THE GOLDBUG DIARIES Q1 the latest news and comments - January to March 99 January entry February entry April entry May entry |
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THE GOLDBUG DIARIES Q1 the latest news and comments - January to March 99 January entry February entry April entry May entry |
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A VISA for USA Residents Only - details15 March 1999
Last week Mr Alan Greenspan's words did not upset the markets and it was thought that the Dow would set a record high and pass the 10,000 barrier. It did not and will probably do so next week although investors are complaining that really it is not representative of the market! True. Once again time and space prevented me from mentioning two UK stocks during the last month and I would have purchased these - Aggregate Industries plc when they were 65p and Caird plc when it was 185p for quite a time after the stock split. Aggregate had been in the 65/70 range for quite sometime since the merger with Tarmac plc was called off. As I mentioned in the last entry it is difficult to pick stocks in the market and in the UK I like Rolls Royce plc (267.5p) as a double digit growth is forecast for the next 5 years; Centrica plc (118p) which is paying its maiden dividend and returning 12p to the shareholders. For sometime it has moved between 110/120p and I think that this is its range and should not drop after the dividend. Two non executive directors of the company recently purchased 110,000 shares between them and it is reported that it has kept 80 per cent of its Gas customers with deregulation and gained 850,000 customers for its electricity service. It also has the infrastructure to offer other services, so maybe that will be in the pipeline? Could it be the internet? I also suggest Thistle Hotels plc at 138.5p which at one time was at 250.5p when it was subject to several take over offers. Could one day this hotel company emulate Bass plc? If it does then the share price could increase quite substantially. Baird plc reported profits down 9 per cent, but increased the dividend and stated that market conditions should improve during the second half. Medeva's profits were down by more, but this company also increased its dividend and stated that growth should start to show through again in the company. Saltire plc has been giving shareholders a very choppy ride and a lot of money could have been made by anyone brave enough to purchase when they hit there all time low only to rebound sharply again. One share that has rewarded followers of the Diaries very well is Lonrho plc. In the finance sector the shares in M&G plc the fund manager moved up 40 per cent on the takeover approach for the company. This drew attnetion to AMVESCAP plc and other fund managers, one of which I was looking at about a month ago Edinburgh Fund Managers plc when it was about 250p - possibly Intercapital plc (mentioned 15 January at 27p) could be a takeover target?Hong Kong has been cheered up by the prospects that Disney might put a theme park there and also Microsoft and Oracle's interest in this town. It will rise again, of that I have no doubt. Fund managers are now looking to increase there investments there, but I would hold off maybe until the third or forth quarter. Elsewhere in the Far East the Japanese stock market is moving up.
Everyone is complaining about the speed of the internet in Spain. In Germany RWE the electric company came up with using their infrastructure for the internet and the shares went up 10 per cent last year. The market is wide open for this to happen in Spain and it only needs Endesa, Iberdrola or Union Fenosa to make a similar announcement and their shares could move up quite sharply. I think that there would be quite a defection from Telefonica if this were to happen, but I do not think that this will affect their share price, which despite Brazil, has been quite strong. In this Latin American company thinks seem to be settling down a bit and are not causing to many ripples to other markets. It is only in the USA and in the UK that the stock markets are hitting new highs and some European markets are nearly 20 per cent off their all time highs so this is probably where the investor should look during the rest of 1999. About a month ago I heard an analyst say that he liked the hotel sector and in particular those in Southern Europe. Followers of the diaries should look at NH Hoteles SA (was COFIR) that made a good profit when they sold their interests in the Rioja wine business to the other partner, but this did not seem to affect the share price which has been much higher. You could also look at Sol Melia
I March 1999
"The leading small companies in America are selling at their lowest valuations EVER, This is a (truly) pivotal time for investment in small companies." says Lawrence Auriana of The Kaufmann Fund - #1 Small Company Fund for the 10 Years ended 12/31/98, per Lipper Analytical Services. Find out more at:
http://www.kaufmann.com/findout. I received this in my mail box today and I am using it, as during February I heard an analyst on CNBC give the same advice. I feel that apart from the USA this advice can be applied to the UK where it is thought that the country is now about to move out of recession, especially with the valuations of the FTSE 100 companies in the UK and the DOW constituents in the USA so high. It is thought that some of the profits made here might be taken and invested in the S&P 500 (USA) and the FTSE 250 stocks (UK) and even in the small cap stocks in both countries. The American and English stock markets have been testing new highs, but what of the European Mediterranean stocks which were tipped to out perform earlier in the year? I think that it is only a question of time especially in Spain as this country has the best European growth prospects. A nice safe stock there would be Europistas SA (bolsa.eur@jet.es) in the current market conditions. Here profits are up by 19.06% to 14.356 'milliones de Pts', thanks to the increase in revenue and the containment of costs. It's Autopista del Sol (25 per cent interest) linking Malaga and Algiceras should open by 1 July 1999. The share price at 7.70 euros has not moved up in line with the increase in profits.During the last two weeks of February we have had the G7 meeting and Alan Greenspan's measured words, both of which have effected stock markets world wide. There is a nervousness, are interest rates going to go up in the USA - will there be a further decrease in the UK and will the European Central banks reduce rates? Telephone and banking stocks have been the front runners and the markets have been supported by merger activities, but right now it is difficult to recommend any stocks. Volatility is the name of the game, but the consensus of opinion is that there is so much money that could come out of bonds and cash that the upward movement of the market will happen over the course of 1999. Just keep your cash dry and be ready to move into a stock at the appropriate time.
