-
26-07-2020, 06:13 PM
#13481
My own feeling is that we are in a kind of 'false holding dawn'. Come September when the wage subsidies are suddenly removed, I think the dire outlook for 2021 will suddenly come into sharper focus. But with Inland Revenue kindly funding the bad company loans (thank you Grant) , I can see Heartland with a smaller loan book but not necessarily a loan book that is worse for wear credit wise. So maybe Mr Market's view that mid tier finance companies are in a relative sweet spot is correct? That Mr Market does seem to do an OK job of forecasting, for 90% of the time at least, might be something to ponder?
SNOOPY
Yeap I noticed during the week it broke above its 100 day moving average and have had a bit of a think about things already. My preliminary thinking is along very similar lines to you and we are in some sort of false economic dawn and once the stimulus wears out, look out ! The massive recent jump in unemployment feels to me like the tip of the iceberg. Plenty more pain to come. LOTS of small business's just holding on by their fingernails is how I see it from the coalface.
Last edited by Beagle; 26-07-2020 at 06:15 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
-
26-07-2020, 06:17 PM
#13482
Firming nicely lately, I think the effect of ending of extended wage subsidy is over stated, not convinced the impact is going to be as bad as predicted.
-
26-07-2020, 06:53 PM
#13483
Originally Posted by tim23
Firming nicely lately, I think the effect of ending of extended wage subsidy is over stated, not convinced the impact is going to be as bad as predicted.
Tim I notice you are posting from Masterton. I was there for the day last year attending Sir Brian's funeral. The town looked very spick and span I thought. The rugby ground was immaculate, and I'm not just saying that because it was the 'venue of the day'. People on the street were wandering around with purpose and contentment on their faces, Plenty of customers at the little cafe where I stopped off for lunch in town. But, it has to be said, there weren't many signs of overseas tourists about. There are lots of inter-generational drystock farmers in the Manawatu who are having their day in the sun with good prices for lamb and beef. Farming wealth runs this town, This is a solid farming community off the main tourist trail. I think Masterton will do OK as the wage subsidy comes off. Where I do see problems are in the tourist towns, particularly in the South Island: Kaikoura, Queenstown, Franz Joseph and Fox Glacier. The other places I see problems are the gateway cities of Christchurch and Auckland. There is too much high end hospitality in those cities that locals will not be prepared to step up and pay for at last years market rates. What I am saying here is that I expect the effect of the wage subsidy removal to be uneven around the country. Don't assume that because your patch looks O.K. that other towns around the country will be.
SNOOPY
.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
-
27-07-2020, 04:38 AM
#13484
Originally Posted by Snoopy
Good point. It pays not to forget the 'bigger picture'.
|
Share Price 25th November 2019 |
Dividends Paid |
Share Price 26th July |
Period Gain |
Westpac |
$25.89 |
0c |
$19.05 |
-26% |
Heartland Group Holdings |
$1.70 |
4.5c |
$1.32 |
-20% |
Turners Automotive Group |
$2.62 |
4.0c+6.0c |
$2.27 |
-10% |
Geneva Finance |
$0.56 |
(1.25c +1.5c)x 0.7c |
$0.425 |
-21% |
Turners suffering less than the others. Perhaps being free on all restrictions about paying dividends has something to do with that? Although I see Geneva Finance are still paying dividends post pandemic. Some things don't change though. Westpac has still been the worst of the four to own over the Covid-19 period.
SNOOPY
That really depends on one's entry point and how their Average cost of a holding looks
It's been possible to accumulate some very attractively priced holdings over the past 4-5 months
Factor in possibly a larger next period dividend (perhaps to make up for an interim or final suspended), prospects of SP lift
as & when normal economic conditions return (if they do & to what extent)
Also external factors - with the Aussie banks, SP will be seeing reaction to continuing C-19 infection rates particularly in VIC & NSW still resurging with further lock-downs in OZ
I think a valid comparison should look at the High & Low over the past 4-5 months, rather than a fixed point start & end
Last edited by nztx; 27-07-2020 at 04:56 AM.
-
27-07-2020, 04:42 AM
#13485
Originally Posted by Beagle
Yeap I noticed during the week it broke above its 100 day moving average and have had a bit of a think about things already. My preliminary thinking is along very similar lines to you and we are in some sort of false economic dawn and once the stimulus wears out, look out ! The massive recent jump in unemployment feels to me like the tip of the iceberg. Plenty more pain to come. LOTS of small business's just holding on by their fingernails is how I see it from the coalface.
Very much an Economy in a caged goldfish bowl, where the Haves & Have nots after many transitions between the two courtesy of C-19 is likely to prevail
Some niches & sectors have done very nicely - thank you very muchly.
Some have not fared well & may be on the edge (I think we can pick the sectors & likely flow on feed into other businesses servicing those sectors)
However very fair warning worth observing before dipping toe into some securities / sectors + always do some research & diligence before throwing gold at shares / funds one knows little about
Interest bearing Investors are likely to be suffering, Share investors remaining hopeful on the future.
If not scrambling for stocks with solid prospects / likely dividend continuity with minimum perceived risk
or into commercial property away from Low Interest Returns & Politically punished Residential Rental sector
that said, the boards on NZX & other Exchanges are littered with increasing proportions of what can only be termed 'low quality rubbish' and quality investment grade shares are being picked out by Buyers and priced back up quite quickly
Last edited by nztx; 27-07-2020 at 04:53 AM.
