Search goes on for hidden value t CRITERION: Tim Boreham | July 08, 2008
UH-OH, it's quarterly confession time. Criterion -- your in-house stock tipster -- largely failed in his bold quest to detect any signs of life on the bourse's wizened landscape. But he was much better at suggesting stocks to steer well clear of, which arguably is the entire market at the moment.
Criterion ascribed "buy", "long-term buy" or "speculative buy" calls to 98 stocks during the June quarter. On average they lost 8.6 per cent in value, compared with the All Ordinaries' 1.6 per cent slide during the period.
However, his 38 "sell' and "avoid" calls obliged with an average 12.9 per cent loss, well beyond the market average.
As could be expected, there were few stars on our "buy" list, partly because we took a wary stance on the junior iron ore sector and emerging energy stocks. Your columnist is grateful for the well-followed 26.5c Central Petroleum, which accommodated with a 55.9 per cent gain.
We also thank Babcock & Brown chief Phil Green for putting the struggling group's bankers in their collective box. We backed the stock at the height of its dramas and were rewarded with a handy 43 per cent gain.
Your columnist frankly expected little of Medical Developments, but the 28c minnow obliged with a 48 per cent gain.
But there's no escaping the long casualty list, with the worst returns resulting from our thwarted attempts to back the down-and-outers at their lowest ebb.
Our classic mistake was incurring a 50 per cent loss after backing the ability of ABC Learning Centres to repair its balance sheet by selling assets. The stock did indeed rally, but too temporarily to bolster our stats.
Our staunch faith in the banks went unrewarded, while we came a cropper by breaking our anti-airline stance and backing Virgin Blue on the prospect of corporate action that didn't eventuate.
Backing ad house STW Communications (down 35 per cent) on the cusp of a media downturn wasn't that flash, either.
On the "sell" side, we were rewarded with our more robust approach to speculative stocks, or those vulnerable to an economic downturn.
Avoiding Solagran, the Opes Prime-ravaged Russian drug developer, was a no-brainer. And with three takeover offers for Beyond International evaporating, it was a case of "lights camera ... cut" for the TV production house.
Our old friend Traffic Technologies, down 57 per cent, plumbed new lows, as the bankers -- and other vultures -- circled. The company recently moved its Melbourne offices from plush Kew to leafy Eltham in a desperate attempt to cut costs.
But we're more surprised by the extent of GrainCorp's 35 per cent decline and Futuris's 48 per cent retreat, given the agri-sector is in otherwise healthy shape.
In summary: another quarter to forget after the March quarter's 16 per cent drubbing. With the bourse posting fresh bull market lows last week, conditions don't look to be improving in a hurry.
But with adversity comes opportunity and Criterion will continue to poke under every crevice for hidden value. And remember: the darkest hour is just before the dawn and it sure looks black out there.