It is said that demand for houses in the UK is now outstripping supply, the period for selling a house dropping from 11 weeks to 3. This could be good news for the carpet retailers such as Carpetright plc - Victoria plc and Allied Carpets plc whose share price has moved south since I mentioned them two weeks ago
14 February 1999
My two enemies, time and space. I had meant to mention William Baird plc in the last entry to the Dairy on the 1st of this month when the shares had slipped to 78p. Had you bought then you would have made a good profit. Why did they slip from a high of 285.5p? It was the contagion of the Marks and Spencer plc profit slump and board room shuffle. However William Baird announced shortly after that there would only be a 4 per cent decrease in profits during the current year so it would seem that the drop in the share price has been over done. At 98p it yields 13.4 per cent and selling at 4.7 per. What has impressed me with this company that even through it's recent restructuring the dividend has been maintained and if this is the case with a forecast 4 per cent drop in profits then this is one to add to a high yield portfolio.Commentators have been talking the markets into a correction predicting a 5 to 10 per cent fall. However the French Government have predicted that the proposed Air France privatization could be up to 23 per cent over subscribed so the investors have go money to invest!
With unlimited funds I would have invested recently in Dialog plc when they went below 50p and Pilkington plc when at the start of the month they were 50p, but rose quite steeply when CNBC commentators started mentioning virtually every day that this company could be the subject of a bid. If they came back to 55p then I could be interested. At 65p they are selling at a per of 49.10 which is a bit high for my liking!
Investors could look at British Borneo plc currently at 104p down from 430p. The petrol price is not likely to improve in the near future, but it is estimated that the recent merger with Hardy Oil and Gas plc should show savings of £7/8m a year. Another company to look at is Eurocopy plc where Chairman C Gay increased his shareholding over the last year from 9,910,601 shares to 14,810,601. He reports to shareholders that 'we can see ourselves turning the corner'. Medeva plc which has also reported during the last two weeks advised the market they to would turn the corner despite a 39 per cent drop in profits. However the dividend was increased which should keep shareholders happy and hopefully with a return to growth the share price will rise once again. If I had shares in this company I would be adding to the holding at 98.5p.
Goldman Sachs has added British Telecom plc to its list of recommended stocks even though some analysts think that it is high enough with a per of 32.20. It has moved up strongly since I mentioned it a couple of weeks ago and with all the interest in the mobile telephone sector and the internet it could still go higher over the course of this year. Purchase on any weakness of the current share price of 1044.5p. Lonrho plc out of favour with the City for many years seems to have seen its image improve and has moved up quite sharply over the last two months. Maybe it's South Africa coal interests could benefit if there is a coal miners strike in the UK - currently 382p. Before I forget this one. Look at Allied Carpets plc The company broke off take over talks with Kingfisher plc as the protracted negotiations in the company's opinion were affecting the share price (at about 45/47p). A price of 67p had been talked about, analysts having put the price between 50p/100p when it seemed that there could be several interested parties. At the parting of the ways the share price did the opposite and slumped to 30.5p but has since recovered to 38p and on last years figures sell at a per of 4.9 and a yield of 25.20. Expect this to drop in line with the profits dip which might be up to 20 per cent. However with further cuts in UK interest rates consumer spending should increase finding its way into new homes and of course fitting them out with equipment such as carpets - expect this company's fortunes to improve when that happens
In Hong Kong there is nothing that really interests me at the moment and I feel that it could take another year before the situation there improves. If you are going to invest there go for the blue chip companies. I still like First Pacific Company Limited which just after it announced its recent expansion of its telephone interests in the Far East has done like wise with another of its core activities - food. Also I would be looking at Wharf Holdings Limited if there was any weakness in the market.
