicks democracy below the belt
Anti smacking referendum gets the votes
Sacha Cobern's letter to NZ Herald Editor
Cindy Kiro gets violent
Anti-smacking law puts young boy at risk
Mallard in Court
Trevor Mallard's anti violence advert
Duck Season Extended: Mallard must go

c Political Animal 2008

The Poll's toll for Labour

The Roy Morgan Poll out last Friday is the continuation of a trend of political polls going back more than a year that have confirmed a clear split of over 20 points between Labour and National since October.

The Roy Morgan Poll is a critical one as it predicted accurately the outcome of the 2005 Election and the polls leading up to it.

If National were to continue the current polling trend then they would have a clear majority to govern the country on its own.

The latest poll was taken before the two major protests of last week, against the unpopular Labour Party and its increasingly out of touch stance with the average Kiwi working person.

Increasingly as public opinion goes against Labour, the Prime Minister and her cabinet have resorted to vicious personal attacks on John Key. All of which have backfired in spectacular fashion because of inaccurate details and "misspeaking" by the Prime Minister, Helen Clark.

Comments on previous polls by Labour have been called "rogue polls" by the Prime Minister and inaccurate by the support party New Zealand First.

c Political Animal 2008

August reporting season will give investors a true barometer of company health

The Kiwi stockmarket is down markedly off its highs last year but the real test or indicator of company health and capital value lies in real results and an indication of the future prosperity or otherwise of the company that you have invested your hard earned dollars in.

Gather 'round investors! Reporting season is the moment of truth.

The New Zealand reporting season kicks off in August and regardless of the Credit Crunch and its fallout, record high energy prices, a bursting housing bubble and high food costs for consumers, financial results and future indication of direction are still the main indicators of company health and a company's possible day to day market value.

The slowing economy and its fallout is expected to vary widely impact wise on Kiwi companies. Of our top 30 stocks reporting, 10 were indicative of their respective fields: Auckland International Airport [AIA ] Briscoe Group [BGR] Telecom [TEL] Freightways [FRE] Fletcher Building [FBU] Goodman Fielder [GFF] Contact Energy[CEN] Tourism Holdings[THL] PGG Wrightson[PGG] and The Warehouse[WHS].

Both Briscoe Group and The Warehouse have warned of lower profits over the last week

Many companies have already indicated profit warnings, Hallenstein Glassons[HLG] and Postie Plus(PPG) have come to the table, while many companies have indicated flat earnings, The Warehouse, Telecom, Contact Energy, Sky City Entertainment[SKC] Pumpkin Patch(PPL) and Freightways have all indicated pressure on margins over the past year.

The pressure has come mainly from government intervention, with some of the obvious fuel, interest and food cost increases not helping. Increased labour costs through a higher minimum wage, 1 week extra holiday and paid maternity leave have all pressured businesses and margins. The recent increases of diesel and road user taxes by government have pushed the cost envelope to bursting. Clearly those companies with very high staff numbers will be affected by this, retailers especially.

In addition to the above, more Government associated paperwork for administration staff has lead to lower productivity.

More Government pressure from reckless spending has led to higher interest rates, for consumers and lending for business, and the increases in energy costs, due to Government dictated taxes on petrol and electricity have made 2008 a bad year and are due to get considerably worse in 2009, even under a new government.

There maybe some surprises on the upside during the current reporting season.

Sky City is likely to be one of the better performers this reporting season as economic downturns don't usually affect gaming businesses as much as retailers or infrastructure companies, like Contact Energy. Sky's Cinema business is going to have an awful result though.

Mainfreight[MFT] looks like a good bet to increase profit and Restaurant Brands[RBD], the often talked about whipping boy here should show an increase from a very low comparison this time last year.

This reporting season seems like a turning point for investors to me.

They must make up their minds whether they want to hold their investments during a coming hard year or run crying for the hills with their share proceeds in their hands.

