Losing faith in the NZX and I don't think it's just cyclical

[entrep]

I think I might be done. Not entirely, but the conviction is gone.

Looking back at my NZX positions over the years, the picture is grim. KMD, Spark, Sky TV, Steel and Tube, Sky City, WHS, FBU. All names I would have called solid Kiwi businesses. All have cost me money. Some I sold, some I'm still holding and watching the chart bleed.

What bothers me most is not the losses themselves. It's the growing sense that what we are watching here is structural rather than cyclical.

The drivers seem clear enough. Almost no institutional capital is flowing into NZ small and mid caps. Overseas allocators have effectively zero interest in this market. Local wealth that would once have rotated through the NZX is going offshore, into ETFs, crypto, US tech, anywhere with a real growth story. Meanwhile the rest of the world is funnelling everything into US mega caps and AI infrastructure.

And then there are the cap raises. Dilutive raise after dilutive raise, punishing the loyal holders who provided the capital in the first place. The board structures, the strategy resets, all of it points to companies playing defence rather than building.

I get that markets are cyclical. But this feels different. The NZX feels like a backwater the world has stopped caring about, and the companies listed here mostly seem to be defending small patches of turf rather than growing into anything.

I'm not arguing the NZX is going to zero. I'm arguing the case for retail capital staying here is getting weaker, and the opportunity cost is now too large to ignore.

Curious whether anyone else is feeling this, or whether I've just had a bad run and am rationalising it. Open to being told I'm wrong.

[Scooter]

 KMD, Spark, Sky TV, Steel and Tube, Sky City, WHS, FBU.

That's a grim list of names right there.  All ones where you could of made money if you had brought and sold at the right time.   Fletcher building is one I would never put money into.  These guys know how to destroy value.  I've owned skytv and whs but sold those at the peaks. You should look into other company's like tower, Turners, HLG,  powercompanys and one that not everyone likes seeka. There are still value company's out there. Great help on this forum too. Basil got me into MFB only 2 weeks ago and that's certainly surprised.    Thanks Basil 😁

[Plata]

I think recently the NZX has been/is a good place for property and utilities, everything else not so much. Check the yields (FCF or dividend) and compare to overseas equivalents and you'll be hard pressed to find higher. I wouldn't trust many NZ management teams to run businesses in sunset industries or industries without geographic moats, and I think almost every cap raise ive seen in the last 6 years was negative for retail holders.

[BlackPeter]

KMD, Spark, Sky TV, Steel and Tube, Sky City, WHS, FBU.

That's a grim list of names right there.  All ones where you could of made money if you had brought and sold at the right time.   Fletcher building is one I would never put money into.  These guys know how to destroy value.  I've owned skytv and whs but sold those at the peaks. You should look into other company's like tower, Turners, HLG,  powercompanys and one that not everyone likes seeka. There are still value company's out there. Great help on this forum too. Basil got me into MFB only 2 weeks ago and that's certainly surprised.    Thanks Basil 😁

I'd agree with the message. There are good and bad companies on the NZX, and I've seen good and bad things on other exchanges as well. Longterm earnings of NZX is not too difficult from e.g. the ASX or the DAX (one of the other markets I hold some stocks in).

Sure - some of our so called stars are run by boards not really selected to improve company performance but as elefant graveyards ... and yes, we have clearly  more small companies than  others. Risks and opportunities.

Advantage of investing close is that you are closer to the moneyflow and the justice system - and if you look what really pushes the US sharemarket - this is a very small number of highrisk companies. Sure - they won't break over night, but if the SP drops back to a sensible PE, decades of preassumed growth and dollars will float down the river. If  you are driven by social networks, Elon friendly cars's and AI - just make sure you find an exit when the Musk or AI bubble burst.

Nothing wrong with an NZX portfolio with e.g. Turners and Seeka (I hold a lot of both ...), and yes, many will have as well HLG and TNR shares - and yes, I hold as well a number of energy and real estate shares (which may or may not improve, but I think the overall risks are low). Good companies like MFT and SKL are good for the upcycles - for anybody who likes the high PE companies (waiting for the exit ...), there are as well some of them on the NZX like IFT or FPH and many of our infrastructure (ports and airports).

I think if you are looking for an annual average return of say 8% - nothing wrong with a good selected NZX portfolio.

If you look for an average return of much more ... maybe there are more opportunites overseas, but so are the risks, i.e. do this only with money you are happy to lose.

[entrep]

Tony Alexander:

In this week's issue of TV I look at recently released data showing falling productivity in NZ for the past four years. We are getting poorer and at risk of higher inflation for any given pace of economic growth. Add in a growing list of other factors and interest rate risks lie firmly on the high side with the only main source of restraint being the deteriorating outlook for our economy. Survive to '35?

https://www.tonyalexander.nz/wp-content/uploads/Tonys-View-30-April-2026.pdf

[Left Field]

I think I might be done. Not entirely, but the conviction is gone.

