NZX Share Split good news for profit takers

The announcement of a 3:1 share split and improved dividend payout by the the New Zealand Stock Exchange Ltd [NZX.NZ] shows that directors of the company are confident that future performance of the company is going to exceed market expectations.

The share split is an attempt by the NZX to get more mum and dad investors on their share register as the bulk of shareholders are currently brokers -who used to privately own the company - and those on the "inside" of the stockmarket industry.

This is the second time the stock has split since its 2003 listing.

The theory of stock splits is that by making shares "cheaper" it increases liquidity and enables more people to own shares.

In practice though, splitting shares has no material long term effect on the company doing it - and nor should it - and rarely does much for liquidity.

The main effect a stock split has is to allow short term investors to make good quick profits based on the typical rise of the pre-split share price and then dump the shares before the stock splits.

Post split, shares sometimes rally as well so there is opportunity there to turn a fast buck.

This kind of "sleight of hand" with shares is rarely sustainable for any long term share price increase and it is back to basics for concrete results to get a real indication of a market value for a company.

If you are keen to make some fast moola there should be more to be made before the record date for the share split on Monday 21 December 2009 . The share split will happen after market close on Monday 21 December and be effective on, and from, market open on 22 December 2009.

NZX shares have rallied around 60c on the news since it came out on Monday 7 December so if you take the plunge please be aware of the risk involved.

Good luck!


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c Share Investor 2009

Stock of the Week: Telecom Ltd

Telecom New Zealand Ltd [TEL.NZ] is a good stock to trade rather than hold long term simply because the trading volume is consistently the highest on the NZX and that is why I have included the company in this Stock of the Week series.

I am not a chart man myself or a short term trader but if you look at the one year chart above there has been a good deal of money to be made in the earlier part of 2009, going from around 10c per share right up to 60c per share profit.

The share price reached an 8 month low of NZ$2.36 yesterday and has risen like a roller coaster (hence the trade possibilities) from a year low reached in mid January 2009, so one could assume that indicators are showing that an opportunity exits for a good trade at these stock price levels and a good range for profit made considering its recent trading history.

I don't like the long-term prospects for the company, it still has a defensive, reactive culture with employees who are badly trained and informed on what they are selling and poor service levels but it has a 10% plus gross dividend and it isn't going to go out of business any time soon.

Shorties will win here.

Good luck!

Telecom @ Share Investor

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Stock of the Week Series

Reprise - Contact Energy Ltd
Restaurant Brands
NZ Refining
Ryman Healthcare
Mainfreight Ltd
Fisher & Paykel Healthcare
Xero Ltd
Auckland International Airport
Sky City Entertainment Group
Burger Fuel Worldwide
Michael Hill International
Contact Energy Ltd
The Warehouse Group
Fisher & Paykel Appliances

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c Share Investor 2009

Carbon Trading: A good reason to exit the Stockmarket

When your taxi driver, next door neighbour and friends at barbecues start talking about how much money they have made buying carbon credits on the NZX, which start trading in New Zealand in July 2010, you will know it is time to exit the New Zealand Stockmarket, and other global stockmarkets as well.

Whether you think the theory behind climate change, which carbon trading is supposed to help ameliorate, is true or not - and it has been proven it isn't - carbon trading is going to be the buzz phrase of 2010 and beyond. As the price for these carbon credits increases, and it will, it is going to take stockmarkets on a ride with it not seen since the Internet boom on the late 90s.

Like that boom though, Carbon Credits have no real assets behind them to back them up, they are simply "made up" and the revenue that flows from these credits is based on political maneuvers and manipulation rather than real economics, so the ride isn't going to last forever.

As I picked almost 2 years ago I expect a bull run for the NZX in 2011, for different reasons back then but the carbon trading market is going to be part of the resurgence.

This isn't about knocking global warming or carbon trading though, because others do it better and quite frankly it is easy to do because of the sheer kookiness of it all. This is about my strategy to get out of the stockmarket before the carbon trading market inevitably collapses and takes everything else down with it.

I prefer my own exit strategy, I don't like being pushed. but I reckon i will have little choice once this pile of bullshit gains momentum.

How bad it will be nobody knows but the carbon trading market is likely to get intertwined in every facet of our lives as well as our financial markets so any fallout from its collapse will be significant.

I just have to wait for those first signs to come and for every Al (oh hang on HE already is and is already making moola out of it), Dick and Harriet to start blabbing constantly about it and I know the market will be near its peak.

Keep that in mind if you are going to get into carbon trading directly or the stockmarket in general and head for the exits if you dont want to lose your carbon neutral shirt.

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c Share Investor 2009

Hugh Fletcher: Silver spoon no recipe for success

In an interview with Kim Hill on National Radio a few weeks back Fletcher Building Ltd [FBU.NZ] former CEO Hugh Fletcher gives his views on the history of the business and his time there.

Fletcher followed in the footsteps of his father and grandfather at what was then Fletcher Challenge. He remains a director of Fletcher Building to this day.

He is currently on the board of the Reserve Bank of New Zealand in 2002 and chairs the board of directors of IAG New Zealand and is a director at Vector Ltd [VCT.NZ], and a board member of Insurance Australia Group.

The interesting part of the interview is the glossing over by Hugh of his failure as CEO in the 1980s-1990s. Under his reign the company limped towards oblivion in the 1990s as failed expansion attempts led to the breakup of the company into 3 different divisions in 2000.

He made many enemies along the way, notably Sir Ron Trotter, Sir Ron Brierly and Dr Rod Deanne, a former director at Fletcher Challenge and failed former CEO of Telecom NZ [TEL.NZ].

A very interesting view from Mr Fletcher on the history of what is now Fletcher Building and it is ironic that the company went back to its roots in the building industry after its failure under the grandson of the founder.

It just goes to show, leaders and business are not born but made from hard work and ability and often separated from parentage.


Disc: I own a small FBU holding in the Share Investor Portfolio


Fletcher Building @ Share Investor

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From Fishpond.co.nz

The story of his family and their company is told in Fletchers: a Centennial History of Fletcher Building by Paul Goldsmith




c Share Investor 2009