April Newsletter

Know your investing personality part 2, Stock of the month...

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Knowing your investing personality -Part II

Behavioural finance studies show that our embedded personality traits along with emotional and mental behavioural biases contribute to the “how and why” of our important financial decisions. In a research report released by CFA Institute, investors are categorized on four different types based on their behavioural biases. Here we discuss on the four types and the common issues they face with investing.


Preservers focus on preserving wealth rather than taking risks to grow wealth. They are anxious about losses and short-term performance. Preservers also have trouble taking action for fear of making the wrong investments decisions.

An ideal investment strategy should be segregated into short, medium and long term goals. By focusing on short term returns, preservers risk making an emotional decision based on the short-term performance, which may end up being more detrimental to them in the long run. So, if someone identifies themselves as a preserver, they should clearly define the three different stages of goals and create a plan around it.


Accumulators are confident investors who want to be actively involved in making investment decisions. They are risk takers and typically believe that whatever path they choose is the correct one.

The issue with accumulators is overconfidence. History has shown that it is impossible to predict markets at large scale, yet accumulators continue to try and do so and expose themselves to extreme risk. An accumulator should be honest with their risk taking ability. In other words, put a cap on how much they can afford to lose or how much return they are happy with and be disciplined about it.


Followers may lack interest and/or knowledge of the financial markets. Hence their decision-making process may lack a long-term plan. Followers are investors who tend to follow their friends and colleagues’ advice or follow the current trend.

The downside with followers is that they follow the herd mentality – a concept of investors piling into the same investments as others. This is often the basis of investment bubbles and subsequent crashes in the stock market. A follower personality should invest in themselves and understand their investment decisions and how they fit into their overall plan. Educate oneself on common financial terms and concepts, and understand the “why” behind investing in an asset rather than simply relying on others’ advice.


Independents are engaged investors who have their own ideas about investing. They are often analytical and critical thinkers and trust themselves to make confident and informed decisions, but risk the pitfalls of only following their own research.

Similar to overconfidence bias associated with accumulators, independents face similar issues with relying too heavily on themselves. It is always a good idea to have a second opinion by looking at the market consensus and then settling on an investment.

In conclusion, it is important to understand your investing personality, develop a three-fold strategy, empower yourself with knowledge and then execute your decisions. After all it is your hard earned money that you want to grow and investing in yourself to gain knowledge will help you in the long run and reduce dependency on others.

So, what kind of investor are you?

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Stock of the month: a2 Milk Company 

What does the A2 Milk Company do?

The a2 Milk Company (ATM) is a premium dairy company which sets itself apart from competitors by selling products which contain only the a2 protein from cows (i.e., A1-free). The company offers fresh milk under the a2 Milk brand and through the Anchor brand in New Zealand as well as infant formula under the a2 Platinum brand. Furthermore, it provides a2 Platinum premium stage 4 junior milk, premium a2 Milk powder which is blended with Manuka honey and an a2 Platinum premium pregnancy milk formula.

Why is the A2 milk company our stock of the month?

A2 milk is our stock of the month because there has been lot of news/discussion about the company in the media and discussion boards as the stock price continues to drop. As a result we thought it is timely that we present all the facts about A2 milk to users so that they can make informed decision.

· In December 2020, the company announced they had agreed terms to acquire 75% of Mataura Valley Milk which is a dairy nutrition business, located in Southland, New Zealand.

· According to a media release by ATM the acquisition of Mataura Valley Milk will provide the opportunity for the company to engage in the manufacturing of natural products, provides supplier and geographic diversification and it further strengthens key relationships with Chinese partners. The completion of the proposed acquisition of Mataura Valley Milk is subject to approval by the New Zealand Overseas Investment Office, with an expected completion date expected to occur on 31 May 2021.

· However, the main challenge for the company remains in the disruption in the daigou/reseller channel with a flow on impact to the cross-border e-commerce (CBEC) channel resulting in subdued revenue forecast for the future. Gross margin is also under pressure due to competitor pricing and a higher inventory holding and cost of goods sold. The management has stated that they are already implementing strategies to improve the margins and re-activate the daigou/reseller channel.

· On a positive note, the company carries no debt and holds commendable cash reserve which should help them fund any growth opportunities through acquisition or implementation of new marketing strategies.

· According to 16 Analysts aggregated consensus, the target price is $10.

Recent Stock News

The share price of ATM over the last 52 weeks has seen a decline of 61.28% according to NZX. On the 16th of December ATM share were put into a trading halt pending a revision of earnings guidance by management. On the 18th of December management released their updated guidance and trading continued which saw the share price drop from $14.12 down to $11. At the time of writing the report, ATM was trading at a price of $7.65 as of 29th April, 2021.

The revised guidance by management saw group revenue for financial year 2021 (FY21) expected to be in the range of $1.40 billion to $1.55 billion down from a prior guidance of $1.80 billion to $1.90 billion. Furthermore, the revised earnings before interest tax and depreciation (EBITDA) margin for FY21 was expected to be between 26% and 29%, down from prior guidance of a margin of 31%.

Recent interim financial results

· Total revenue of $677.4 million, down 16%. This was mainly due to disruptions in the daigou/reseller channel which resulted in an impact to the cross-border e-commerce (CBEC) channel.

· EBITDA for the half came in at $178.5 million which represents a drop of 32.2% from the previous corresponding period with the EBITDA margin for the half coming in at 26.4%.

· The company’s China label infant nutrition saw strong growth for the half with revenue growth of 45.2% and saw an increase in market share to 2.4%.

· The Australian liquid milk segment also experienced strong revenue growth of 22.3% for the half which was driven by higher levels of in-home consumption due to government mandated lockdown. This strong revenue growth was further emphasized by a record value share of 11.7% in the Australia liquid milk market.

· The half saw continued strong investment into their brand with $67.4 million spent on marketing.

· The company balance sheet remains strong with no debt and a strong closing cash position of $774.6 million.

· Operating cash flow for the half came in at negative $9.2 million.

· Inventory for the half came in at $198.6 million which is an increase of $51.2 million compared to the prior corresponding period.

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