- Keep an eye on the company’s latest presentation and reports
- Healthcare sector is the major contributor to S&P/NZX50 index
- FPH reported double digit growth in profit
- Consumer Staples sector is the third biggest contributor to S&P/NZX50 index after utilities sector
Wealth creation is not as easy as it may seem; it comes with a lot of difficulties and includes lot of hurdles. Some are of the view that one of the ways of wealth creation is the equity market. It is critical to note that the allocations in equities might result in decent returns. Some investors are of the view that the companies having higher cash levels and lower debt are the ones which can deliver stable returns.
Now, when you have the basic knowledge of choosing a stock, and you also have some technical knowledge too; you are all ready to invest! However, you have a lot of stocks to pick from. How to choose? Going through every stock is a tedious task, and this for sure is not the way! If you are new to the NZX market, you don’t have to worry. We have a guide ready to help you navigate the difficulties in the uncertain world. Also, if you think that selecting security exclusively based on the stock screener will help, please note that this does not give you a complete picture and is susceptible to mistakes.
Best Practices for the new investors to pick quality stocks on the New Zealand Stock Exchange
Presentations and Reports
After shortlisting the potential stocks, turn your attention towards the company’s presentation. You will get an idea about their business models, growth opportunities, future guidance, and general overview of the company. A decent understanding of the business will further refine your search and will help you in getting the broader understanding of the company. You can also compare the performance of the company with its peers and check if it has any potential to outperform its competitors. Also, the investors should consider the past performance of the company in order to have a view as to how the company has performed.
Data of the company’s profitability and debt profile is a must. Generally, the company having lower debt is considered by the investors. Other metrics which one should check are valuation multiples, trading levels, performance of industry, etc. Based on the information, try to formulate a long-term view. Notably, one should also check the company’s management team and their history.
Keep your Emotions in Control
Keep a check on your anxiety levels and do not engage in panic buying or selling. Trading based on rumours which have been spread or deciding on the basis of herd mentality can result in losses. Check the proper news and developments and conduct a thorough analysis. One should also check the promoters’ activities. Over time, if the holdings have increased, that means they are confident in the company.
There are generally two types of methods which investors follow in fundamental investing. One is top-down approach, and another is bottom-up approach. When it comes to stock selection, one needs to understand the broader sector and what factors can drive the performance of the sector.
Let us now look at some of the key sectors of New Zealand
Sector Breakdown (Source: S&P Dow Jones Indices)
Healthcare sector is the biggest contributor to S&P/NZX50 index and contributes about 25.3 per cent to the total index. Some of the leading companies in healthcare sector are Fisher & Paykel Healthcare Corporation Limited (NZX: FPH), Ryman Healthcare Limited (NZX: RYM), Ebos Group Limited (NZX: EBO), Summerset Group Holdings Limited (NZX: SUM) and Metlifecare Limited (NZX: MET).
FPH Announces Its Full Year Results; Profit Up by 37%
FPH has recently announced its results for the full year. The company reported operating revenue of $1.26 billion, up 18% over last year, or 14% in constant currency. Net profit after tax stood at $287.3 million, up 37% over the previous year, or 30% in constant currency.
The rise in revenue was primarily because of growth in the use of OptiflowTM nasal high flow therapy, demand for the products to treat coronavirus patients, and strong hospital hardware sales throughout the course of the year.
Utilities sector is the second biggest contributor to S&P/NZX50 index and contributes about 17.4 per cent to the total index. Some top companies in utilities sector are Meridian Energy Limited (NZX: MEL), Mercury NZ Limited (NZX: MCY), Contact Energy Limited (NZX: CEN), Vector Limited (NZX: VCT) and Infratil Limited (NZX: IFT).
Recently, rating agency Standard & Poor’s has reaffirmed MEL’s corporate credit rating as BBB+/Stable/A-2.
Consumer Staples Sector
Consumer Staples sector is the third biggest contributor to S&P/NZX50 index and contributes about 14.3 percent to the total index. Some top companies in Consumer Staple sector are Synlait Milk Limited (NZX: SML), Delegat Group Limited (NZX: DGL), Scales Corporation Limited (NZX: SCL) and Sanford Limited (NZX: SAN).