GNS (ASX) looking good.

Originally posted by benben ↑

GNSPA is, effectively, a convertible preference share.

READ: GNS pays every GNSPA holder "5%+ 90day BBSW"* of interest a year (split quaterly)... then, at some time** in the future, gives holders $100 or $100 worth of GNS shares (subject to a certain limit... I think the minimum is around 15 shares, and the maximum is around 450 or so).

* BBSW was, 24 hours ago, 4.04% ( http://www.afma.com.au/scripts/nc.dll?AFMAv6:HOMEPAGE ). So, for simplicity sake, currently, GNS is paying around 5%+4.04% = 9.04% = $9.04 to each GNSPA holder every year. You can buy them for around $74.5 on the ASX:GNSPA.

**I would envision October 2010 will be this moment, but, I only hold a small number of these (though, that is kinda dissapointing. I would have no objection to doubling my holdings, but, I also see opportunities like ELDPA, MXUPA, ERJO, etc... or de-risking by chucking on a large retail company.... that's a side-note though).

On a very related note, I am about to go write an article on these 'Hybrids' for Ozbankers.com and will post it on here for you when I'm done.

But, to pre-empt my article, why invest in GNSPA instead of GNS? I expect $1.55 fully franked on 14th Jan 2010, around $1.60 fully franked on 14th April 2010, around $1.65 fully franked 3 months later, around $1.70 fully franked 3 months later and around $100, probably worth of GNS shares around October 2010. I think I bought them 12 months and 2 weeks before my expected 'conversion date'.

Ignoring compound interest, that's around $106.50 I expect from these... I paid $74.50. They are much lower risk than GNS..... In Oct 2009, did you expect 43%*** return on investment from GNS in 12 months and 2 weeks? If so, there still wouldn't be a reason to invest in GNS, unless you thought that GNS would increase by *more* than 43%, *OR* you thought GNS had less risk (lol!)... or you were a risk-seeker (lol, a very, very, very, very, very, outrageous, irrational, risk-seeker).

***IN reality, I expect to get $100 of GNS, sell for, say, $98... and from that $6.50 in interest payments make another, say, 10c in interest.... so, really, I expect:
($98+6.5+.1)=$104.6 - 74.5 = $30.1 profit per GNSPA held. Just a shame I was too stupid and only bought 27 of these. Still, $800 or so profit is nothing to sneeze at, I suppose.
POSITION AND SENTIMENT IN GNSPA ONLY.