Just to add to this... meanwhile ARV and AFT produce very robust results... share price dooowwn
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dont know why people rave on about retirement stocks being so wonderful , there crap investments this year
rym down 23%
arv down 27%
sum down 33%
met down 36%
oca worst of the lot down 37%
and most everyone raves on about there so good long term lol heres the best long term shares performing yr after yr even this yr
pph up 71% this year
fph up 40%
atm up 28%
Heaps of advertising in the papers for villages and village life in general - Oceania, MET and SUM in particular.
Suppose I should yap a bit about my theory on this.Quote:
So....are we in a lala land???
There is no question that there has never been a greater disconnect between the market and the present and immediately foreseeable economic fundamental's.
I've been investing since the early 1980's and have never seen anything remotely like this. So what to make of it ?
Firstly, if history is any sort of guide, the market usually bottoms about 7-9 months before the economy does, i.e. the market starts rising 7-9 months before the economy does. This seems logical enough as the market is always a forward looking beast and is always looking to price shares based on future expected earnings.
How do we know that the economy will bottom in 7-9 months ? We don't. The market appears to be pricing in a vaccine solution by the end of 2020 or very early in 2021 which will be rolled out in 2021 worldwide. What if this doesn't happen ? There is clear downside risk and one is best to be in needs based business's capable of paying a good dividend yield like this one.
What's the insurance policy. Central banks worldwide appear ready to throw almost limitless stimulus money around. This is la la land stuff. Ultimately it is highly likely to destabilize currency values and those countries who end up with really high debt to GDP will suffer some consequences.
What's the answer to the conundrum the current situation presents ?
1. Stick to needs based business's that will do well no matter how long we are in recession.
2. Stick to companies that can pay you a decent and sustainable dividend yield so that you are not counting on capital gains and can weather a protracted economic storm by simply collecting the dividends and being satisfied with that.
3. Stick to value stocks trading on compelling fundamental's - There is no fluff or la la land pricing built into their prices.
OCA fits the above criteria very nicely so is by far my largest investment position on the NZX.
Good post, Beagle! In a nutshell, a dose of reality!
:)
The BRILLANT MR B has spoken. As Winston Church said "there is nothing certain except death and taxes" or some such. Retirement homes are here to stay and some other business are not. There are very few well run public companies on the NZX and companies like Fonterra and FBU unfortunately are approaching basket cases and uninvestable , AIA not much better, (runway in bits). Monoply companies like SKC and POT are few and far between. New Zealand really doesnt understand that if need a radical new policy on multiple fronts to transform its ecomony. Sadly a center left economy is not going to transform an economy at the bottom of the world but it is a safe place to live prehaps..
Even if the market is pricing in a vaccine within the suggested time frame, hasn't the damage to economies already been done, but the full effects have yet to be felt? Think any other economic down turn that isn't triggered by a pandemic (and let's face it, we were well overdue a correction), you'd expect some long drawn out pain, right? Fundamentally there was a pretty decent bubble before C19 came along. Sure, this massive QE injection is all well and good, but it's not stopping people from losing jobs left right and center. It's not suddenly going to breath life back in tourism and everything else that enjoys the foreign currency trickle down. Is QE the silver bullet? Didn't we (maybe not so much NZ) have plenty of that last time?
To me it just seems like we're going to have '87 all over again, when every man and his dog was speculating, and a huge chunk got burnt, never to return. History never repeats though, right?
Yeah, I think the market is in la la land. But who knows. I've got some FOMO of my own going on, but having lost ~80% back in '87, I'm being pretty cautious. Like Beagle, OCA is by far my biggest holding currently, because I think it's a pretty safe hedge, regardless of which way the market (and MET's takeover) goes.
Yes complete separation between Wallstreet and Mainstreet. Im still majorly out since Feb 4th except for Goldies and gentailers and some dabblers.
Yes...sure is, thanks Beagle. So...its the assumption of having the COVID issues resolved in 7-9 months that is interesting. Not sure that production of vaccine is a necessary factor, although it would be ideal. Maybe a drug to treat the disease within that time period is more likely. Seems to me that a vaccine might take a couple of years.
What I see happening is that most countries are going to have to learn to live with the virus applying public health controls (social distancing, group control etc) as needed to keep the curve flattened to the point that their health systems are not overwhelmed. We are seeing this with the opening up of USA and Europe even while the virus is still prevalent. This is quite different from our approach in NZ. This will let those economies start to function again in a relatively normal (might be a new normal) way. So what does this mean for investment in NZ and following on from what Beagle has above:
Agriculture: Our customers are going to keep needing food.
SCK PGW REL SEK FSF
Ports: We will need them to export our production
Power Companies: NZ'ers will continue to use power
Healthcare: FPH, PAZ other ?
Retirement Villages: Hmmmm...I see them, simplistically, as largely a real estate play. And I think price of property will drop a bit as unemployment & lack of immigration bite.
Now...I hold a lot of other companies as well...will I be brave enough to re-structure along these lines ? Not sure.
Excellent post with some great searching questions. To your first point and perhaps as RTM has suggested, perhaps some sort of treatment program is more likely within this timeframe ? No question huge parts of the N.Z. economy have been seriously affected and there's plenty more damage to come when the wage subsidy program finishes...possible third leg to that program using some of the $20 billion unallocated in the budget ?
Yes there will be plenty of sustained economic pain from this and widespread effects on people's mental health and you are absolutely right we were well and truly overdue for a correction.
More concerning is on a forward looking FY21 market earnings basis the NZX has arguably never been more expensive than it is now.
There is no silver bullet to this, there never was but we started this with just 20% debt to GDP so that and the way we have managed this Covid 19 thing, (Ardern and Bloomfield have been a very impressive duo) leads me to think we will weather this much better than most.
The parallel's between 87 and now are certainly not lost on me just the names have changed. Instead of Judgecorp, Equitycorp and Ariadne to name just 3 we have a new breed of companies trading on little more than the hope of earnings at some undefined point in the future.
The market overall is VERY expensive based on foreseeable earnings, for sure, but there are pockets of value like this one but they are few and far between and I am happy to sit on a large allocation to short term deposits and Kiwibonds rather than jump into a FOMO market that appears at least to some extent being driven by some people investing their stimulus payments.
I think we come through this okay but the way some Govt's are printing money by the trillions and grossly mismanaging the Covid crisis could lead to some worrying consequences down the track.
From Reserve Bank - Unemployment could rise to 18 per cent, house prices could halve
https://www.stuff.co.nz/business/121...-biggest-worry