Are N.Z. Equities too expensive ?

[percy]

Appears forecast average earnings for NZX companies this year is about 6%/7% so you wouldn’t be buying the Index at a PE of 22 odd would you percy

Like you stick to stocks that meet our criteria and don’t worry about the Index (too much)

Being a stock picker, buying the index, or placing funds under management does not appeal to me.Would take away all the fun.!
Yes I try to keep to stocks that meet my criteria.This off course means I do not share in the taxi drivers' hotties,and under perform them at times.Maybe my investment horizon is longer than theirs'.?

[Beagle]

FNZC reckon that the forward looking PE of the NZX is 22.7

The median PE is far lower at 15.6 with the gap of this to the average PE continuing to be at near record levels. Suggests that small and mid cap stocks have been left far behind and unsurprisingly this is where many attractive opportunities exist

Don’t worry about overall market valuations - be a stock picker and run with those


What’s the earnings growth of the NZX - might surprise some

What a great thread this has been so far. Thanks to all for your contributions so far. Just picking up on your point Winner. This disparity between the average, (if we are to assume this is a market capitalization based average), and the medium shows the degree of influence the average number is affected by factors I noted in post #1.
It shows there is indeed relative value to be found in the mid and small cap sector but I agree with another poster who suggested some people are punting on companies with little or no track record in an attempt to find value.

Just wanted to add a couple of snippets from my time spent watching world and business leaders opine at Davos as reported and shown on CNBC.
Worldwide economic growth predicted by many to be strong at 3.9% in 2018.
Consensus view that inflation generally is moderate but fiscal stimulus will have to be wound back as the year progresses to avoid inflationary pressures.
Still a LOT of money on the sidelines in cash.

Further thoughts.
No question new money coming to the market every single month from Kiwisaver now 10 years old is having a supportive effect on the market.
The high average dividend will be supportive of the N.Z. market as interest rates rise.
We are fortunate to have an imputation system that allows us to reclaim tax paid by our companies, not all that many countries do.
We are fortunate to not have capital gains tax on shares, enjoy that while it lasts.
Many commentators are now calling the end to the great bond rally of the last 20 years and long term interest rates look certain to head higher from where I sit. Long dated corporate or Govt bonds look like a very poor place to have capital allocated to me.
Lower yielding REIT's could come under pressure as interest rates rise, I prefer highest yielding REIT's like ARG and GMT, both PIE funds.
Our corporate tax rate is starting to look a little high relative to other OECD nations.

[minimoke]

We are fortunate to not have capital gains tax on shares, enjoy that while it lasts..

My understanding is that there is a tax on shares if they are bought with an intention to sell and they are sold for a gain. Not Capital Gains TAx I know. But a tax on gains all the same. (judging by the language of many posters here they clearly intend to hold shares for the purpose of selling - and show no hesitation in actually selling when opportunity for gain seems to be reversing.)

[Beagle]

Probably a topic best left for a different thread minimoke. I simply made that remark to put our market valuation into context as other markets do indeed have an all encompassing capital gains tax system and some have capital gains tax and no ability to claim imputation or other tax credits back.

[couta1]

Probably a topic best left for a different thread minimoke. I simply made that remark to put our market valuation into context as other markets do indeed have an all encompassing capital gains tax system and some have capital gains tax and no ability to claim imputation or other tax credits back.

Yes agreed, just chasing tails getting into that subject, although I like what winner said a few years ago," We are all traders, it's just the time till sale that's different".

[percy]

Yes agreed, just chasing tails getting into that subject, although I like what winner said a few years ago," We are all traders, it's just the time till sale that's different".

I always buy to hold forever,and to receive growing dividends.
I only ever sell to preserve capital, [so as I may remain "well positioned"].

[peat]

I am not going to suggest that NZ shares arent highly valued
POT and AIA are highly valued for sure and their obviously achievable growth may not be as superlative as ATM PPH.
But there is a very different risk profile involved in holding either of these very moaty transport/infrastructure shares cf the general market which obviously allows higher valuations than your standard businesses that are based on competing with other similar businesses. I would suggest they deserve at least a significant chunk of their high valuation based on the barrier to entry in their industry without even considering their performance. Growth doesnt always come from where you expect it to - as shown by AIA's very profitable recent sale of shares in other airports.
Sydney Airport for instance trades on a PE twice that of AIA, and would be comparable in terms of monopolistic advantage
POT would appear to be especially highly valued and I wouldnt buy it myself , but then I said that at just over $4 and now it is over $5.

As market become more and more highly valued and then some clouds begin to appear on the horizon we should also note that there quite often tends to become a very discernible flight to quality and so well managed monopolies will benefit from that.

[Beagle]

http://www.sharechat.co.nz/article/1...n-exchangehtml

AMP Capital opines on the subject.

[peat]

yes I was just thinking this article was very relevant to the thread!
Pretty much agree , and very noticeable that they inject some emotion into their comments by using the word 'euphoria' in their latest report.

My main equity investments have been in withdrawl mode for a while now , slowly ever so slowly reducing a number of mutual funds.
I am reluctant to reduce overseas unhedged exposure though when the Kiwi is high,which incidentally is via an AMP Capital fund

[Beagle]

Days like today I am happy that I am of a similar view to you Peat and AMP and sitting on a pretty reasonable cash allocation but most other days this month it hasn't felt so good lol