HLG - Hallenstein Glasson

[jimdog31]

HLG financial year F20 NZD.USD average was 0.6355

Seems to be about 0.66 at the moment ...and forecasts suggest its going to get stronger

Id almost trust long range weather forecasts more than forex forecasts at the moment.

[Beagle]

One thing I often find when people ask what I invest in is that they are surprised to hear Hallenstein Glassons. I don't imagine I'd get the same response if I said The Warehouse. Maybe Briscoes would fall somewhere in the middle. I can't speak entirely from experience though as haven't held the latter two. But possibly this is one of the issues, it hasn't taken off with the Sharesies crowd, or the analysts, and hence we have this liquidity issue and subsequently it probably won't make it into the NZX50, which in itself means the cycle can't be broken and the share price will continue to languish with a conservative PE. Oh well, treat it as a gift and accumulate. One day the market will figure it out.

That's exactly what I'm doing mate. I have unlimited patience when getting an 11.8% gross yield.

[Ferg]

But possibly this is one of the issues, it hasn't taken off with the Sharesies crowd, or the analysts, and hence we have this liquidity issue and subsequently it probably won't make it into the NZX50

Did you see my post 5045 above? HLG#post853639

Are you referring to absolute or relative liquidity? My calculations suggest absolute liquidity is fine but I have no idea on relative liquidity. Can you elaborate on the liquidity issue?

Methodology is here: https://www.spglobal.com/spdji/en/in...tfolio-index/#

[Cyclical]

Did you see my post 5045 above? HLG#post853639

Are you referring to absolute or relative liquidity? My calculations suggest absolute liquidity is fine but I have no idea on relative liquidity. Can you elaborate on the liquidity issue?

Methodology is here: https://www.spglobal.com/spdji/en/in...tfolio-index/#

Yeah I did, Ferg, and in a way my post was a follow on from what you are saying, but I'm no expert on the subject of inclusion into the NZX50 and haven't really delved into it to be honest. One thing that's pretty obvious though is this stock doesn't see a lot of turnover and consequently it doesn't take much to move the SP...which can be good and bad of course. Anyway, it's not like PEB have dashed off into the sunset with their recent inclusion, although they had massive growth in June / July, so would probably take a lot more than that to move them up from this point.

Guys, who was that Aussie investment house that did the little video piece on HLG early last year, pretty little thing, still wet behind the ears I recall someone saying haha...back when they were about 4 bucks. Shortly after that they started to head north quite strongly. Just need a rerun of that

[Ferg]

Thanks for that. Yeah the rules are not light reading and I'm not sure I have fully got my head around them. I don't think HLG will get there naturally, I reckon it will be a case of others dropping out. Plus, as you say, inclusion in the NZX50 might not be the pot of gold we think. I'm less bullish on growth prospects than others given that over the decades HLG have taken a very conservative approach to expansion and growth. Australia may be slow to grow (purposely), but online does not have the same constraints as bricks & mortar so maybe we are seeing a new type of growth given they appear to transitioned to that relatively easily. I finally got back into this stock late July off the back of some NZ Stats numbers and the expectation of high local turnover and resumption of dividends. Wishing I had got more....oh well, hindsight is 20/20!

[winner69]

Thanks for that. Yeah the rules are not light reading and I'm not sure I have fully got my head around them. I don't think HLG will get there naturally, I reckon it will be a case of others dropping out. Plus, as you say, inclusion in the NZX50 might not be the pot of gold we think. I'm less bullish on growth prospects than others given that over the decades HLG have taken a very conservative approach to expansion and growth. Australia may be slow to grow (purposely), but online does not have the same constraints as bricks & mortar so maybe we are seeing a new type of growth given they appear to transitioned to that relatively easily. I finally got back into this stock late July off the back of some NZ Stats numbers and the expectation of high local turnover and resumption of dividends. Wishing I had got more....oh well, hindsight is 20/20!

Interested to know what Stats NZ numbers gave you optimism.

[Ferg]

Interested to know what Stats NZ numbers gave you optimism.

There were a few factors. I used the NZ Stats electronic card transaction data plus similar data from Australia. Whilst the initial focus was on apparel, I was also looking at overall spending trends, e.g. NZ Department store spending in May & June was +10% and -4% vs prior year which was encouraging.

I compared the HLG H1 report to the market overall, projected H2 based on data available to 30 June and added the COVID subsidies which were in the public domain to estimate earnings. Whilst Apparel was flat for the market for H1, HLG was up 5.7% which suggested they may experience falls smaller than the market during lockdown. H2 was a half of two halves; Q3 the apparel market was down 43% due to lockdown but Q4 was -21% May and +6% June. This gave me some confidence spend was coming back.

Also, the clients I work with had been experiencing a massive surge in local spending (albeit in unrelated industries, more on this below*) which added to my confidence. This was probably the biggest factor, and NZ Stats did not contradict this. It wasn't so much that NZ Stats gave me optimism, rather I thought the base of sales was still there post lockdown and HLG had been over-sold. Given HLG was debt free with a proven track record, then expecting a resumption of dividends wasn't unreasonable. Same goes for FRE into which I jumped at a similar time, pretty much for the same reasons (except they have debt), but with a popular DRP any such FRE dividends are mostly non-cash.

*Like I said, the single biggest factor for me was seeing growth in my clients revenues of between 30-60% per month year on year since May. The industries are fencing, sheds, kitchen and bathroom hardware, and benchtops etc sold nationwide. I figured that sort of increase had to be flowing through other parts of the economy not exposed to tourism. By the way, we are still seeing those percentage increases right through to the end of October - and forward volumes show no sign of abating which gives me confidence buying other local stocks. I touched on this in another post. I have the reverse Midas touch where the SP usually goes down after I buy, and true to form HLG did but it has bounced nicely.

I'm curious to know whether or not my picks are simply part of a wider rising tide that is lifting all boats. I don't want to burst my bubble yet so I will probably look at that when I start getting over-confident. I'm guessing part luck + part contrarian.

[Baa_Baa]

Not meaning to rain on the ramping parade, but this cyclical has massive capital swings and is in the top zone right now, heavily over bought on all TA metrics. If it breaks up great, but history says if it doesn’t, well buyer beware. A delicate balance happening now

Not holding, it’s too volatile for me. Those who don’t care about capital value and have the stomach for sustained earnings regardless of share prices should be able to withstand any volatility, not me though at any yield.

[Balance]

Thanks Ferg for posting your thoughts and assessments. 👍

[Cyclical]

...the single biggest factor for me was seeing growth in my clients revenues of between 30-60% per month year on year since May. The industries are fencing, sheds, kitchen and bathroom hardware, and benchtops etc sold nationwide. I figured that sort of increase had to be flowing through other parts of the economy not exposed to tourism. By the way, we are still seeing those percentage increases right through to the end of October - and forward volumes show no sign of abating which gives me confidence buying other local stocks.

Nice work there Ferg. Some of those industries you've listed there are of course the likely recipients of cheap mortgage money, which is exactly what our friend Grant has been gunning for in the hope that low interest rates mean home owners enjoy a wealth effect and borrow and spend accordingly, with the resultant trickle down keeping things bubbling along. Not sure how far the trickle needs to go before it hits HLG's coffers, but I'll run with it.

Meanwhile it's good to see the HLG SP seems to be relatively immune to the current market nervousness. Bucking the trend even.