SECRETS to Stockmarket Success, the new expose by Grant Fenn and Paul O'Malley, has been hailed by critics and investors alike. In this tell-all tome, two of Australia's best-known bizoids reveal the inner workings of the stockmarket and how to enjoy enormous success against all odds.
Released yesterday in simultaneous launches at Downer EDI's earnings result and BlueScope Steel's life-altering joint-venture announcement, their revolutionary strategy provides a blueprint for those seeking to impress a jaded and disillusioned investment community.
The key, apparently, revolves around managing expectations.
Step one involves lulling the general market into a sense of impending doom and anaesthetising long-suffering investors by smothering any anticipation of improvement. This can be a long and arduous process often taking years, if Downer EDI's model can be used as a guide.
The second step is crucial and timing here is of the essence. At the point when ordinary souls have abandoned all hope, the idea is to mount the white charger and ride to the rescue.
Paul O'Malley managed this in spectacular style yesterday, unveiling a joint venture with Nippon Steel over BlueScope's North American and Asian coated products business that will inject more than half a billion dollars into the ailing company, helping slash debt and pulling it back from the precipice.
Fenn, by contrast, didn't require such theatrics. All he did was announce a result that didn't contain any explosives.
So accustomed have his investors become to awful news, massive write-downs and unexpected balance-sheet atrocities, that the mere absence of such surprises yesterday sent short-sellers scurrying for the exits, desperately seeking to buy Downer shares to close out positions.
Downer EDI shares surged, ending the day more than 11 per cent higher at $3.47.
Goldman Sachs analyst Richard Coppleson neatly summed up the mood of stunned traders, highlighting the fact that Downer's earnings result was ''not too bad''.
The mining contract and engineering group delivered $112.8 million profit for the financial year just ended. That's a long way north of last year's $27.8 million loss and substantially higher than most analysts expected.
For most of the past decade, Downer's fortunes have briefly waxed but mostly waned on a series of disasters that forced the company to install a revolving door in the chief executive suite with departing bosses magnificently rewarded for abject failure.
But it was difficult to unearth any negatives in Fenn's earnings release yesterday. Not only was the profit better than expected, revenue was stronger than anticipated, net debt was slashed 29 per cent, cash flow was up 96 per cent - twice even the most optimistic projections - the official guidance for next year was well received and the divisional performances were good.
No wonder the punters were perplexed. But Fenn was well and truly outperformed by O'Malley.
Faced with what seemed certain death, the once wheezing BlueScope Steel yesterday not only steadied itself but showed definite indications of renewed heartbeat after O'Malley's deftly executed corporate CPR breathed life back into the group.
The new joint venture with Nippon Steel will inject $540 million into the group, which will reduce net debt to $384 million.
Before the deal, O'Malley was desperately attempting to whittle the debt down to between $650 million and $750 million by the end of the year.
The announcement sent BlueScope stock soaring. It leapt 50 per cent immediately after the announcement and ended the day 34.6 per cent higher at 35¢.
While much was made of the $1 billion forecast loss for the company, a large part of that relates to asset write-downs and most analysts were heartened by what appeared to be signs that significant parts of the business were returning to profitability.
The company has been hammered by a near-lethal combination of a strong Australian dollar, cheap international steel prices and exorbitant prices for iron ore and coking coal.
While commodity prices have come off the boil, the currency is still wreaking havoc with BlueScope's earnings and as O'Malley indicated, the company still is not yet out of the woods.
Nippon Steel itself is in the process of massive change. A merger with Sumitomo Metals will make it the world's second largest steel maker.
O'Malley seems to have learnt a valuable personal lesson when it comes to stockmarket credibility with his decision to forfeit all rights to a bonus, given the forecast for a $1 billion loss.
Last year, he was awarded a $721,000 bonus as the company teetered on the brink of disaster and as more than 1000 workers were laid off, most of them at the company's Port Kembla steelworks, which did little to endear him to investors or Steel town locals. The mood at this year's annual meeting is likely to be much warmer.