A Review of NAB

Despite the current economic crisis, National Australia Bank shareholders should be very happy with the bank’s profit result this week. The bank posted a first half year profit of 2 billion dollars, which equates to approximately $100 profit for every Australian. NAB has continued to improve their profits in recent years although this has not necessarily equated to an increase in the share price.

NAB shares closed at $20.63 yesterday (30 April 2009), which is the same price it was almost 12 years ago in September 1997. Anyone who has invested in NAB since 1 January 1998 has suffered an average loss of 2.6 per cent per year, excluding dividends. In my opinion, this does not constitute a good long term investment and characterises why I am not an advocate of the buy and hold mentality.

If we review the top 20 shares in Australia, only Telstra and AMP have performed worse than NAB over the past 11 years, with NAB being the worst performing bank in terms of capital gain. In the 11 years to December 2008, NAB has delivered a capital gain in 6 of the 11 years, which suggests that you would have been better off investing your money in a term deposit. Out of 4 of the 6 years, NAB rose around 15% or better, which reinforces why I don’t believe NAB is a stock you would buy and hold but rather actively manage to take advantage of opportunities when they arise.

So what can we expect in the market?

Despite my expectation of a minor pull back in the market during April, the All Ordinaries has proven quite resilient. While it has fallen early in each of the past two weeks, it has found buyer support and hence rebounded towards the end of each week. In the short term, I believe the market will continue to rise to a high of around 4200 points before it falls into a low over one to two weeks sometime between 7 and 22 May. That said, as always anything is possible in the share market and there is still a probability that the market will continue to rise.

Right now I believe investors need to be cautious when entering the market until we can be sure of the direction. While there are plenty of solid blue chip shares looking very good at present, there are just as many exhibiting inconsistent signs, which suggest that the market is still not confident that the bear market has ended. Given this, I would still encourage investors to take a staged approach to investing in the market and to avoid the use of any margin lending at this point in time unless you are a very experienced trader.
Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

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