Patience a virtue for big names

By ELLEN READ

The country's most successful investors are back on track after suffering from the speed wobbles last year.

But patience, rather than acumen, has been largely responsible for the recovery and uncertain times may lie ahead, according to investment adviser David McEwen.

The eight portfolios followed by the McEwen Investment smart money index (SMI) rose 18.2 per cent in the three months since March, increasing in total value by $91 million to $605 million.

The percentage rise was double that of the NZSX40 capital index, which climbed by 9 per cent over the same period.

McEwen has been monitoring the portfolios of the group - Craig Heatley, Eric Watson, Peter Masfen, the Todd family, Peter Spencer, Hugh Green, Michael Friedlander and Phil Briggs - every three months since March 1999.

The latest gains show patience has paid off for several of the wealthy investors, who have persevered with investments that appeared to be going nowhere, McEwen said.

For example, Spencer's $6.2 million portfolio gain was due almost entirely to his massive holding in Affco - a company long regarded by many as a lost cause, but which had recovered after a sharply improved interim profit.

The $71 million appreciation in the Todd family portfolio over the three months was also the result of patience and of playing for high stakes.

The family's portfolio is narrow, with very large holdings in only a handful of stocks, including Independent News, which took off in the quarter when the media giant sold its publishing titles to Fairfax.

The Todds scored large gains over three months on this deal, as well as from the appreciation in shares in retirement village operator Metlifecare, another share that had stagnated but started rising after producing a record annual profit.

Success aside, just over $10 million in new money was invested by the eight during the three months - a sum deemed modest by McEwen, given that the total portfolio holdings are worth more than $600 million.

While this could be a reflection of uncertain times ahead, what was interesting was what the smart money did buy, he said.

Fletcher Forest preference shares feature in several portfolios, showing that the smart investors saw the opportunity of sharp rises in Fletcher Forests because of the sell-off of forestry assets that had been undervalued for years.

The healthcare/retirement sector was also in favour, with five portfolios including a company from this field. Eldercare, Metlifecare and Ryman featured strongly.

McEwen said the healthcare category had time on its side.

"As an ageing population of baby boomers reach their retirement years, demand for retirement and healthcare can only increase, and these investors know that."

The smart money index covers only significant stakes in New Zealand public companies.