Ron ….picked 40 times and reserve 11 times …158 entries
Pretty well loved eh
Quick skim through IFT was top of the pops with 42
Market voting machine?
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Well its a good discusion regarding pros & cons for Oca
Retirement stocks not my cupof tea but
Reading the tea leaves it has to be all about cash flow???
Bull case sell heaps of units
Bear case don't sell heaps of units
Take your pick,risk/reward
Some get lucky but sitting on a laggard for a long time but can be a frustrating exercise
Well I'm bloody glad of my blind spots that's for sure.
Daytr, “Urgency” is the wrong word …I said “soon” , and by “soon”, I mean in the next 2 years.
Selling quicker than that will mean they sold them too cheap. Fortunately OCA does not have a funding/debt issue to require “urgency”.
Firstly on debt…The analyst's primary focus right now is on debt and how are all the RVs going to reduce it. It's a fad that will change but it's the biggie right now after RYMs rather dramatic fall from grace.
Back to OCA , of all the RV’s they are in a unique position right now. They have a load of finished product ($420m) and by selling it soon over the next 2 years will delight the analysts with their balance sheet focus and significantly boost profits for investors who have patiently waited for this crossroad.( If achieved , the market will then want to re-rate this stock and 75c will be inappropriate)
If they can't sell many then the model is a failure , debt doesn't go down , and discounting is the next option. No need to expand those consequences further, its bad! (so the market would be right at todays 75 cents).
So in predicting this binary outcome, can a hicksville local get a head start on the analysts and global hedge funds out there?
I say yes. Percy did it with Turners.
Even this post will be of some use to the 4 or so NZ analysts as they are used to only dealing with SUM and RYM villas until now, rather than OCA high end apartments. They will also be learning on the hoof too.
The stunting problem for them is that they have to go an analyze some semi conductor company or airnz next week. I am seriously impressed by their abilities.
For you especially Value (as I also admire how put effort into understanding) here are a few of my GENERAL learned new sales patterns, bare in mind each village is unique as to; location , local competition, cold or warm start , timing of the market and village size:
This info doesn't come from the top brass, they are very proper with what they can tell me if they haven't already told you. This info comes from years of observation and repeated site visits over various stages . A small example just recently is a load of cool intel from the barrister lady of a fairly new delivery. It's striking how proud, knowledgeable and connected ALL the staff are with their respective villages.
Observations and conversations;
-Pre Sales are tiny, usually at most half a dozen and these are the top units.
-Starting with an empty tower is just bloody slow and hard yakka for the first 6-12 months.
-A year from opening the community vibe starts to build , critical mass happens, folk have had enough time to decide to “pull the trigger” , referrals from residents start happening, and the thing starts selling nicely .
-Residents take ages to decide to move in. It’s their last house purchase and they want to get it right. ( example , a resident has just signed up after going to the open day 2.5 years ago. )
-The most expensive units sell first.
-As villages get much bigger and mature the new sales are slower as the set rate of inward residents are offered resales in the mix. Yes, OCA do focus on resales as the village staff both care for the family they've got to know over the years and also OCAs contracts mean they are up for costs if it takes too long to resell. (likely upcoming reform changes are already in practice )
-Once a village sells down over 2 years then the pace of inward residents is greater than available units. Waiting lists form.
-I back calculate that sales for any individual village over a HY has a ceiling of about 15 in a neutral property market.
-National housing sales rates significantly affect RV sales rates.
-Summer has more sales than winter.
I suspect many folk, like I used too, imagine that there should be a queue clamouring in a line to get in on open day. You can now see how selling a villa off a plan is just soooo much faster and easier.
RYM should have rung me before diving into intensive vertical buildings.:)
What about OCA current sales?
So right now Helier , from the lobby, should be looking like an empty showpiece. Fortunately Brent has told us the sales numbers to date of about 12 late November ( which are actually faster than expected, which he also commented on).
I am really surprised how many new CHCH have already sold (⅓) , again much faster than usual. This will be in part to the fact that there is already a vibe from adjacent apartments already sold down a few years ago.
Hamilton was a shocker at the beginning but sales are cranking well now and they haven't dropped prices to do it. In fact OCA have never dropped prices and have always said that is not the factor that slows sales.
There you go Value, I I hope that helps you and gives you structure for your work and context of new sales for others who are interested.
Resale's are easy , they are linear due to waiting lists.
IMO you sure picked a good time to be donkey deep in OCA.( that's just my opinion).
Your experience and intelligent pushback is VERY welcome Mista Tea, sharing countering ideas is what this forum should be about. As far as not being as smart as I reckon I am...you been talking to my wife?!
Above I have tabled 2 of my reasons, reducing debt and growing profit that OCA is going to rerate this year.
