Cool prospectus, poor performance
If you’re looking for a solid investment this year, it might pay to avoid anything too trendy.
Analysts say investments’ ‘‘cool’’ factor sometimes overhypes the price.
One case in point is listed brewery Moa, which launched its IPO in 2012 with a slick brochure that claimed to be ‘‘your guide to owning a brewery and other tips for modern manhood’’. It listed with an IPO price of $1.25. Shares are now trading at 50c.
By contrast, the less glitzy milk producer Synlait listed in July 2013 for $2.20. It is now trading at $7.
Mark Fowler, head of fixed income at Hobson Wealth Partners, said Moa had been disappointing for investors, despite its ‘‘glossy prospectus and slick marketing’’.
‘‘In our experience, ‘cool or trend investing’ can be quite demographic-driven. We have seen a significant increase in funding obtained through crowdfunding sites like Kickstarter which allows investors to help fund their local bar or cafe´ , but this is more at a community level and reflects the owners’ inability to source capital from the banks. Investors clearly perceive it as a ‘cool’ thing to do but is it a prudent approach to investing?’’
Trade Me listed for $2.70 in 2011. It’s now trading at $4.50. Skincare company Trilogy listed in 2010 for $1 and is now trading at $2.82 after a period of strong performance.
AUT finance lecturer Ayesha Scott said anything fashionable was in demand. ‘‘More people are interested in it and therefore it is priced higher than it would be if it weren’t on-trend. Typically, these are ‘growth’ stocks. [It’s] no different to a dress worn by royalty – suddenly everyone wants one and they sell out or get more expensive.’’
Morningstar Asia Pacific director of manager research ratings Chris Douglas said it was human nature to follow the crowd and invest in fads.
‘‘It’s not just investors who do this, but fund managers, too.’’
Snowball Effect is an equity crowdfunding platform that allows investors to take a stake in companies before they are listed publicly.
Co-founder Simeon Burnett said the most successful public offers had been from mortgage broking and peer-to-peer lending group Squirrel, Graham Nortonlinked Invivo Wines and Designer Wardrobe.
He said investors were often driven by emotion, or familiarity with a company’s product. C
Fowler said there might be a more fundamental question to consider.
‘‘How do you define cool? Millennials could make the argument that Apple is a ‘cool’ company to be involved with and this has undoubtedly been one of the better places to be invested in the last decade. The trend has been a strong one and you have to think that their glossy marketing and wide appeal has been a significant contributor as well as leading technology.
‘‘In our view, cool only gets you so far and ultimately, returns and long-term sustainability should drive investor behaviour.’’