In Spain it is going to be a year of opportunities if you know how to move in and out of the market. Here I still like Vallehermoso SA which is below its start of the year valuation. Being in the IBEX 35 it has suffered from the girations caused by Brazil., but should not have been so as most of its activities are of a domestic nature. If it goes below 11.50 euros I believe that it could be worth making a purchase in the belief that it could pass it's all time high of 13.80 euros by the end of this year
The penny stocks are letting me down if I am honest.
Even though the bubble has been pricked in the US Internet stocks I still ask my friends how itc communications are doing? Visitors to Barnes and Noble their yardstick 2,300 - 2,700 - 3,000 - 3,700 (Weekly figures) So the rule of thumb of traffic doubling every 100 days could be true!
1 February 1999
To mention a share in these diaries is a responsibility and yes I can make mistakes. We are all human beings, so it was gratifying to see that I am not the only one. On Sky News teletext I saw that the Investors Chronicle had advised readers to buy London Forfaiting plc when they were 113p on 'sharp recovery of profits'
The share price moved up to 121p., but a week later the company released its results and the losses were 10 times worse than anticipated. I had looked at these shares and had considered a purchase at 98p but they had moved up to 108p so I did not take the matter further. They moved sharply up to 150p + and then fell
back to around 120p for some time. I had first looked at this stock when they had fallen to a low of 67p, but since this news has been released they have fallen
further. Albert Fisher plc has fallen back to 5.5p when at the same time as announcing a disposal they mentioned that trading remained difficult. I still think that
it is a reasonable gamble as a 'recovery situation' as people have to eat food.'The January effect' It was not the normal one with prices rising during the month of January, but a roller coaster ride for investors. The Brazilian virus spreading to the Far East with rumours of a devaluation of the Chinese currency which caused the Hong Kong Dollar to come under attract from our friends the speculators. I think that it fair to say that the Chinese will not devalue their currency, especially during the 50th anniversary and it is now a known fact that the countries that
have devalued really have not obtained any benefit from the move.With the bid for LucasVarity plc from an American company, it has spotlighted other UK companies with a similar line of business, amongst them Avon Rubber plc
and Britax plc. I have mentioned these last month and last Wednesday the Daily Mail mentioned these two companies amongst a group of six that could attract the attention of a predator. They were both selling at a per of 9. LucasVarity is on a per of 18.20 at 292p. A purchase of these companies shares at their current price would be worth while I feel, with the bid element thrown in for good measure.Telecoms has been the sector to be in worldwide and in America Internet related stocks and worldwide mobile phone shares such as Nokia (Finland) and Vodaphone(UK). British Telecoms plc has the opportunity of of purchasing the 40 per cent of Cellnet that it does not own and several analysts have placed a price on it. The company also has an Internet portal the value of which is possibly not fully reflected in it's share price. It will also be receiving the compensation for the frustrated MCI takeover. Would it not be an idea if the company demerged the Internet and mobile activities into a new quoted vehicle giving the current shareholders a stake in the new company on a one for one basis?
Not forgetting the small investor I draw their attention to a penny stock Fastrack plc. I have noticed recently the share price of another company in the same sector Nightfreight plc move up quite sharply from approximately 20p to 30p whilst the price of Fastrack plc has not moved. The company has been the subject of a company doctor and in the last report moved back into profit. One to watch. Current price 5.25p
In Spain the stock market was castigated for most of January for the 'Brazilian Connection' and even domestic stocks with no interest in Brazil were affected. It could be worth looking at these especially in the motorway, construction and utilities section. The electrical company Iberdrola SA has interests in Brazilian communications and together with Telefonica SA have agreed to bring forward their investment and it is thought that the Brazilian government will have offered incentives. I think that in the medium to long term the Spanish companies investment and for that matter any other countries will be profitable. The rumor in Spain is that the stock market will leap forward in March. If that is going to be true then you should be researching the companies that you wish to invest in during February, being invested by the end of the month. In Brazil the stock market has been rising for the last 5 days so hopefully calm is returning there.
