Your Ideal Stock #2

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holycow

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Post Number: 233
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Wednesday, October 27, 2004 - 09:33 am:

Peter,

I am starting a new thread here to continue our discussion because the old one is getting too long and takes quite a while to load.

Strangely enough when I had my chat with my accountant the other day he too brought up TWR together with HHG as a comparison... anyway he is a "value investor" and he simply sees things from a valuation point of view (the main reason why I like to talk to him). In his view, he considers HHG to be of good value, has a good/large portfolio which has been underperforming in the recent past that caused its demise; and in Asia in particular, HHG is quite "involved" and is quite respected. He reckons HHG could potentially make a lot of money given time.

The only problem with HHG is its insurance biz which he believes if HHG can successfully get rid off will mean its balancesheet will improve greatly. And for a while I believe quite a few other funds were buying up HHG for that biz potential or at least some kind of partial takeover.

However judging from HHG's chart, I think that possibility seems to have dissipated. Not sure why but I can see the interest is slowly drying up. Without really digging into HHG, I think this stock will take a while to regain the investors' interest.

My take on HHG is again this - too many shares floating around. When a stock is too widely owned, sometimes it just can't make much headway. Just take a look at TLS! And to an extent AMP. I like to think of all these share holders as an army without a leading general - they charge at all directions and go nowhere. The only remedy for these stocks is some kind of consolidation where investors become tired of the "non-performance" of the stock and bail out and the shares consolidate in a few large holders' hand who know what they are doing.

I think AMP is well on its way but HHG is just going through the shake-down; and TLS is as usual - deader than dead (still my accountant is making big$$$ from TLS!).

Coming back to TWR, my comment to my accountant on that day was "I am willing to bet with you TWR will be merged/takenover well before HHG would..." and he took notice with the above view of mine, ie, large float base. Take a look at the attached charts and imagine how much more $$$ the takeover party has to forked out before the deal can be done? Likewise, a normal daily question, how much would it take to move one point up in HHG comparing with TWR?

Cheers.

twrhhg

HC

"... if you've got a chart, I have an opinion!"

dogalog

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Wednesday, October 27, 2004 - 10:53 am:

SUPERCHEAP-ipo dividend statement-1.9cents forecast for 31/12/04[paid 4/05],3.9c 30/6/05 [paid 10/05]dividend policy is 35-45% of npat.
Stores in Qld.often located in 'strip'centres,not Westfield etc.The locations are owned by the founder of company.As i've said before he's Staunch.Not just the money but the Achievement is his motovation.This business is his life[unlike say repco,pac brands which have been 'unloaded'by "evil"venture capitalists!!?!]
i'd be interested in both your thoughts on 'Tightly Held's.
i think employee/franchisers involvement is very positive.For one thing it can bring a whole new batch of 'fresh meat'never before shareholders to the Action.

peter loh-it is surely not the "wrong" thing to just 'get on'to a share instead of 'wait for retracement'rules?The Institutions will have to wait the Founder's Stake to get in/on the market,wont they?
i consider this a Safe share,but i'm not going to hold it forever,just get a feel for it,have a practical,working knowledge of it,"Specialise" in my "code/lexicon".That way it'll be just that more Safe.
I invest in shares for "Amusement",the returns are far superior to just money that way.I love being in the machinations/the game.
Must organise a poker game with you all one day.Do you know the variation called "Manilla"? 5 cards dealt face up in middle,2 cards dealt to players;with cards revealed and the two in your hand;you make your best 5 card combination to PLAY.More fun than a BBQ!
there's some 'amusement'also in the betting but ahhh i'm salvinating on the key-bored already,so i'll nix out.
[ will come to non reply period soon,just got to pick up a package first!]

buy/sell things,
jr

holycow

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Wednesday, October 27, 2004 - 11:41 am:

Dr.D,

Your back! :-)

There is no Supercheap in Melbourne (I think) because I only know Autobahn and Repco. So SUL comes across as alien as the alien as in the movie "Alien". But after hearing what you said about the owner, he kinda reminded me of the "old timers" as in the old business school where virtues like thrift/honesty/integrity/blahblahblah are held and are highly valued - this, to me is a great plus!

