Opinion: Investment wisdom

Investment wisdom from Idealog’s favourite agony uncle

Q Looking at NZ, I see cows. Should I be thinking about cows as a market, not people?

A Yes. Cows need to be fed, their effluent dealt with, their health looked after and their milk extracted and processed. There are a number of early stage companies in this space worth supporting, but also plenty of opportunities. Ones worth watching include Kahne Animal Health, which has a bolus that goes inside the rumen and monitors cows' pH and temperature, allowing the farmer to adjust feed and water to maximise health and productivity and reduce CO2 belching. Kahne is using New Zealand IP and testing results to build credibility for future offshore customers.

Then there’s Waikato Milking Systems, which creates and exports orbital and herringbone milking machines, along with all the associated meters and other components – bringing greater efficiency to the milking process. Leitissimo went the whole heifer, so to speak, and exported the entire NZ dairy system, starting with cow embryos and building an end-to-end greenfield production and marketing system in Brazil. EasyYo, owned by Westland Milk Products, and Dairy Goat Farm with its goat-milk infant formula, have milk powder products that command serious premiums globally. There are countless more examples, many covered in these pages.

New Zealand, like it or not, is seen offshore as a primary producer, so it should be easy for us to be the world’s best at agri-tech. But from that base we can easily extend to other fields. Take Define Instruments, which manufactures and designs electronic systems, including for Waikato Milking, but also for other industries. As a country we are just getting started on agritech. Rather than sitting about complaining that Fonterra is exporting commodities, get involved and start or support a business.

Q I want to back new tech stocks but how can I judge the great from the dreadful?

A Leave the finances until last, and instead start with the end user and the product itself. How do you feel about the product and how it fits the end-user needs? In fact, start by making sure there are obvious end users, and there is a clear route to paying customers. Look for evidence of sustainable customer growth and low churn rates, and try talking to users if you can. While you are out and about, get hold of some industry connections and find out how the company is internally. Are people excited to join and stay? Or are entire teams leaving the sinking ship? There are real stories out there, and people in the know can find out and act. Finally, look at the numbers; make sure the basics stack up. Last tip: avoid the short-term hype and stock market gyrations by investing for years, not for a month or two

This article first appeared in Idealog Magazine #55