Tamsyn Parker 's Opinion

Money Editor for NZ Herald

Stock Takes: Best and worst performers of 2013

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F&P Healthcare has performed strongly despite the high New Zealand dollar against the greenback.
F&P Healthcare has performed strongly despite the high New Zealand dollar against the greenback.

Just over the halfway point in the year Stock Takes thought it would be a good chance to have a look at the best and worst performers on the market.

Based on share price growth Xero is, unsurprisingly, the best performer having grown by more than 120 per cent this year. The accounting software firm yesterday powered past the $2 billion market cap point, despite the company still not having made a profit.

At the start of the year Xero shares were worth $7.48, yesterday they were trading over $17 and closed on $17.49. Many in the market are scratching their heads around how Xero has got to where it is but those who back it believe it still has plenty more room to go.

Xero was also the best performer on the NZX 50 last year.

HEALTHY PERFORMANCE

Three other companies among the best performers are in the healthcare sector. Long-standing performer Ryman Healthcare has gone up about 42 per cent this year. It started the year at $4.68 and traded at $6.37 at the end of June, closing yesterday on $6.51.

Some have speculated the stock is overvalued given its strong continuous growth but it remains one of the most popular stocks on the market.

F&P Healthcare has also gone up about 40 per cent this year after posting a record profit result in May, closing on $3.48 yesterday.

The company has performed strongly despite the high New Zealand dollar against the US dollar. The recent declines in the kiwi could also be good news for the company for the remainder of this year depending on its currency hedging strategy.

Ebos Group, which distributes pharmaceutical products, has also snuck into the top performing stocks with its recent $1.1 billion acquisition of Australian firm Symbion. It was up nearly 35 per cent as of the end of June having gained much of that since the end of May. Yesterday its shares closed on $9.60.

NOT GOLDEN

At the opposite end of the scale, gold mining company OceanaGold Corporation has more than halved in value this year. It was trading at $3.50 at the start of the year but hit $1.44 at the end of last month, and closed yesterday on $1.65.

On June 28, Oceana announced it would "mothball" its Reefton mine by 2015 due to the declining price of gold.

Also hit hard has been children's clothing retailer Pumpkin Patch which revealed a profit downgrade last week sending its shares downwards. The stock is down around 38 per cent for the first six months of this year and could find times tough with the economic down-turn in Australia showing no signs of letting up.

Yesterday its shares closed on 82c.

The third worst performer has been rural supplies company PGG Wrightson. Its shares were down close to 28 per cent in the first half of this year.

Wrightson's major shareholder Agria has struggled to meet its financial commitments to Livestock Improvement Corp and last month LIC's boss Mark Dewdney was appointed chief executive of Wrightson after the surprise resignation of George Gould. Yesterday its shares closed on 30c.

WHERE TO FROM HERE?

Research firm Morningstar says it is seeing some opportunities emerging in the sharemarket after its recent fall off but they are still rare.

"The New Zealand market is fairly valued after being quite stretched at our last outlook quarterly. More investment opportunities have emerged following the pullback in share prices," the firm stated in its recent quarterly outlook.

"We see investment opportunities in the electricity and telecommunication sectors while building materials stocks remain expensive. Stock selection remains the key."

Chorus, TrustPower and Kiwi Income Property are the only three companies on its "best ideas" list.

Morningstar's report states that TrustPower's shares are trading at a healthy discount to where it values the company, while offering an attractive dividend yield of 6 per cent.

"We think the regulatory concerns are overdone and more than adequately factored into the share price. TrustPower has the best prospects in the electricity sector." While it sees flat prospects in the New Zealand electricity sector TrustPower's Australian wind generation business presents a "good long term opportunity". It has an accumulate rating on the stock.

TrustPower's share hit a high of $8.73 in October last year but fell back to $7.07 last month. It closed on $7.40 yesterday.

TELCO ATTRACTION

Morningstar is also singing the praises of Chorus - despite the stock's poor performance since its split from Telecom.

"We believe Chorus is slightly undervalued and uncertainty over fibre take-up rates is already in the current share price.

"The long-term growth driver for Chorus is the demand for fixed-fibre services. Our current forecast assumes Chorus will complete the fibre rollout on time."

Morningstar said the take-up rate of fibre over the longer term was supported by increased data demand.

"We expect data usage to strengthen as richer multimedia and high-quality content uses more bandwidth. In our view, the risk of mobile and wireless substitution is overplayed given the technological difference and, more importantly, premium pricing for wireless on a per-unit basis."

It has an accumulate rating on the stock which yesterday closed on $2.58.

INS AND OUTS

Broker Craigs Investment Partners is not a fan of Chorus and has just ditched it from its core investment portfolio.

"Chorus does not meet our requirements as a core holding. The lack of a well defined regulatory framework, low reliability of revenue and a mixed earnings [and dividend] outlook, concerns over levels of future capital expenditure and the associated returns all contribute to the risks for the company," according to the firm's monthly report from its investment committee.

"We also see the telco infrastructure being at risk from technology, overbuild and bypass."

Instead Craigs has added Mighty River Power to its portfolio although it has reduced overall exposure to the electricity sector from 15.5 per cent to 14.5 per cent of its portfolio because of perceived industry and political risks.

"While the sector still remains well-represented in our portfolio, this move reflects increasing risks across the industry and the political spectrum. Primarily, these risks include the potential for the Tiwai Point aluminium smelter to close, and the potential for a Labour/Greens government to implement its single buyer model policy change."

It has replaced the power exposure with increased investment in Sky TV, SkyCity, F&P Healthcare, Trade Me and Mainfreight.

THE P FACTOR

The NZX has made it easier for investors to zero in on important company announcements with a new "P" symbol attached to any news that is "price sensitive".

So far it seems not a lot of what is released to the exchange is actually that exciting. On Tuesday just six announcements on the main board of the stock exchange were given a "P" and on Wednesday is was just four.

Maybe it's just a quiet week.

- NZ Herald

Tamsyn Parker

Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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