Hopefully the Bank of England will reduce interest rates in the UK this week restoring confidence to the manufacturing sector. Despite weakness in the Euro it is thought that the European Central Bank will hold rates where they are this week, no opinion being given on those in the US where last week Alan Greenspan's remarks did not move the markets as normally happens, especially his comments about internet stocks! w/e 31 January itc communications visitors sent to Barnes and Noble were up 29 per cent which may give you an idea of the growth in internet - 2700 visitors!
15 January 1999
They say that the first week in January sets the mood for the rest of the year and this year the market bounded ahead, especially with Euro Fever driving the European markets. For a while it looked as if they did not need to take a lead from Wall Street. Analysis's were predicting a volatile year and so it has turned out with the Brazilian Virus. They said look at individual stocks, not sectors and this is sound advice as there is always an attractive stock in any market. They particularly advised that investors look at Telecom stocks and with regard to Europe the said that the Italian,
Spanish and Portuguese markets were the most attractive. In England I have been watching a few stocks and during the first week one could have gone into Britax plc at approximately 105p. This car components company was trading at near 193.50p during part of last year and was tipped by one newspaper when it fell to about 150p. Look at this one as directors have added to their holdings recently. Another is the Pharmaceutical company Medeva plc whose share price seems to have found a base of about 105/110p. Profits were down by 20 per cent last year and the share price has been castigated. The share price has been to 185p over the last 12 months, but has been much higher. At 109p the per is only 5.4 and the yield 5.1p. Crestacare plc is another one that seems to have found it's base and can be purchased at about 27.5p. Last year there was take-over speculation for this health care company at about 45p so if these resurfaced the share price could quickly rebound. Saltire plc is very speculative, but could be worth a gamble. The share price is currently 10p the equivalent of 1p taking in account the capital reorganization when it changed it's name from Cannon Street Securities plc. After the 1974 crash under Ken Hislop the share price never went to 1p and stood at about 2.5p whilst it was nursed back to health at one stage reaching 400p if my memory does not fail me, at today's nominal value £40 a share. That's what investors dreams are made of and it would be nice if the directors had an aim - to restore the share price to that. Also look at another automotive company even though I recommended it at 410p just before Christmas, I believe that it could go higher than its current share price - the company is Avon Rubber plc. Another company that is worth looking at is Staveley Industries plc. It announced good interim results and reasonable prospects for the full year but the share price subsequently went lower to 77p. Worth a look at around 80p I feel. Anyone that purchased one of my 1999 stocks - Albert Fisher plc will have been pleasantly suprised, moving up from 5p to 6.75p in just two weeks, at one stage being 7p. Intercapital plc is another one that I would have added when they were 27p during the last two weeks. They are currently 30p. When it was Exco plc the directors were purchasing shares at about 55p so hopefully the recent share price rise from 23.5p is signaling that the re-structuring ( the merger between Exco and Intercapital) is working. I would not be doing my job correctly if I did not point out a couple or directors dealing this month in two penny stocks which do appeal to investors - Pacific Media plc and Middlesex plc. However these are really for the gambler the first owning cinemas in Singapore and Thailand and the second having interests in Russia. Pacific Media recently has a successful raising of capital to which the directors subscribed to and also financial institutions at twice the current market price. They have the use of the United Artists name in the Far East with the
exception of Hong Kong and have plans to expand into other markets there.The Brazilian fall out in the Spanish market will throw up a chance to buy Telefonica SA shares at a good price for the medium to long term. Do you remember what happened with the Russian Crisis last year? Well look at Brazil in this perspective. We all knew that it was coming anyway. It has been the major indices that have been the most volatile in the USA and the UK and one should look at the S&P 500 or the FTSE 250 for your purchases maybe, even the Russell 2000 or Small Cap in the UK. In Hong Kong the First Pacific Company Limited is expanding its Telecommunications interests in the Philippines, by taking a position the the main carrier, where it also has existing operations (SMART). It should be able to find synergy between the various operations there and it's share price has moved up since this news was announced. It has four core activities, but telecoms is probably the main growth activity of this company in the future, and the share price is not at the multiple of other telecoms companies - worth a look and can be purchased on the London or Hong Kong stock exchanges. 37p in London. INVESTORS THERE IS NO NEED TO PANIC in this market. Remember that normally their is a 'January Effect' (prices should rise by the end of the month).