(In fact he reminds me of the old founder of Walmart and Warren Buffett.)

So if a tightly held stock a good thing - yes! Because I can trust him to look after my money as if his own. No - if and when he goes to meed his maker. This is the same tough question thousands of BERKSHIRE HATHAWAY INC. stock holders are facing every year when they attend the Oracle's annual meeting - Warren Buffett is getting older (and older) as year goes by, will he ever kick the bucket? If he does, what'd happen to BH's share value?

So the question for SUL is very similar. Will his family look after your money as well as he does?

Cheer.

ps: BERKSHIRE HATHAWAY INC. http://www.berkshirehathaway.com/

HC

"... if you've got a chart, I have an opinion!"

holycow

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Post Number: 238
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Wednesday, October 27, 2004 - 01:01 pm:

Some news on SUL...

"UBS is confident that Super Cheap’s (SUL) store rollout programme will expand to 209 outlets by June 2005 instead of 205 previously predicted in its prospectus.

This is due to the store achieving a 22.1% sales growth for the first quarter of FY05 on the previous corresponding period, driven mainly by store numbers rising from 144 in June 2003 to 194 to date. At the same time same store sales growth was 4% year-on-year.

The broker has also upgraded SUL’s 2005 fiscal year net profit after tax to $21.7m, well above the prospectus forecast of $18.4m given that UBS is forecasting the 209 stores by June 2005.

UBS retains its Neutral rating of the stock with price target intact at $3.25."

Cheers.

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Friday, October 29, 2004 - 10:02 am:

HC,

Good comparisons between TWR and HHG, especially your charts. Unfortunately I called it wrong if we compared them as I overweight in HHG and neutral weight in TWR.I also expect more to come from TWR now in the short run.TWR is small cap compare to HHG. Also HHG has a lot of value Fund Managers on its register.We hardly get any information or news how it is going consequently, a lot of investors lost interests.I, too am affected by this silence. I know the fund management and insurance industry are doing very well, with the equities market improving and this will continue for a few years.So I am prepare to wait a bit longer hoping eventually when the good news come out, it does pay for the waiting. This is what I call patience, probably a bit gutsy for hanging on to HHG.Having said that HHG does have a very good reputation in the Pacific, mainly Asia.

Peterloh

-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

peterloh

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Friday, October 29, 2004 - 10:24 am:

This one is on the verge of breaking out.Many fund managers are wrapped in it and currently overweight in their position.Although it is not global like but nevertheless it is leader in Australia on personal and general insurance.It is totally focus on its business after ridding itself of its financial planning arm.I got in this one last year and has been adding on to my position. It has a very good capital management programme. I like the management and I think James Strong is very dynamic in his approach.

Peterloh

holycow

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Friday, October 29, 2004 - 11:12 am:

Hi Peter,

G'day. It's good to read some disagreement once a while otherwise I am beginning to wonder if I have become one of the herd. :-)

I agree that comparing TWR and HHG is quite wrong. The lumping of them together in my context is "strictly" confined to the discussion of both of them being seen as takeover target, that's all. My chart in putting them side by side is just to show the number of shares and $$$ are involved in a daily basis to move each them.

On IAG, I think I will stay sideline and watch for a while. Chart wise it is very bullish and "uptrend" which, in using my "scary cat" thesis, I am approaching it with heightened nerves and try not to catch one of those "cliff hangers" aka AVV and friends.

Interestingly I'd just read two separate reports on the insurance sector in general: one is a study by Delotte and JP Morgan on insurance sector earning momentum and the other from Macquarie on insurance stock outlook.

Basically, the first study says the earning momentum might be slowing and hence would impact the profitability of the sector; the other from MacB is saying "not so soon" with regard to slowing in the earning momentum, instead they say "buy on dip" - since the "experts" and analysts are in somewhat disagreement, I reckon the best policy is not to "open" a new insurance policy until they are all "in sync".

Cheers.