Looking back at my NZX positions over the years, the picture is grim. KMD, Spark, Sky TV, Steel and Tube, Sky City, WHS, FBU. All names I would have called solid Kiwi businesses. All have cost me money. Some I sold, some I'm still holding and watching the chart bleed.

.... Open to being told I'm wrong.

Crikey Entrep you have my sympathy, that is one motley share collection and investors on both forums have been warning about investing in several of these companies for many years eg SPK, FBU, Steel & Tube etc

Perhaps rather than looking for failure in NZX you should critically examine your investing criteria and skills.

1.) Why did you choose these companies? (was it was broker recommendations?)
2.) Did you use TA?  ( eg checking you were  buying at optimum times? Not buying in a down trend etc.
3.) Did you buy in  small/maneagable increments and only buy more of your chosen company when it proved itself worthy and its SP growth provided you a safety margin?
4.) What FA tools were you favouring?
5.) What macro economic indicators supported your purchases at the time they were made and do you regularly review your portfolio in recognition of changing economic circumstances.
6.) Look closely at what 'winning'  share investments you have missed out on..... and ask yourself why.

etc etc. (no need to answer these questions on this forum, I'm just suggesting them as a possible guide.)

Please don't shoot the messenger....you asked and I'm trying to help.  We all make mistakes.... and there are learning opportunities in them.

FWIW my NZX investing aim is to beat the NZX 50 by at least 10%  annually ( as measured by SP gain and dividends.) In my 14 yrs of serious NZX investing. I've achieved this on all but 2 years.

[entrep]

Hi Left Field, thanks for the response.

I am familiar with all of that and use it to one extent or another, except I don't follow brokers calls as they are more often wrong than not.

Basically, giving it some real thought, I think it comes down to investing in businesses that I don't really know how they fundamentally work or what fundamentally drives them. I just figured they were good, solid companies that I thought I was getting at a good price. They were meant to be my safe investments compared with some of the other investments I make.

For example, crypto I know extremely well. Forex I have a feel for it too. US stocks: I fundamentally know the companies I invest in very well, I am a customer of them and there is also much more material written about them that I can prune and review.

I have been successful in all other kinds of investments, including US shares, commodities, forex, and crypto, just not NZX.

I think I'm deciding that individual stock picking for NZX is not for me. If I did want to get exposure to the NZX, I'd do so via some sort of index.

I also want to add that I have made some decent investments on the NZX; however, the losers as above by far and away outweigh them.

[Basil]

Investing in the NZX has been bloody hard work in the last 6 years, especially, and you've had to be exceptionally discerning and skillful to make decent money.  Consider this, on 10 January 2020 the NZX50 gross index was 13,091.  Here we are 6 years and 4 months later and its only 12,843 as I type.  Worse, this is a gross index which means all dividends paid in that timeframe get rolled back into the rolling index calculation.   

Just to hold its real purchasing power, (no real return in more than 6 years) the index should be at 16790, (source Reserve Bank inflation calculator) so with it being at just 12,843 a person buying a basket of shares representing the NZX50 in January 2020 has presently lost 12,843 / 16790 = 23.5% of their purchasing power as well as getting no return whatsoever for their money or risk !!

Its easy to become disheartened as frankly, its taken exceptional skills to do well when the tide has been going out for so long on our market and at such a great rate of knots.  Frankly there's not many companies really worth investing in on the NZX and most of the few that are, already trade on quite demanding metrics.   

My contention is pretty simple, Unless one is extremely dedicated, is prepared to spend enormous amounts of time and resources to upskill and follow the market closely, most people are best suited to putting the vast majority of their capital into a global ETF like the smart shares total world fund, https://www.smartinvest.co.nz/funds-and-performance/etfs/international-shares/smart-total-world-etf or if they really think some fund manager has special expertise, (I'm not really convinced any of them do and can reliably and consistently beat the market over time after their fees), with a fund investing in the international markets.  Much better diversification and investment into industries that N.Z. simply don't have. 
For example the Total world fund is up 72% in the last 5 years after fees and tax.

For what its worth, that list Entrep, includes quite a number of companies that I have criticized in the past and none of them are opportunities at present in my opinion.   

[entrep]

Investing in the NZX has been bloody hard work in the last 6 years, especially, and you've had to be exceptionally discerning and skillful to make decent money.  Consider this, on 10 January 2020 the NZX50 gross index was 13,091.  Here we are 6 years and 4 months later and its only 12,843 as I type.  Worse, this is a gross index which means all dividends paid in that timeframe get rolled back into the rolling index calculation.   

Thanks Basil, that truly puts it in perspective. Even more perspective:

[Plata]

My understanding is the ASX 200 PE ratio has risen substantially since Jan 2020, what does it look like on an earnings growth basis entrep?

[LaserEyeKiwi]

I think two separate issues identified here - high amount of crap companies on the NZX - but the more interesting issue is the low valuation multiples on quite a few of the not-crap companies on the NZX.

I'm talking about companies that if they were exactly the same company with the same fundamentals and everything else, would be trading significantly higher if they were instead listed on the ASX or a US listing.