Fortune will favour those who hang on to good companies and if you are buying shares for the first time or adding to your portfolio, look for good management first before anything else, for it is good managers with a track record that will be able to ride out the inevitable tough times.

I'm ready to face the coming months, good or bad, and reporting season is definitely going to give investors a clearer indication of exactly where their companies and therefore investments are going.

There is too much panic at the moment and decisions to sell by some who already want to should be put off after they hear company announcements this coming August.

Disclosure I own WHS, PPL, PPG, FBU, FRE, SKC, HLG, GFF and AIA shares

The economy looks bad now? But wait there's more!
The Warehouse set for a turbulent 2008
New Zealand Stockmarket set for a discontent Winter and Summer

c Share Investor 2008

Why Did you buy that stock? [Briscoe Group]

A recent addition to my portfolio, Briscoe Group[BGR], like every other listed New Zealand retailer, has had its share price slashed over the last few months because of a stagnant economy and poor sales. Briscoe Group is the operator of 3 store types, Briscoes Homeware, Rebel Sport and upmarket homeware store Urban Loft.


Why did you buy that stock?

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

In this Why Did You Buy that Stock? I have to reveal the compelling reason why I bought was the cheap historic price. Not a singular good reason to buy a stock, any investor will tell you but I cant pass up a distressed good company.

Sure, Briscoe Group has just announced a profit downgrade, one of a number over the last few years, but all retailers are suffering at the moment and the retailing scene in New Zealand will recover. Now really is the time to be buying these marked down retail companies.

The management of BGR have done well to position Bricoes and Rebel Sport in an area of the retail sector in New Zealand where they are clearly the leaders in what the sell. This is a tough ask in a crowded and highly competitive retail environment.

Every time one thinks of buying a towel, cheap frying pan or cheap Chinese wine goblet they usually think of Briscoes first-it is hard to miss their saturation advertising and continuous "sales". The same can be said of quality sports gear from Rebel Sport. They are both well known "category killers".

Rod Duke, CEO and majority owner of the company, has done well to run BGR successfully in such a small market. Given that, the size of the company cant get alot bigger.

Future profit increases will come from cost cutting and an improving economy and Duke has his brands well positioned for profit improvement, with the exception of the struggling Urban Loft, as the macro environment becomes more positive.

One other main attraction for me to buy this stock is the company's low debt and very high cash in the bank. As we all know this allows business to cope when the rain comes and boy is it coming down in cats and dogs now.

Even though I just bought my 3000 BGR shares last week, I would answer the question I always ask in this column in the positive, about whether I would buy more given the opportunity-with a rider in this case.

Given the current whacked out nature of the retail sector, any new purchase of this stock would have to be at a share price of 75c or less. The closing price this last Friday was 91c.


Related Share Investor Reading

I'm Buying
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c Share Investor 2008

What is Jan Cameron up to? (UPDATE 4)

What is Jan Cameron up to?

(PPG share purchase update) On Monday 5 July 2010 she bought 600,000 shares to take her holding in PPG to 19.26% or 7,702,537 shares. She previously held 17.76%.

Cameron, who sold a 51 % stake in her Kathmandu outdoor clothing company for NZ$275 million in 2006, would now own over 7 million shares in PPG for a sum of less than $5 million.

The 19.26% of PPG Cameron now owns is not far short of the 20% takeover threshold where if she wanted more of the company she would have to make an offer to all shareholders for their holdings.

Like her competitor in retailing, Rod Duke, who has recently built up a stake in Pumpkin Patch Ltd [PPL.NZ] she could be just taking advantage of beaten down stock prices, with a small non controlling stake in Postie Plus or building up a holding for a possible takeover. This doesn't seem likely though.

Jan likes control in her business life so it would be natural to assume that she could see herself as an outright owner of Postie Plus.

At current share prices, in theory at least, she wouldn't have to pay more than $14 million for the remaining 32 million shares in the company. Of course a premium would have to be paid for full control but either way she could probably grab the entire company for less than $20 million.

