KEY POINTS:
Guinness Peat Group
Guinness Peat Group (GPG) saw its share price drop this week, as it always does this time of the year when it issues a one-for-10 bonus share to all its shareholders. Technically, the share price should fall by 10 per cent to take into account the dilution caused by having more shares on issue but the same amount of assets. This happened. But now the share is already retracing its losses back to its previous price. This is a feature of GPG and is quite illogical because the company is being re-rated on a higher price to earnings ratio, because of a simple arithmetic exercise that added nothing to the bottom line. Nevertheless, this is always how it's been with GPG. The company has an extraordinary following in NZ by smaller investors who have seen Sir Ron Brierley add value for them since the 1970s, partly through his tendency to issue bonus shares.
BHP Billiton
BHP Billiton is an extraordinary company, in the right place at the right time. And it just seems to get better as the global economic boom drives up the demand for the resources BHP produces. It is one of the biggest mining groups in the world, with interests across the world in coal, iron ore, diamonds, lead, zinc, copper and manganese ore. It also has a range of energy assets covering oil, gas and coal. It has been an investor's darling. But what a lot of investors seem to forget is that the share went virtually nowhere through the decade of the 1990s. It was only around 2003 that it really got going, rising from under A$10 to A$34. The question of how much longer the resource boom can last is too hard to contemplate, and in the meantime BHP makes hay while the sun shines.
* Views expressed in this article are those of IRG, not the Weekend Herald