syrah: a sell rating?

Dire data on tipping, but we're still ahead of herd

BY: CRITERION
From: The Australian
July 10, 2012 12:00AM

THE latest numbers are in and it's looking dire, not just for Julia Gillard but for Criterion's tipping reputation during the June quarter, which suffered from a potent combo of speculative resource plays not doing the right thing, cyclicals getting further trashed and many a blue chip not doing the right thing, either.

Still, we beat the market, which is more than what your typical index manager (lavishly paid for just following the herd) can claim.

The sum of our 120 "buy" calls reveals a 4.9 per cent loss, compared with the 6 per cent decline in the All Ordinaries index.

Most of the damage resulted from our predilection for two-bob resource juniors, which became more bereft of support as the quarter wore on.

Biotechs and our own groaning sector (media) hardly did us any favour either.

Dishonourable mention in particular goes to to Bioxyne, the well-backed biotech that looked poised to be snapped up by a big pharma partner before admitting last month that a trial of its respiratory drug failed to meet targeted "endpoints".

Basically, the trial flopped and Bioxyne's market value disappeared as fast as serial killer Julian Knight's parole prospects.

On the "sell" and "avoid" side, our 55 stocks dropped 6 per cent, led by a rag-tag collection of resource wannabees, life-sciences laggards, overpromising tech houses and piscatorial serial disappointer Clean Seas Tuna.

Our biggest sell-side miss was not hitching on to the graphite wagon, rating Syrah Resources a sell before a powerful rally on the back of initial (but yet to be assayed) drill results at its Balama prospect in Mozambique.

On the "buy" side, we notched our best gain from old nemesis PMP, as we rode the powerful share rally after the ticket-printing minnow's $250m takeover.

The stock was also one of our best "sell" calls, as we suggested folk unload before questions were asked about the mysterious offer.

Speaking as such, we're yet to win any kudos from our repeat endorsement of David Jones as a takeover target, which we last enunciated when the stock was trading at $2.50 in May.

Double-digit gains were as rare as Black Caviar coming second, but we managed to eke such welcome increments from consumer financier Flexigroup, truck-tray builder Maxitrans, James Hardie Industries and reliable West Australian goldminer New Star.

Our attempt to call an end to the media sector's malaise resulted in dud calls on Fairfax Media, Seven West Media and Ten Network. We devoted much attention during the period to the intrigue surrounding rare-earths play Lynas Corporation and the approval process for its contentious processing in Malaysia. Our "speculative buy" calls have been in vain, but with consent expected to be granted, we'll stick with it.

Some share behaviour has been erratic, to say the least.

NewSat shares have tumbled even though the minnow is closer than ever to owning and launching its own satellite.

It's symptomatic of the broader market, really: while the speccie spruikers are reaching for the stars, investors are reaching for their wallets, and only to make sure they're clamped shut.

But the current quarter heralds early hope and we seem to have reached an equilibrium point between the glass half-full brigade and the doomsayers.

Resources gadfly Warwick Grigor, of broker Cannacord BGF, sums up the sentiment by saying "value is always in the eye of the beholder and it is always relative". "But even the most sceptical investor would acknowledge that there is extraordinary value in the markets due to the abandonment of equities as a popular investment alternative," he says.

The last word goes to one broker who likens the market to a strapless bra: "Half of us are wondering what is holding it up and the other half are waiting for it to drop so they can grab the opportunity with both hands."

Tim Boreham's regular Criterion column will return on July 17.

http://www.theaustralian.com.au/business/opinion/dire-data-on-tipping-but-were-still-ahead-of-herd/story-e6frg9lo-1226422037527