Which to buy?? AIA FPH MFT THL

[percy]

hi Justin
B/c Resmid litigation BUT FPH have come out the winners so far.Shows the value of their intellectual property & patents.

This will be ongoing for years, and will cost both parties millions upon millions.

[kiora]

Thats what happens when there is IP that has real value

[MauroNZ]

ps.The book on the history of Mainfreight is a fantastic book to read.

Thanks for the recommendation, I had a lot of fun reading it and also a good learning.

[MauroNZ]

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Your winners haven't raced yet..This rosy future is not guaranteed..THL is a cyclical Company and growth may not be sustained during an economic downturn..a true cyclical waxes and wanes.. grows and shrinks..It is very hard to determine whether THL is in fact experiencing real positive growth (grows more than it shrinks) more than MFT over an extended time....As Peat pointed out the beta co-efficient for THL is a lot higher than MFT..This makes THL a darling exponential money maker when the economy booms and a portfolio killer when the tide turns and THL does some shrinking..a typical cyclical stock which should never be included as a buy & hold in a very long term (superanuation type) portfolio..

MFT is also affected by economic conditions but over the many years (including recessionary times) it has had growth....It's been a constant performer..




Cyclicals grow and shrink so their PE is always lower than the NZ index average.. so THL is loooking a tad high (overvalued)....MFT is a growth stock so their PE will always be higher than the average,,until they stop growing..





Growth stocks usually have either no dividend or low yielding dividends...much of the profits reinvest into the growth story...Constant shareprice increase takes care of the non-dividend..(and no tax).
Cyclical stocks during boom times pay out very high yielding dividends which again makes THL look a bit lousy at the moment.....eh...and cyclicals also often pay high yielding dividends during bad times sadly with a much reduced payout with a much reduced shareprice.

Hoop, thanks for the explanation it helps a lot. Now, after reading Peter Lynch book "One up on Wall Street" and he mentions there cyclicals and growth companies. However I'm still trying to learn how to distinguish one of the other, so in your opinion is there any other book that would help in that regard?.

Thanks.

[Oliver Mander]

.

Your winners haven't raced yet..This rosy future is not guaranteed..THL is a cyclical Company and growth may not be sustained during an economic downturn..a true cyclical waxes and wanes.. grows and shrinks..It is very hard to determine whether THL is in fact experiencing real positive growth (grows more than it shrinks) more than MFT over an extended time....As Peat pointed out the beta co-efficient for THL is a lot higher than MFT..This makes THL a darling exponential money maker when the economy booms and a portfolio killer when the tide turns and THL does some shrinking..a typical cyclical stock which should never be included as a buy & hold in a very long term (superanuation type) portfolio..

MFT is also affected by economic conditions but over the many years (including recessionary times) it has had growth....It's been a constant performer..




Cyclicals grow and shrink so their PE is always lower than the NZ index average.. so THL is loooking a tad high (overvalued)....MFT is a growth stock so their PE will always be higher than the average,,until they stop growing..





Growth stocks usually have either no dividend or low yielding dividends...much of the profits reinvest into the growth story...Constant shareprice increase takes care of the non-dividend..(and no tax).
Cyclical stocks during boom times pay out very high yielding dividends which again makes THL look a bit lousy at the moment.....eh...and cyclicals also often pay high yielding dividends during bad times sadly with a much reduced payout with a much reduced shareprice.

Quick comment to add some context hoop - in BOTH cases, on a 12 month beta (admittedly relatively short term), the beta is below 1 (around 0.5 for THL, 0.4 for MFT). That would put BOTH stocks into the category of 'non-cyclical' / defensive type stocks. So while your theory is correct, I'm not sure its borne out by the data. Difficult to use a 5 year beta on THL, as the company has changed out of sight over that timeframe.

Also - I would consider BOTH companies growth stocks on the basis of their past performance and future forecasts.

To me, they sit in the 'goldilocks' zone - proven performance, solid growth and non-volatility relative to market. PE's of 16 (THL) and 21 (MFT) are not overly high to pay for Goldilocks...so maybe even some buying to do here still.

Disc: Hold both! (and not letting them go...)

[hardt]

returns since the first post 24 August
Code 24/8 price 4/9 price return
AIA $6.86 $6.66 -0.20 or -2.9%
FPH $11.68 $12.00 +0.32 or +2.7%
MFT $24.65 $24.74 +0.09 or +0.3%
THL $4.63 $4.57 -0.06 or -1.3%

	24-Aug	6-Oct	SP Change	Dividend	TOTAL RETURN
AIA	686	625	-8.89%	10.5	-7.36%
FPH	1168	1262	8.05%	0	8.05%
MFT	2465	2503	1.54%	0	1.54%
THL	463	492	6.26%	11	8.64%