Then there's obviously warming property/ inflation sentiment…None of that is particularly smart but it is going to potentially have a meaningful outcome. ( if sales go on track - finding that out is the part where someone far less smart like me will win over Wall St) .
I'm firmly saying IMO things are going to get rather sporty for OCA this year onwards.
And you are absolutely right about us common folk being not as high IQ as others out there who are setting stock prices. But this deficit can be made up for with perseverance, specific focus, hard work , and good ol` local knowledge unavailable overseas. Making money is one of the few areas ( politics being the other) where being too intelligent in real life actually seems to work against people.
Agreed ...certainly not a concern you or I need to worry about. ha!
;)
Mav, love it when you comment ‘things are going to get rather sporty for OCA this year onward’
Many agree with you …after all 40;picked OCA in the competition …and 11 more hoping they need to replace something and OCA goes in
@Maverick, thanks for another insightful post. I don't think people realise how much time and effort you put into your analysis, especially the part about visiting the RV's and talking to the staff and residents. Thanks for sharing, it's very much appreciated.
Mav, you've got a blind spot mate.
They also have to attend their compulsory Te Reo classes, stress about their mortgages and explain to their wives why if they are such good analysts that they have to work for a wage. Then the rainbow session, the 2 hours in traffic a day and all the corporate nonsense, compliance etc... I could go on.
That depends on what you define 'reasonable' and 'most'. Let's all do an exercise together, go and look at the stock price chart of 10 random businesses with a market cap over a billion dollars. Pull up a 12 Month chart, you may use any year. Now see the % variation between the highest and lowest price. I will tell you something for nothing. The value of that business did not change anything close to that much during the year... This is obvious. But OCA you say has supposedly been mispriced for a long time? Damn the Refinery was dramatically mispriced for most of the entire 20 years I was there. The entire bond market of the entire world was mispriced for a long time. I could name dozens of stocks that were and are mispriced for a long time.
Many businesses are mispriced for many many years if not decades.
I certainly do not think I am smarter than everyone else. I just think I am smarter than most people. But this is not really a requirement here... Issac Newton got smashed in the South Sea Bubble... Doctors are among the worst investors on the planet.... Uber smart people make terrible investors... It's about a combination of some level of basic understanding, 5th Form Math and the correct behaviour.
Remember rates have gone from the lowest in all of recorded history to historical norms in record time as well... I'm reading a great book at the moment called 'the price of time'.
Also... It's not just OCA, the whole sector has traded in a similar fashion, so our blind spot must be for the industry not just the company.
I do think it is accurate to say that most stocks are valued near enough to their true worth most of the time.
There are examples when stocks are clearly under or over valued (dotcom bubble anyone?) but that is not the case MOST of the time.
I am sure there are many examples you can show me where there are fluctuations in price in a relatively short time. And I take your point - how can a business be ‘worth’ $1B today and then $600M a month later? It makes no sense!
Except we have to remember that at all times investing and speculating is based on EXPECTATIONS. Where the expectations change suddenly then you can see big shifts in market value.
If the market as a whole expects more headwinds for a business than you do, then if you are proven right and buy in when the pice drops you can make good money. But even if you do make money, in most cases you cannot necessarily say the market was ‘wrong’ as such. Hindsight will make it appear that way, but in a lot of cases the lower expectations were very rational.
Regardless, the point is that there is usually a rational explanation for why a stock price drops. The market expectation has usually changed for the worse, and I think it is a good idea to understand the reasoning behind the drop better than the market does as part time your analysis (otherwise you quite literally have a blind spot in my view).
Look at a stock I really like - OXY. Massive price volatility.
At one point during covid the stock dropped to about $10 a share! Why? With everything shutting down there was a worry (expectation) that oil prices would fall through the floor for Christ only knows how long.
That expectation did not play out and if you bought shares at $9 a pop a couple of years back you would be sitting pretty today. But was the market ‘wrong’ at the time? No, not really.
Even now OXY sells at a low PE, in part because the market is concerned about oil prices given lower demand, uncertainty around China recovery etc. So OXY is priced in part based on the expectation that oil will sit around $65-70 a barrel for the foreseeable future.
I have a different expectation and am keen to buy like Buffett is at these prices. If my expectation plays out and we observe higher average oil prices that’s great and I will make some bank… BUT IT DOES
NOT MEAN THAT THE MARKET IS ‘WRONG’ TODAY.
It just means I have located a company where my expectations are more bullish than the rest of the market.
Of course, if oil prices turn out to be lower than I and the market expected then I will be left with my d1ck in my hand looking like more of a mug than usual and in hindsight we will be talking about how wrong the market was too because they ‘clearly’ overvalued the stock etc etc.
It’s all about expectations mate. But there is a reason why a stock price moves either way - you just have to be humble enough to be open to exploring the other side of the coin.