Xero shares

Terry Hall writes at Stuff:

Xero is a very, very different company. Some 400 people queued patiently in light rain in Wellington’s Taranaki St for the packed annual meeting expressly to hear messages of hope and reassurance that they were shareholders in a company that was on target to become a global force in the unlikely and unglamorous sounding world of software accounting.

Judging from the applause at announcements that the company was surpassing its own ambitious growth targets – and the bonhomie at the aftermatch function – most seemed delighted with their investment. And the share price – which had eased back before the meeting – rebounded. On Friday’s weaker market it closed at $5.30, having nearly doubled since the latest capital raising (at $2.75) in February. This raised a total $35.6 million (it has $39m in the bank) to finance its growth strategy for the immediate future.

I can recall few annual meetings where shareholders were so enamoured of their investment in the 50 years and hundreds of annual meetings I’ve attended since I started reporting them as a teenager in Dunedin.

One was Brierley Investments in 1971 when a youthful RA Brierley (as he was then known) was considered a budding financial whizzkid, though he was offside with the financial establishment. Eighty-odd people crowded into an upstairs bar at the St George Hotel to drink copious amounts of a rough Aussie drop called Woodleys Wines, one of BIL’s first Australian investments. However those early BIL shareholders were right on one thing: BIL did become a big growth stock for the next 20 years before things turned to custard.

Xero is a great rarity. Shareholders of most companies whinge. They bridle at any suggestion of increasing directors’ fees. They question dividend policy and profitability. Where are the women directors? When are they going to appoint some? There is usually an argument over increasing directors’ fees.

None of these issues were aired. Shareholders are aware they are investors in a riskier company: analysts at Forsyth Barr and Craigs have cautious recommendations on it mainly due to its high share price.

I am a very happy Xero shareholder and customer.

Ironically though on Friday I asked my broker to  sell half my shares in Xero. This isn’t because I don’t still believe the company will do well, but just about reducing the risk a bit for some guaranteed profit.

I purchased my shares for $1.00, so at $5.30 I am getting a 430% return on investment, which is pretty damn good. Even if the share price drops on my remaining shares, I’ve made a gain of at least 215%.

If the share prices continues to increase, I’ll still share in that, as I’ve kept 50%. But can’t see it increasing by another 430%! I look forward to one day getting dividends on my remaining shares, but support the no dividend policy while Xero is expanding the customer based so rapidly. If it cracks the US market in a big way, then it really may become a global giant. As far as I can tell it still has no serious competition, with MYOB’s online offerings being far removed.

Note these are just my thoughts on my personal investments. They should not be taken as financial advice to others, so  I don’t end up in breach of whatever stupid law regulates giving an opinion on financial matters!