SCT - Scott Tech

[Snoopy]

Snoopy:"...There are still no announcements from the company that would explain a share price rise of 71%. Whatever happened to the NZX 'please explain ' watchdog? Has it gone to sleep? "

Was it ever awake, really?
After decades of disappointment with NZ market regulation, I can't wait to get out of my NZX listed holdings. So far got $60% over to ASX stocks, but slow work waiting for chances to escape without having to swallow too many dead rat losses.

No wake up call yet. SCT up another 10c at $1.25 as I write this on - wait for it - a measly 516 shares! Way below a marketable parcel. This share is performing so well I am getting worried now....

SNOOPY

[Snoopy]

No wake up call yet. SCT up another 10c at $1.25 as I write this on - wait for it - a measly 516 shares! Way below a marketable parcel. This share is performing so well I am getting worried now....

Yesterday the correction came. The share price declined from $1.25 to $1.24.

Today the SCT share price climbed another 16c to $1.40. The day closed with bidders for SCT still there at $1.40 and sellers at $1.45. Four months have past and the share price gain has been 100% from that 70c low. Good stuff, yet no significant announcements from the company over that time!

I can now report that, at last, I am back in the black with my SCT investment. Some would suggest that I should now 'sell out'. However, I am definitely in for the long haul. I won't be thinking about reducing my holding until those robotics profits start to flow through. If anyone wants SCT shares, they won't be buying mine.

SNOOPY

discl: have held SCT, albeit in a small way when I started, since 1997!

[PointyHat]

Hi Snoopy, that was me messing about yesterday, I have an order in for 10,000, (averaging) and I managed to get only 115 then later 2500 at 1.25

I then saw a 3000 buy come on at 1.40 and I got ASB to sell the 2500 at 140. Couldn't help myself. Made $345 - in about an hour ? I then ameneded my original buy to12,500 and dropped my price to 1.21

I am sure the price will come back to the 1.20s next week and I'll pick some up then.

Like you I am a long term holder and find that these small quanities change the price so drastically, it means you just cannot deal in sufficient amounts and the price is easily manipulated.

I am quite excited about the Rocklabs addition and hope the co can show some bottom line improvement in Oct. Certainly the directors have a lot of share interest as an incentive. New leadership and premises etcetera ... hopefully optomistic

Keep up your imput into Sharetrader, I dont post very often but am always reading, and agree with most of your posts and sentiments ...

[Phaedrus]

I can now report that, at last, I am back in the black with my SCT investment. (I) have held SCT, albeit in a small way...since 1997.

Snoopy, at a personal level you are a really good man. One of the best. Over all our years of arguing the relative merits of TA vs FA you have never once stooped to personal attacks, focussing solely on the topic under discussion. That is all too rare on these boards. Your fundamental analysis is invariably meticulous and the points you make are well supported and well argued. You have applied your fundamental analysis with precision and dedication for literally decades and your faith has never wavered. How you can maintain this level of commitment and optimism in the face of debacles like this one is totally beyond my comprehension.

Here you are, invested in a stock that you have held for 11 years, one that has recently doubled in price, and you report that you are "at last" in profit"! To me, this is a spectacularly damning indictment of the methods you have been using. Eleven years of "investment", most of that time during the biggest Bull run we have ever had, for........nothing! (it's about here you start talking about dividends, right?) I can but continue to marvel at your fortitude and dogged perseverance. Don't you have any doubts? Have you ever wondered if your approach might perhaps be improved upon? Ever entertained a sneaking suspicion that market sentiment just might be worth taking into account?

I'm not knocking SCT as a stock. You had in fact tripled your capital at one point, but in the absence of any discernable exit strategy, coupled with a dogged refusal to sell at any price, you gave all your profits back to the market. It seems to be a point of honour for you to ignore prevailing market sentiment - indeed you take a perverse pride in acting contrary to it. This approach has cost you very, very dearly. A quick easy example of this is where you were buying "value", adding to your SCT holdings when it was in a very clear downtrend. Brave - but foolish. You made exactly the same mistake with TEL and other stocks, but let's not talk about that!

Some would suggest that I should now 'sell out'.

Not me Snoopy. The time to sell was when I did - when SCT ended that magnificent 3 year uptrend. (The "SCT Chart" thread gives blow by blow documentation of this.) Now SCT is in a new uptrend, making it again a good stock to hold. It will eventually peak and downtrend again - and you will doubtless hold on through yet another cycle.

What price "buy and hold" eh?

[Snoopy]

Hi Snoopy, that was me messing about yesterday, 10,000 (averaging), and I managed to get only 115 then later 2500 at 1.25.

I then saw a 3000 buy come on at 1.40 and I got ASB to sell the 2500 at 140. Couldn't help myself. Made $345 - in about an hour ? I then ameneded my original buy to12,500 and dropped my price to 1.21

I am sure the price will come back to the 1.20s next week and I'll pick some up then.

