Originally Posted by
Harrie
You blame the decline in share price on one large seller and tight liquidity, yet you fail to acknowledge exactly the same factors were present in reverse when the share price was bid up to 97c. 97c was a Ben Graham 'vote', caused by an index fund having to buy at any price.
Snoopy...You are pushing that barrow a bit hard mate. Firstly Milford is not an index follower, most of its funds operate as absolute return funds. In other words the index has nothing to do with how they manage their funds despite the fact that they may compare their performance to a recognised index.
Secondly Milfords holdings in ATM were far above the % ATM represented in the NZX 50 in fact at around 60c ATM only just made it into that index. At 97c ATM would have represented around 6% of the total market and around 9% of the NZX50 so you could hardly say that they needed to continue to buy as the price increased on that basis given that they already held around 15%. That is more than twice what they needed to be if they were following that index.
Following mandates, that can change as market conditions change, is quite different to following indices. Selling pressure is more of a mandate change in strategy which is more often than not caused by risk minimisation, and that's where IMO where the selling pressure is coming from. Its nothing to do with NTA's and P/E's, its simply a reassessment of the risks involved with the possibility that ATM's growth strategy will pay off. That's why I think that the 49 to 53 range will be maintained until sales volumes in target markets either meets expectations or disappoints.