Sims Group Limited

A result of tight conditions in global metals markets, this metal recycler’s sales, profits and share price have all boomed. Net profit jumped 51% to $113m and the final dividend of 40 cents was supplemented by a 20-cent special dividend, both 48%-franked (ex-date for both is 20 Sep). The results were impressive, but that’s why booms are so dangerous for investors—everything looks impressive right at the top. Even Sims’ management hinted at the fantastic industry conditions, with statements like ‘unprecedented escalation in ferrous prices’ peppering the earnings release. With our repeated warnings in the face of rising prices for metal stocks, we’re starting to sound like the boy who cried wolf. But we’ll keep calling out until this bubble bursts, which it will. Sims shares are up 8% since issue 148/Apr 04 (Sell—$11.52) and we urge any subscribers who haven’t yet followed our recommendation to do so while the going is good. SELL.