Like you I am a long term holder and find that these small quanities change the price so drastically, it means you just cannot deal in sufficient amounts and the price is easily manipulated.

Nevertheless PointyHat, there is/was a buyer in the market that is/was willing to pay $1.40. Good on you for booking your $345 profit in an hour. But it is very hard to figure out what is a good price to pay for SCT without a bit more disclosure from the company. And once that disclosure comes then it will almost certainly be too late to buy.

During 2007, a total 9cps was paid as a dividend. Based on a share price of $1.40, that is a gross yield of around 6.4%. That sounds about right in this market. But so much has changed since. Rocklabs has been acquired. The automated meat room project at last looks to be on the cusp of generating a real return. Yet the exchange rate vs Europe is not particularly favourable and building a whiteware line for the USA would be barely profitable with the $NZ/$US exchange rate approaching 70c. So can we get back to that core earnings level of 9cps just by building whiteware production lines? If we can, $1.40 might seems a real bargain in a few months. If not, I wouldn't bet against you filling your order in the $1.20s Pointyhat

Nevertheless Pointyhat, I can't help noting that your strategy looks to me to be all over the place. I am not familiar with what a 10,000 (averaging) order is. Perhaps someone will enlighten me? But given your acknowledgement that SCT shares are notoriously hard to come by, why sell when you had only bought shares at around one quarter the level you had targeted? And then having sold the very next day you raise your target to 12,500 shares (to make up for the shares you sold?). That almost looks like an admission that you didn't really want to sell in the first place. Of course I never asked you what your strategy was. If it was to buy in the $1.20s and sell in the $1.40s, perhaps what you did was fair enough. But IMO trading a price range of 20c is too low for a share with the liquidity and variance of prospects that SCT has.

Without any news update, I would be happy to see the SCT share price consolidating in the $1.20s this week.

SNOOPY

[Snoopy]

Your fundamental analysis is invariably meticulous and the points you make are well supported and well argued. You have applied your fundamental analysis with precision and dedication for literally decades and your faith has never wavered.

How you can maintain this level of commitment and optimism in the face of debacles like this one is totally beyond my comprehension.

Here you are, invested in a stock that you have held for 11 years, one that has recently doubled in price, and you report that you are "at last" in profit"! To me, this is a spectacularly damning indictment of the methods you have been using. Eleven years of "investment", most of that time during the biggest Bull run we have ever had, for........nothing! (it's about here you start talking about dividends, right?)

Since you mentioned dividends Phaedrus I should point out that since July 1997 when I first invested in SCT (12 years ago) dividends paid have amounted to 80cps. That is a not insignificant amount. After taking into account brokerage I am probably as near to breaking even on capital as it is possible to be. If indeed I have made no capital gain at all then one simplified way of looking at my compounding returns is this:

$1.40(1+i)^12=($1.40 + 0.8)

That comes out to a 3.83%pa compounding after tax, or about 5.7%pa compounding before tax. So even taking into account dividends, my returns on SCT have not been fantastic. But you have to remember the circumstances in which we are measuring this performance. This is supposedly the worst financial crisis since the 1930s, and a housing downturn globally was what started it. And if housing starts are down, that means whiteware worldwide has been torpedoed. So I don't think now in isolation is a fair time to judge the success or otherwise of this investment. Given what has happened, I am not displeased with where I sit.

I can but continue to marvel at your fortitude and dogged perseverance. Don't you have any doubts? Have you ever wondered if your approach might perhaps be improved upon?

You are speaking as though the SCT management are themselves oblivious to their problems Phaedrus. They have made progress on better organising their work shifts. The automated robotics project is a long term project which up until the last few months anyway has not been reflected in the share price. And of course there has been the diversification into Rocklabs.

Ever entertained a sneaking suspicion that market sentiment just might be worth taking into account?

I told you the reason the share price was heading down in the most recent downtrend Phaedrus. It was a failed fund manager being forced to liquidate his portfolio. So I *was* indeed taking into account (actually taking advantage) of market sentiment even as I purchased my SCT shares all the way down.

I'm not knocking SCT as a stock. You had in fact tripled your capital at one point,

No I hadn't Phaedrus. I may have been up something like 100% at one stage. But I didn't have an average entry price as low as $1.38 in those days. And although I was up 100% the overall number of SCT shares I held were modest. 100% of a modest amount of money is still a modest amount of money. And I kept the holding small because I was more focussed on 'selling out' in those days. These days I have realised that I will probably never *need* to completely sell out, so I am more comfortable with having a more substantial holding.

It seems to be a point of honour for you to ignore prevailing market sentiment - indeed you take a perverse pride in acting contrary to it. This approach has cost you very, very dearly. A quick easy example of this is where you were buying "value", adding to your SCT holdings when it was in a very clear downtrend. Brave - but foolish.

