Christmas Stocks - The Best of Times and the Worst of Times

Tuesday 8 December 2015
Nic Crowther's picture
Co Editor
The Shaker

It’s a Christmas carol... a tale of Past and Future: Dick Smith and John McGrath. One, a famous Australian adventurer and long-time face of the nation-wide electronics store. The second is a (former) shark whose real estate empire stretches almost as far.



The Battle of Life
The reason these two represent an interesting issue is that, as the public face of two publicly-listed companies, both have had to front the media in order to defend the performance of the companies despite control now lying in the hands of investors.

In fact, half the people reading this possibly weren’t even born when Dick Smith Electronics was sold to Woolworths. The year was 1982, and the price was $25 million – a number which, in that day, provided plenty of play-money for the global adventurer.



Great Expectations
Woolworths held the stocks for around 15 years before selling Dick Smith Electronics to Anchorage Equity Partners for $98 million. By the time the business was floated two years later (ASX: DSH), the company was allegedly worth around $500 million.



Hard Times

This has to be questioned by even the most reckless investor. What 40-year company could possibly achieve 400% growth in 24 months? The fact the stocks have dropped from $2.20 to only $0.20 will leave a lot of people out of pocket.

Was it the smiling and familiar face of Dick Smith that led investors to believe that the investment was a safe one? Hard to know, however the listing showed an extraordinarily bullish attitude, and the for owner and Australian of the Year can do little to assist.



Bleak House

So, to Mr McGrath. This is another float that may well have fallen victim to the cult of personality. Certainly John McGrath is an approachable and affable soul whose appearances on Channel Nine’s The Block, and Channel Ten’s Shark Tank on helped to raise his profile (and sense of business nous) ahead of floating his 27-year-old agency.

The fall hasn’t been as severe for McGrath Real Estate (ASX: MEA). Yesterday’s float saw the stock released at $2.10 to close at $1.85), however, as Colin Kruger reports in The Sydney Morning Herald, surely, out of anyone else in business, it’s going to be the real estate tycoon who knows when it’s time to sell.