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Friday, October 29, 2004 - 11:24 am:

HC,
Rec'd report on CPU,from Schroders, very positive over it.Can you send your email address to me via IC so that I can send it to you, ie if you like a copy?.

Peter

peterloh

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Friday, October 29, 2004 - 12:35 pm:

HC,

I didn't think it would be wrong to compare, it open our eyes, as to their performance.I was aware you were highting certain aspects, but the chart did strike me, one TWR is going NE whilst the other HHG is just ranging.

The only time you find agreement amongst all the analysts is when the share is trending very strongly, even then they is always some different views.This is mainly because of different style on investing, time frame etc. A value investor will take a different approach from that of a growth or GARP, or even a capital approach investor. It is therefore not strange to find different views.I have also read the different reports of Delotte and JP Morgan. Whilst these are experts in their own rights, they have not considered or brought up other aspects in their presentations.

The general insurance industry has consolidated and they are fewer players around then it used to be especially on personal insurance.As a consequence of that, insurance companies can command a higher premium. Not only that, because of good weather and less disasters, less wet days, the incident of claims have been reduced. They used to lose on taking risks and made money on investments, they are able to make money on both sides. Not only that, they are able to pick and choose on what they want to insure.In areas they do not choose to expose, they imposed a high premium to discourage that particular type of business.

The other aspects, that have been overlooked is the strong equity market. IAG had choose a different approach to their investments, choosing to be more exposed to equities gave them the benefits which they are enjoying in a bull market.

I also like their capital management approach in buying back their shares, which will reduce the number of shares in the market.AS they are in the top ASX 100, the demand would be greater as they would be less shares around. Their new policy of increasing their dividends paid out by 10% per annum, shows they have direction in maintaining shareholders value.

When a company becomes good, they wont turn bad overnight. The good news will keep on coming especially when they have good management, they would be kept on the right path.Now that they are on the right track, I can see that their share price will continue to head up in the right direction. I would consider it as an ideal stock to be in my portfolio and do expect to give me great rewards and enjoyment for years to come. They is even a likely hood that IAG may merged one day, as IAG is strong in the Australian, whilst QBE has 80% of its revenue from overseas.

Peterloh

holycow

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Friday, October 29, 2004 - 01:53 pm:

Peter,

Thanks for the Schroder report offer. I think it's enough just to know they think good of CPU. The rest, I will rely on my chart reading.

With regard to IAG, I am not sure if I like what they do really. The following are my concerns:

1) over emphasis/reliance on equity - right at this moment I am rather "concerned" about the market "toppishness"; with the recent resource sector uncertainty including this morning's big swing in Rio/BHP; in a longer time frame (say 6 to 12 months), I can't say right here that I can see a pot of gold at the foot of the rainbow;

2) I read sometime back IAG has made a move into Asia, for eg, having a partnership with a local insurance firm in Malaysia providing somekind of automobile insurance and services - I am not entirely comfortable with that;

3) share buy back is a 2-edge sword - they add investors' value OR you can read that to mean they can't see a better use of their cash. Is the management running out of idea?

4) from your message I believe you are holding a much longer term view on IAG than me, I guess what I have said probably would not matter much.

Cheers.

ps: QBE - I am still holding the view that "this one" will be a short candidate, let's wait.

HC

"... if you've got a chart, I have an opinion!"

peterloh

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Sunday, October 31, 2004 - 05:40 pm:

JR,
Thanks for info on SUL.

HC

Agree we have different view points on IAG, probably due to different time frame and different approach.Joint venture operation in Malaysia is insignificant. I think IAG management know what they are doing when they switch from fixed interest to shares, consequently their investment portfolio has done very well.If they have nothing worthwhile to invest, gives me the money any time, instead of blowing the money just to satisfy someone's ego.

Also do not see QBE as a short, long or short term view.However I know that you know what you are doing and I wont go into a long discussion on this topic.

Best wishes & good trading.

Peterloh

peterloh

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Thursday, November 04, 2004 - 10:46 am:

HC,

Look like the one you have watched closely XYZ has taken off.

Nicola, just to refres