My entry points have not been 'optimal' into SCT Phaedrus with the benefit of hindsight, I admit that. However, considering SCT 'listed' at the equivalent of $1.74 (taking into account two 1:8 bonus issues along the way), the fact that I have only paid $1.38 for my shares is not exactly a disaster either. The question is are the possible entry points as shown on your long term chart, with the benefit of hindsight, real? I notice that you have carefully left any volume indicators off your SCT chart. You might be able to pick up 2 to 3 thousand shares at the entry points your chart indicates. That level of volume is of little interest to me. So I would argue that those chart entry points are not real.

Buying in a downtrend is only 'risky' if you believe that 'volatility' = 'risk'. I don't believe that which is why I am able to pay so little heed to the market. A low risk company as far as I am concerned is one which has a low level of debt and a competitive advantage for their product or service. And generally risk can be further reduced by reading up as much as you can about your investment. By these measures SCT was an extremely low risk investment for me, when I was buying in at around $1.20. Even though I realise such a view is an anathema to 'market followers' who give a zero rating to such concepts because they are not represented on their charts. Still if those chartists don't wish to consider all of the information in the public domain, then more fool them.

My approach Phaedrus now means that I have a significant (for me) holding in a company at a price I am happy with. Meanwhile I await the returns from the meat processing industry robotics and mining company support industry, which it looks like I have largely acquired 'for free' so far.

SNOOPY

P.S. You asked whether my approach to my SCT holding could be improved upon. Well when I first bought those first SCT shares I was only barely aware of Warren Buffett. I was very keen on buying into export industries as a way of supporting the country. These days my investment portfolio is much more balanced spread among different sectors. One thing I have pondered is whether I should have put any money into export industries at all.

Perhaps what I should have learned is:

Do not invest in any export industries (directly) at all!

But then again if you are a long term investor, and you do believe you should have at least some of your money in our export industries, can you name an exporter that has outperformed SCT over the last twelve years?

[warthog]

Perhaps what I should have learned is:

Do not invest in any export industries (directly) at all!

Well Snoops, if you keep an eye on the technical side of things then buying into the right exporter will see you looked after very nicely indeed!

[Snoopy]

Well Snoops, if you keep an eye on the technical side of things then buying into the right exporter will see you looked after very nicely indeed!

Care to name some names Mr Hog? How many years do you think it will be until Rakon recovers to their listing price? What about FPA and their enormous destruction of shareholder wealth by being caught out when moving their production lines offshore? FPH are doing OK but with a PE of 27 or something, that doesn't look a very good place to put my export money. Wellington Drive Technologies has an endless history of losses. Windflow Technologies have likewise never returned their shareholders any profits (because they are loss making).

Of course SCT itself made a loss in FY2008. Yet in a historical basis, even if SCT gets back to half steam from the historic peak on the appliance production line side of things, $1.40 will not mean the share is trading on a demanding PE ratio.

SNOOPY

[Snoopy]

Snoop,

I had assumed you were accumulating so you could vote yourself onto the Board and use your expertise to assist SCT is becoming what they continuously promise to be (but seem to take just a little too long to get there.) And no - this is not a tongue in cheek comment as I know of at least two other member of this forum who are doing the same.

You know Ian Urquhart Belg? Looking at the 12th September 2008 shareholder register he seems about the only small (if I can use that word) shareholder with enough shares to get a board seat. In fact with 15% of the company, why isn't Ian on the board? The rest of the individual shareholders on the top twenty list look to be 2 to 3 million shares shy of demanding board representation.

I suspect the reason that Ian isn't on the board is that he is happy with the composition of the board already. If the board are already doing what you would do, there is no reason to demand a seat on the board yourself. If this is Ian's view then I for one would have to agree with him. A new generation of management has taken over at both company and board level. Time to give them some breathing space and let them get on with the job I think

As for those 'few million' shares you reckon I am after Belg, suffice to say I am still a 'few million' short.

SNOOPY

[warthog]

Care to name some names Mr Hog? How many years do you think it will be until Rakon recovers to their listing price? What about FPA and their enormous destruction of shareholder wealth by being caught out when moving their production lines offshore? FPH are doing OK but with a PE of 27 or something, that doesn't look a very good place to put my export money. Wellington Drive Technologies has an endless history of losses. Windflow Technologies have likewise never returned their shareholders any profits (because they are loss making).

Of course SCT itself made a loss in FY2008. Yet in a historical basis, even if SCT gets back to half steam from the historic peak on the appliance production line side of things, $1.40 will not mean the share is trading on a demanding PE ratio.

SNOOPY

The hog was maybe a bit quick off the mark. How about "Keeping an eye on the technical side of things for your chosen exporters would be a consideration worthy of your time." ?

But yes, RAK and FPH have potential - in the right circumstances - to provide good capital growth.