Even though investors have been going through a rough time during the last week the Internet stocks in the USA have been performing well. Yahoo is selling on a per of 150. I have been advised that the number of visitors to itc communications are every increasing every day and 150 of these a day (w/e 9 January) are clicking on the BarnesandNoble banner (above) at the moment. Latest 2,308 during the last week (w/e 16 January).
31 December 1998
At the end of 1997 I stuck my head out on a limb with regard to the Spanish Stock Exchange. After two years of near 40 per cent growth in each of 1996 and 1997 I said that contrary to the analysis's prediction of 10 to 12 per cent I would go for a further 40 per cent. The results have just been published showing a 37.8 per cent rise in the IBEX. What is my forecast for 1999? Not so great a percentage rise, but maybe half of it. Spain has managed to create growth and at the same
time curbing inflation and is reckoned to be the most favorable Euro economy for 1999 with a predicted growth of 3.8 per cent. Over the Christmas period two
retail stocks share prices have risen - PYRCA SA and CONTINENTE.11 of the 12 European Stock Exchanges will have the share prices quoted in Euros and this will encourage cross border investment far more now than in the past and I think that the Madrid Bolsa could be a beneficiary. For that reason I am keeping VALLEHERMOSO as on of my 5 shares for 1999 as it is only just about to
touch it's all time high reached last April and many things have changed since then, the lowering of interest rates. This is creating a buoyant property market with
prices of domestic dwellings expected to rise by 20 to 25 per cent in the coming year. Provided costs can be controlled this should improve profitability considerably. Bank stocks and Telefonica are been governed by the events in Brazil and may continue to be volatile in 1999 depending on the situation there.
However that said there could be very good buying opportunities. In early October I liked Banco Santander when they were 1.800 ptas. Had I been a fund manager with about 20/25 per cent in cash I would have purchased this stock then without hesitation.A cash position, in the UK market would have thrown up some interesting purchases during 1998. I would have gone into SkyPharma plc when they fell to 45p - Centrica at 81p - Hanson at 250p - Rolls Royce at 180p - BAA at 450p - Tarmac at 80p and lastly P & O plc at 500p. The large cap stock were gainers on the
London Stock Exchange at the expense of the Mid Cap and Small Cap stocks which hopefully in 1999 catch up with their larger brothers if interest rates come down and sterling weakens. My mistakes in 1998 were going for two companies that gave a good yield, namely Brierley Investments Limited of New Zealand and Albert Fisher plc in the UK. I and shareholders can only hope that with new management at the top shareholders interests will be looked after and that the share price
will recover and that dividends can be restored in the not too distant future. I have added Albert Fisher plc to my 5 shares for 1999 on recovery grounds.Like the UK good purchasing opportunities were to be had in Hong Kong by a liquid investor, but the timing had to be perfect. It is still reckoned that 1999 will be a difficult year for Hong Kong companies, but any weakness in the markets will throw up good buying opportunities for the medium and long term. My timing was perfect with Wharf Holdings Limited which I managed to get for HK$ 6.50., unfortunately no all the shares I wanted as they rose soon after. I shall be carefully watching this market in 1999. Against all predictions the Hong Kong Government maintained their promise to hold the dollar peg.
Analysis's are worried about market valuations. especially the American markets which they consider over-valued, but they cannot argue against the wall of money waiting to be invested which is keeping the market up. The question is can people afford to be out of it, especially with falling interest rates. That said I
would still be 10 to 20 per cent liquid as there will always be attractive stocks to buy some where in the world. The Internet stocks in the US are the ones that are the most highly valued, possibly as E-Commerce is only in its infancy and has tremendous potential once the public overcome the fear of trading on line.I will just mention one pet subject. Companies that offer investors dividends in the form of shares which saves the company's tax bill and you the investor dealing expenses on these shares. How many times have you accepted this just to see the share price drop and continue dropping, not just one year but over several years. you would have been better off taking you dividend in cash. It is easier to be wiser after the event. I think that companies that offer this facility should think twice and if adopting it make sure that they do create shareholder value every year. There is only once company that I would take this offer up in and that is ED&F Man plc which to date has not let me down.
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