KEY POINTS:
Mere mortals who have failed to reap substantial share market returns recently can take heart.
Some of the country's most high-profile investors have missed out on cashing in as well as they might on the NZX's recent stellar run.
While the benchmark NZSX Top 10 index climbed 15 per cent in the past three months, a group of elite "smart money" share investors - with a collective portfolio of $670 million - only managed to increase the value of their holdings by 9.1 per cent.
Investment Research Group director David McEwen has been tracking the market fortunes of the eight individuals and family investors since 1999.
Over that time, McEwen's "smart money index" (SMI), which tracks the group's collective NZX investment fortunes, has risen 143 per cent while the Top 10 index has gained only 54 per cent.
But, in the latest issue of his weekly tip-sheet, McEwen's Investment Report, he says the SMI's relatively mediocre performance in the three months to February 1 shows it is hard to outperform a sharemarket caught in the grips of a rampant bull run.
"In those circumstances, you might as well invest in an index fund and capture total market growth," he says.
"But when the going gets tough, that's when smart investors can really use skills and a contrarian approach [buying when others are selling] to stay well ahead of the market performance, and to produce positive returns when the market is falling."
The portfolios McEwen monitors belong to Hugh Green, Craig Heatley, Michael Friedlander, Peter Masfen, Sir Selwyn Cushing and his son David, Eric Watson, Phil Briggs and the Todd family.
Taking the biggest hit over the past quarter was retired property developer Green, whose portfolio fell $14.9 million as a result of a slump in the share price of investment group Hellaby.
McEwen says, however, that Green has still made a significant gain from his investment in Hellaby "which he picked up when it was virtually a penny stock".
While a recent profit warning may have shaved 20 per cent off the company's share price and the paper value of Green's holding, "a quarter is an irrelevant period for an investor like Green, whose horizons seem to stretch to decades".
Masfen holds the most diverse portfolio among the smart money investors and gained $28 million during the past three months thanks to jumps in the share prices of Fletcher Building, Contact Energy and SkyCity.
During the quarter he sold 2.4 million Telecom shares as the stock bounced off the lows it plunged to in the wake of the Government's decision to unbundle the local loop.
McEwen says Heatley made a significant purchase of 3.2 million Infratil shares during the quarter.
"Infratil shares are not cheap, and have never looked cheap," says McEwen. "But its strategy of focusing on long-term growth sectors like energy and airport assets is proving a good one as these are highly sought after sectors and, when managed well, highly profitable."
Former market polariser Watson remains on McEwen's watchlist despite bowing out of almost all activity in the local market over the past few years.
The "Watson factor" has been a huge market influence in the past, with small investors either flocking to, or shunning, companies such as Advantage (now Provenco) and Pacific Retail when he appeared on the register.
During the past quarter Watson sold a $3 million investment in Abano and now only holds a small stake in gold exploration company Glass Earth.
"This [Glass Earth investment] shows the gambling streak in Watson's investment style," McEwen says.
Sharebroker and investment adviser Briggs upped his stake in Cynotech to more than 13 million shares during the quarter.
"Cynotech is starting to trade itself out of difficulty and the share has doubled its price over the quarter, to 20c, handing Briggs a good profit," says McEwen.
The Todd family, which has the most valuable portfolio in the SMI, bought 22 million shares in eftpos company Provenco over the past three months, which amounts to a significant vote of confidence in the company, says McEwen.
"Todd money is smart money and, given the amount of due diligence they would have done, Provenco appears to be at the start of a breakthrough in its increasingly global business."
The Cushings did not change their diverse portfolio of 16 stocks during the quarter, but watched it appreciate by $3.3 million.
The improving fortunes of Air New Zealand have been welcomed by Masfen and Heatley, both of whom bought into the company when its share price was wallowing. The value of the stock has doubled in the past six months, prompting Heatley to sell his 499,000-share holding. Masfen has so far held on to his 559,000 shares.
CASH-IN-THE-BOX
Hugh Green
* Retired property developer.
* Significant holdings: Affco, Abano, Briscoe, Dorchester, Goodman Fielder, Hellaby, Vector.
* Value of shares [as at February 1]: $82.4m.
* Craig Heatley
* Entrepreneur, co-founder of Sky TV.
* Significant holdings: Delegats, Infratil, Richina Pacific, Sanford.
* Value of shares: $21.4m.
Michael Friedlander
* Property developer and lawyer.
* Significant holdings: Sanford.
* Value of shares: $11.3m.
Peter Masfen
* Company director, former chairman and significant shareholder in Montana Wines.
* Significant holdings: Air New Zealand, ASB Capital preference shares, Auckland International Airport, Cavalier, Contact Energy, Dairy Equity, Fisher & Paykel Appliances, Fisher & Paykel Healthcare, Fletcher Building, Mainfreight, NZ Exchange, NZ Oil & Gas, NZ Refining, Northland Port, Nufarm, Nuplex, PGG Wrightson, Port of Tauranga, Property for Industry, Rakon, Rubicon, Restaurant Brands, Ryman Healthcare, Sanford, Sky City Entertainment, Skellerup, Solution Dynamics, Trans Tasman Properties, Turners Auctions, Tenon, TrustPower, Vector, Zintel.
* Value of shares: $192.3m.
Sir Selwyn and David Cushing
* Father and son investment team.
* Significant holdings: BIL International, Cabletalk, Contact Energy, Kirkaldies & Stains, NZ Exchange, PGG Wrightson, Postie Plus, Rakon, Rubicon, Skellmax, Telstra, Tourism Holdings, Tower, Tower Australia, Wakefield, Wellington Drive Technologies.
* Value of shares: $45.8m.
Eric Watson
* Expat entrepreneur.
* Significant holdings: Glass Earth.
* Value of shares: $74,000.
Phil Briggs
* Sharebroker and investment adviser.
* Significant holdings: Cynotech, Kidicorp, Kingfish, Methven, Postie Plus, Salvus, Smartpay.
* Value of shares: $5.5m.
Todd Family
* Significant holdings: Cue Energy, Provenco, Sky Network Television.
* Value of shares: $312.7m.
