AIR - Air NZ.

[boysy]

http://m.nzherald.co.nz/business/new...ectid=11729283

Race To the bottom it seems

[freddagg]

Shame .... sounds like a really nice phone:

http://www.samsung.com/nz/galaxys7

for some reason they don't advertise that it might go up in flames and can't be taken on planes (*) - but this is probably for another thread.

(*) - actually - they just changed their webpage ... now they do.

That link is advertising the S7, they are fine,just the Note 7 that is a problem

[Baa_Baa]

Or the way down from the top..

Cyclical industry bottoms look like this:
1..Industry making large losses
2..Competitors shrink leaving the unprofitable areas of the industry
3..The Country (or Global) where the Industry operates is in a recession
4..Consumers curtailing their spending due to tough times
5..The industry shrinks to prevent oversupply/low or negative margins.
6..Some competitors go bankrupt
7..Many industries are vital to a Country's health...so government bail outs become common
8..probably more but that's all I can think of off the top of my head...you get my drift that the cycle is probably still closer to the top than the bottom

Good summary of a business cycle bottom. In terms of the SP, assuming the double bottoms Apr 2009 and Jun 2012 are a market cycle indicator, it's already ~62% of the way there. Might be time for a bounce off that fibonacci number eh, back test 50% and the May/June lows at 2.02?

[winner69]

Our man Christopher on his annual crusade preaching business sustainability

Talked a lot of other CEOs into getting their business to use more EV - all 1500 odd by 2019

Good on him - sustainable businesses are what we need - even if profits are impacted.

Must be hard to do these crusades at the same time that airlines are increasing emissions at a great rate these days

Never mind - keep at it Christopher, as long as Air makes a decent profit it will be OK

[Vaygor1]

If you bought an average house in Auckland now you'd pay $900K and get $500 a week for rent. .... = Net return ....[of] say $10,720 after tax.
On the other hand $900,000 invested in AIR would likely buy you 513,257 shares at $1.75 plus brokerage which would return you $102,651 in fully imputed dividends....
Pop Quiz - Which sum would be easier for a retired person to live on ?Which alternative involves an awful lot of hard work and drama dealing with tenants and which one involves just doing nothing ?
....

One other distinct advantage in stock ownership vs house ownership is with shares you can reduce your holding for whatever reason by selling part of it. Not so easy with a house to carve off a bedroom and recover the capital on that piece alone.

[couta1]

Obviously buying at the very bottom of the cycle would be ideal but hey most of us have to live in the real world so live with where we bought in at plus a bit of averaging down if we are so inclined. I'm middle of the road at a $2.29 average and a price which could be reached again within 6 months IMO, but regardless I'm happy to have 50% of our retirement funds invested in Air long term. As far as rentals go, not interested for reasons Roger has already pointed out in his last post plus Vaygors additions as well (Mind you I wouldn't like to have to reduce my holding currently for any reason obviously)

[Beagle]

Good summary of a business cycle bottom. In terms of the SP, assuming the double bottoms Apr 2009 and Jun 2012 are a market cycle indicator, it's already ~62% of the way there. Might be time for a bounce off that fibonacci number eh, back test 50% and the May/June lows at 2.02?

Good point Baa Baa.
Yes thanks Hoop for the salient reminder. I believe a lot of the negativity is built around an assumption we're going to have another GFC, (assuming we ever recovered properly from the first one, a decent debate all of itself), and people are quick to point to the cyclical low at the bottom of the last GFC. If we're comparing apples with pears, some people might like to consider how low for example high quality stocks like Ryman got at the bottom of the GFC, I remember them at $1.60, I am sure Vaygor1 with his in-depth knowledge of Ryman would probably remember them lower.

I personally don't think it's especially wise to assume we're going to have a GFC Mk2, granted its a possibility and theoretically possible that AIR's SP could halve from here but so would a lot of other stocks if that eventuated.

If we stick with official average forecasts of the 6 brokers following AIR we don't see any precipitous drop in earnings from FY17 and as Couta1 has noted their average forecast dividend is ~ 20 cps fully imputed for the foreseeable future and that's how company management see it too. The well foreshadowed capex holiday they have after FY19 underwrites their ability to pay at this dividend level well into the next decade assuming we don't have another GFC. Many people would qrgue with quite some merit in my view that the GFC was the most severe financial event since the great depression of 1929.

Food for thought, could the next cyclical low be quite significantly less severe than the last one ?
Further food for thought, is your capital at any more risk in AIR considering its SP has already been beaten up badly than stocks trading on lofty forward PE's ?

One other distinct advantage in stock ownership vs house ownership is with shares you can reduce your holding for whatever reason by selling part of it. Not so easy with a house to carve off a bedroom and recover the capital on that piece alone.

Couldn't agree more mate. Then there's the fantastic liquidity of stocks. We've been trying to quit a couple of low quality sections for over a year now, others we've held have performed extremely well but ones with more difficult build profile are much harder. You don't get that problem with shares do you although anyone with a large position in IQE, PPL or...(insert your favourite penny dreadful) might disagree !

[Beagle]

Obviously buying at the very bottom of the cycle would be ideal but hey most of us have to live in the real world so live with where we bought in at plus a bit of averaging down if we are so inclined. I'm middle of the road at a $2.29 average and a price which could be reached again within 6 months IMO, but regardless I'm happy to have 50% of our retirement funds invested in Air long term. As far as rentals go, not interested for reasons Roger has already pointed out in his last post plus Vaygors additions as well (Mind you I wouldn't like to have to reduce my holding currently for any reason obviously)

Based on e.mail discussions I know you haven't deducted your 35 cent dividend from that so looked at another way your net average is ($2.29 - $0.35) = $1.94. Not so bad mate when you look at it like that. Why not make yourself feel a bit better and look at it the net of dividend way. Quite aside from that its what they can pay us for the next 10 years + that counts mate and is going to make our lives easier.

[Raz]

Our man Christopher on his annual crusade preaching business sustainability

Talked a lot of other CEOs into getting their business to use more EV - all 1500 odd by 2019

Good on him - sustainable businesses are what we need - even if profits are impacted.

Must be hard to do these crusades at the same time that airlines are increasing emissions at a great rate these days

Never mind - keep at it Christopher, as long as Air makes a decent profit it will be OK

Yep is doing the texted book PR, talking three years out which is where the analysts and market should be using as the valuation basis however they are not.

Auckland property of any quality, if you purchased early in the cycle, i.e even 2012, which I did with my ChCH EQ money, was the most easy money I have ever made and liquid as to resell.

One asset is a a different point in its cycle to the other so why compare.

[Snow Leopard]

Annualised table of returns for 1,2,3,4,5,10 & 15 investment periods to the first trading day on or after 14-Oct in Year YYYY. Prices adjusted for splits and dividends.

Orange: <5% return
Green: >15% return
Blue: otherwise



Best Wishes
Paper Tiger