Niche gusher gives DF Mainland advantage

By Geoff Senescall

Between the lines


The good news this year is that no broker produced a negative return from portfolios of its five most favoured stocks.

In the previous 12 months, six out of the 11 firms who participated in the lighthearted competition would have left their clients in the red with their picks.

While the broker performance was strong for 1999, head and shoulders above the 12 who took part was DF Mainland with a stunning 138.2 per cent return - taking account of dividends, cash issues and share price movements.

That means that anyone investing $10,000 in each of the five DF Mainland picks would now have a portfolio worth $119,000.

The reason for DF Mainland's strong performance is its inclusion of Advantage.

Looking over a 12-month period from the cut-off date of December 15, 1998, the share price of the technology stock increased 504 per cent.

Advantage's performance last year reflected the sentiment throughout the market towards any company with internet or e-commerce capability.

DF Mainland also picked Auckland Airport and Baycorp, which countered its two duds: Aquaria 21 and Tranz Rail.

Slipping from top spot to second this year was Forsyth Barr, with a 78.9 per cent return (last year it made a 36.6 per cent return).

It had the most balanced portfolio with all its picks - Auckland Airport, Infratil NZ, Nuplex, Telecom and Tourism Holdings - beating the market average.

Coming third was Ord Minnett with a 76.4 per cent return. Its picks were Air NZ B, Auckland Airport, Fletcher Building, Mainfreight and Tourism Holdings.

Overall, the average broker return was 43.8 per cent. This compares favourably with the benchmark NZSE-40 gross index, up 19 per cent.

Eight brokers outperformed this. The four which did not were all large broking houses whose picks were generally more conservative.

The best performers after Advantage were Tourism Holdings (260 per cent), Baycorp (121 per cent) and Restaurant Brands (101.9 per cent).

The stock most favoured to perform in 1999 was the airport, which landed a 37 per cent return.

Four stocks produced negative returns. They were Fernz Corporation (20.5 per cent), Force Corporation (7.1 per cent), Metropolitan Lifecare (4.7 per cent) and Guinness Peat Group (2 per cent).

Our competition this year shows how picking a small niche gusher like Advantage can pay dividends.

Without this advantage, DF Mainland would have returned around 47 per cent, putting it in fourth place.

What can also be said is that large companies in established businesses are never going to provide the speculative returns of a fledgling stock on the cusp of a booming industry.

But one should never forget the old adage of "the higher the potential return, the higher the risk."