There is no doubt that Cameron is a canny business woman. She built Kathmandu from a small one store retailer in Melbourne in 1987 to a medium sized outdoor "lifestyle" chain with 46 stores, in Australia, New Zealand and Great Britain.

Given her successful past there must be something that she sees in Posties Plus that makes its future better than it is currently.

Postie Plus has three different brands in its store stable. Postie Plus, Arbuckles and Baby City.

Out of these, Postie Plus is doing satisfactorily, Baby City are doing very well and Arbuckles, the manchester business was sold to Cameron in its entirety on June 10.

I could see how Cameron might be interested in Baby City as a brand to grow. This brand, specializing in baby clothing and accessories, is operating in a sector ripe for more branded chain store competition. Baby City really has only one serious branded competitor in New Zealand in Pumpkin Patch. With a little of Cameron's retailing magic Baby City could be a good place for her to start a much larger brand, although recent revelations that Cameron has bought a 6.3% stake in the Pumpkin might give that sort of speculation a lively twist.

The Postie Plus brand is a chain that has recently undergone a bit of a revamp. From selling conservative clothing to older people, especially women, it has now gone slightly more upmarket with a broader range of goods for a larger customer base. It is still struggling in the current economic downturn but with Cameron's retailing expertise and well known focus on minimising cost it could well do better under her guidance.

It is great to see one of New Zealand's more successful business women take an interest in a company with a beaten down capital value.

She likes to take control of her business interests (who doesn't) and is a very aggressive player.

She currently has a number of different retailing interests. A new one, Nood, a home wares store, is going head to head with Briscoe Group [BGR.NZ] Urban Loft stores. Like most New Zealand retailers, Briscoes is struggling at present.

With Cameron's track record and stake in Postie Plus it will be curious to see what her next move might be.

In October 2009 that question has been answered in that Jan has made a move against her former company Kathmandu, who is currently perusing and IPO, by making public her plans to go into competition with them in the outdoor clothing market.





Jan Cameron @ Share Investor

Jan Cameron ready to move on Postie Plus Group?
Kathmandu's 2011 Results Under Pressure from Jan Cameron
Kathmandu IPO: Jan Cameron lands a blow to IPO
What is Jan Cameron up to?


Kathmandu @ Share Investor

Kathmandu IPO: Prospectus Analysis
Kathmandu IPO: Jan Cameron lands a blow to IPO
Kathmandu IPO: What is it worth?
Kathmandu IPO: Retail Interest HighKathmandu IPO: A tough mountain to climb
Kathmandu No.1 but IPO should get the Bullet
Download the detailed Kathmandu Value Cruncher Report - Requires free registration at Share Investor Forum to download
Download Kathmandu IPO Prospectus

Discuss Kathmandu at Share Investor Forum









c Share Investor 2008

Big wheels rolling, were moving on

Emmerson, Friday July 4 , NZ Herald


Emmerson doesn't seem sympathetic to the truckie's protest but the majority of Kiwis are behind them.

It will be interesting to see what the next political Polling will uncover given the awful week Labour has had.

The week started with the backfiring of accusations made against our future Prime Minister, John Key, by Ms Clark, that he had some sort of conflict of interest over owning NZ Rail shares and asking political questions about the company.

Tuesday rolled along and we found out that the NZ$1.7 billion, so far, to be spent on buying Toll Rail and renaming it KiwiRail was unaccounted for, there was no idea how much money it would need to operate it, that it would never make money and that Toll had been paid a taxpayer subsidy to compete against other truck companies.

That same day Annette King broke her promise to give truckers fair warning of road user charge increases.

Revealed in Parliament Wednesday, that a primary school had been left with leaky classrooms,smelly toilets and sewerage soaked playing fields for 3 years with no government intervention.

Friday rolls around and protests not seen in this country against a government for generations elicits an arrogant, ignorant response from Helen Clark- "I didn't see or hear anything, I was too busy".

Can it get any worse next week?


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The backlash has begun
Waiting for the backlash

c Political Animal 2008