March Newsletter - Investify is now LIVE!

The importance of research, Stock of the month...

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Since our mini launch in September 2020, we have been working hard to get our insights on point and are now fully ready with our subscription plans in action. We would like to invite you to start your Premium free trial that we had promised you. You will be getting stock information, ratings, analyst recommendations, company information and news, peer group analytics and the company's financial summary - all in one place! The users no longer need to spend hours going through annual reports of the companies, read through complex broker reports or look for relevant news on the company in different media articles.

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The importance of research in stock investing 

There has been an astonishing increase in DIY investing in New Zealand since the Covid lockdown in 2020. The Financial Market Authority (FMA) in New Zealand estimates that more than 120,000 new investors have joined local online investment platforms such as Sharesies, InvestNow, and Hatch.  About 70 per cent of their members are under the age of 40 with three-quarters of those users being 25-44 year olds and the average user is 35 years old.

The contributing factors for this explosive growth are - market movement creating lot of interest, people getting bored staying at home and thinking about their financial future, very low interest rate and finally, the adoption of technology making it easier for people to trade in stocks. This trend was already visible for the past few years, but Covid has just accelerated the growth of DIY investing.

Whilst this is good news for New Zealand as people are starting to take control of their finances and engaging more with the Stock Market, there is also a risk that many of these aspiring investors may not be well-informed about how things work in the investing world, particularly stock investing.

Rob Everret, the CEO of FMA, stated in a recent interview with NZ Herald, "We've seen the explosion of chat rooms and social media around investing. The US has had this for quite a while, but it's quite new to New Zealand. It's been quite hard until now to find anyone talking about markets. It does worry us. It plays into that broader issue of 'can you trust what you see on the internet', and frankly should half of what's on there really be on there.”

Some of the key messages that he pointed out for the new investors are:

· Most of what's in the chat rooms and social media sites, particularly in relation to specific stocks, you should ignore. Honestly, it may be well-intentioned, but it's certainly not very well-informed.

· Markets are incredibly complex, and it is very difficult to predict what is going to happen in the future. Even the large brokerage firms and investment banks struggle to time the market. Markets can go up and down, so it is very important that people invest according to their means and understand the risk.

· On the upside, this has also been fun. More and more young people are now starting to take interest in investments.

It was encouraging to hear his views which strengthens our belief that good research is critical to making an investment decision. With the explosion of DIY investor numbers there is a real need for platforms that provide good quality research and education that people can trust.

Stock of the month: Fletcher Building Limited 
What does Fletcher Building do?

Fletcher Building (NZE:FBU) started with a very humble beginning in 1909, when James Fletcher built his first house with Albert Morris in Dunedin, New Zealand. Today, the company employs over 16,000 people across New Zealand, Australia and the South Pacific. Fletcher Building is a diversified building company that manufactures building products, operates retail businesses that distribute these products and also builds homes, buildings, and infrastructure. It is also the only fully integrated local manufacturer of cement in the country, through its Golden Bay Cement business.

Fletcher Building is dual-listed company on the NZX and ASX and operates through six divisions – Building Products, Distribution, Concrete, Residential and Development, Construction, and Australia.

Why is Fletcher Building our Stock of the Month?

The half-year result announcement for the company (HY21) showed that it has managed to apply significant cost control in place. Although revenue increased marginally by only 1% from previous corresponding period, all other measures such as Earnings Before Interest & Tax (EBIT) increased by 47%, Net Profit After Tax by 48% and cash flow increased to $428 million from an outflow of $5 million in HY20. The Group now has $1,812 million in available funding, of which $925 million is undrawn, and $618 million cash on hand, thus showing a strong balance sheet position. Furthermore, the management informed that it has also managed to reduce debt by $714 million. All of its six division reported an increase in operating margin.

Recent stock news

The company paid an interim dividend of 12 cps (cents per share) as announced previously on 24th March and is expected to be in position to pay a final dividend for FY21. The EBIT guidance for FY21 is in the range of $610-$660 million compared to $160 million reported by the company in FY20.

Financial record

- Revenue of $3,987 million, up 1% from $3,961 million in HY20

- EBIT before significant items of $323 million, up 47% from $219 million in HY20

- Net Profit After Tax of $121 million, up 48% from $82 million in HY20

- Strong cash flows from operating activities of $428 million

- Interim dividend of 12 cents per share declared

- FY21 EBIT before significant items guidance range $610 million to $660 million

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