Reason: add more
-
27-07-2020, 10:12 AM
#13486
Originally Posted by nztx
That really depends on one's entry point and how their Average cost of a holding looks
It's been possible to accumulate some very attractively priced holdings over the past 4-5 months
Factor in possibly a larger next period dividend (perhaps to make up for an interim or final suspended), prospects of SP lift
as & when normal economic conditions return (if they do & to what extent)
Also external factors - with the Aussie banks, SP will be seeing reaction to continuing C-19 infection rates particularly in VIC & NSW still resurging with further lock-downs in OZ
I think a valid comparison should look at the High & Low over the past 4-5 months, rather than a fixed point start & end
nztx, you present a valid argument. Let's investigate what gains were available from that dark end of March 2020 Covid-19 shock date.
|
Late March Low |
Share Price 26th July (includes dividends) |
Gain from late March Low |
Westpac |
$14.50 |
$19.05 + 0c |
+31% |
Heartland Group Holdings |
$0.93 |
$1.32 + 0c |
+39% |
Turners Automotive Group |
$1.12 |
$2.27 + 6c |
+108% |
Geneva Finance |
$0.35 |
$0.425 + 1.5c x0.7 |
+24% |
Given what has happened in Australia with the new Victorian lock down (I expect the WBC price to be negatively influenced by that), I am surprised at how similar the bounce back by Westpac and Heartland has been. I am also surprised at how relatively small (in terms of a potential percentage share price gain) the opportunity has been to gain from Geneva Finance in the same circumstances. Squinting at the chart it looks like around 20,000 GFL shares were traded on that low day.
20,000 x 0.35 = $7000 worth of shares traded
That isn't much value to grab for all those charting opportunists, or even existing loyal shareholders out there. Low liquidity shares can often make nonsense of charts and the apparent opportunities they present for this reason.
The big surprise to me was how low Turners Automotive Group dived relative to the others. They may have been caught out by their name when car sales ground to a near halt. Although even in the darkest month Turners made some hay by selling to essential workers! As most existing shareholders know, Turners is really a finance company with an automotive sales feeder arm. Just because there are next to no automotive sales in a month, that doesn't mean that all the finance contracts signed over the previous few years come to a halt. I think the market overlooked that. Looking backwards, forcing people to stay at home may have meant that some dodgy car loans were in fact repaid because there just weren't alternative ways available to squander cash.
There is another wider issue with buying finance companies in a crisis. Generally the only way out of trouble is for finance companies in a deep recession is to issue new capital. And that means issuing new shares at a discount to the market price. That means that the thinking person buying at the bottom would be doing so knowing that they would likely be asked to stump up even more cash in a share issue at an even more discounted price. But how much new capital? At the depths of a crisis it wold be very difficult to put a number on that. For this reason, I would not be prepared to buy into a finance company in a crisis until i got a very clear signal from management as to how it was being affected and how much new capital, if any, was going to be required. Yet obviously there are some out there who consider ' buying at at shock low' as a risk worth taking.
SNOOPY
discl: who nevertheless bought some Heartland at $1.10 on 17th March on the way down on the hunch that the price fall was an over-reaction, before the full extent of the financial crisis was apparent. By my own definition I wasn't thinking clearly and with hindsight I just got lucky! Although I was at the time , and am now, prepared to support a cash issue if Heartland wants to square up their books.
Last edited by Snoopy; 27-07-2020 at 11:05 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
-
27-07-2020, 06:54 PM
#13487
Originally Posted by Snoopy
Tim I notice you are posting from Masterton. I was there for the day last year attending Sir Brian's funeral. The town looked very spick and span I thought. The rugby ground was immaculate, and I'm not just saying that because it was the 'venue of the day'. People on the street were wandering around with purpose and contentment on their faces, Plenty of customers at the little cafe where I stopped off for lunch in town. But, it has to be said, there weren't many signs of overseas tourists about. There are lots of inter-generational drystock farmers in the Manawatu who are having their day in the sun with good prices for lamb and beef. Farming wealth runs this town, This is a solid farming community off the main tourist trail. I think Masterton will do OK as the wage subsidy comes off. Where I do see problems are in the tourist towns, particularly in the South Island: Kaikoura, Queenstown, Franz Joseph and Fox Glacier. The other places I see problems are the gateway cities of Christchurch and Auckland. There is too much high end hospitality in those cities that locals will not be prepared to step up and pay for at last years market rates. What I am saying here is that I expect the effect of the wage subsidy removal to be uneven around the country. Don't assume that because your patch looks O.K. that other towns around the country will be.
SNOOPY
.
Fair point - I think there will be variations in how different regions recover at the moment the Wairarapa seems okay.
-
27-07-2020, 07:06 PM
#13488
How will Heartland cope with a W shaped recovery
Next year might be tough
https://www.jarden.co.nz/news-and-in...tralia-and-nz/
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
-
27-07-2020, 07:17 PM
#13489
well a W is better than a VL
Disc: may have bought an extra heartland share or two recently.
-
28-07-2020, 12:50 AM
#13490
Originally Posted by Snow Leopard
well a W is better than a VL
Disc: may have bought an extra heartland share or two recently.
only if you want to go to Wellington or Whanganui. Not so good if you're going to Vladivostok
For clarity, nothing I say is advice....
Tags for this Thread
Posting Permissions
- You may not post new threads
- You may not post replies
- You may not post attachments
- You may not edit your posts
-
Forum Rules
|
|
Bookmarks