Nzx full year results, page-211

Ok so now that the results are in and have been digested, I just wanted to bring up a few points. To clarify I am looking at this from an investor point of view (long-term).

So first things first why don’t we put this in perspective. How much did it really drop? There was a sharp rise for A2M on Monday and Tuesday from $14.84 to $16.01 (nearly 8%) that I attribute mostly to two factors. Firstly the Dow recovery/normal market moves and second the push prior to announcement. Over the same two day period the ASX50 moved up about 2% so using that as a yardstick, just under 6% can be attributed to a push on A2M prior to reporting. That is the key figure. Over the 3 day period, Monday opening to Wednesday close, A2M is down 6.4% and the ASX50 is up 1.11% so we are looking at roughly a 7.51% swing against A2M since the weekend using the ASX50 as a yardstick. Given the growth and volatility of this stock this is hardly panic stations for investors. Sure those cunning Slytherin type shorters will try to work your fears against you but it was actually a strong report. Considering the revenue averaged $25m per week it is hardly anything to be concerned about, the fundamentals have not changed. In my opinion the recent meltdown has been caused by three factors much more than missing the so called expectations. Marketing, guidance and risk tolerance.

IRT marketing this again goes back to the trader vs investor mentality. Some people (mostly traders) don’t care about an investment into future growth, rather just profits. Others will argue the need when demand outweighs supply. I would suggest that further down the track the brand recognition and, especially in the case of IF, the emotional branding for this product will see the returns far outweigh the current costs. Future increase in supply will enjoy continued high demand at premium prices. Given excess cash on hand I see increased marketing as beneficial to long term growth and further market share. Other investors may disagree but the effectiveness of marketing is hard to dismiss when in growth stage. At any rate I don’t think investors should be concerned with the increased spending in the report when it is to increase growth.

As for guidance well every investor would love to have more information and guidance however this is the difference between an income stock and a growth stock. Income stocks will give you a juicy dividend and guidance is reasonably predictable. Nanny state Hufflepuff territory. Growth stocks though have a lot more variables so this is where risk tolerance comes in for the average investor. Once the unknown factors are realised it will reflect strongly on the SP but in the meantime you have to decide what has changed.

If you think that a 41.4% increase in revenue is the sign of a bad board and CEO, then okay sell. If you think the fundamentals have changed because they spent more on marketing to improve future growth, then okay sell. If you think it is all too risky because further supply from Pokeno and increased growth in the US gives an unknown growth factor on top of an already profitable business, then okay sell. For investors that don’t need someone to hold their hand, hold onto your shares instead.