Wednesday, 29 April 2015
N/A
Placed a bid for Slater and Gordon (ASX:SGH) and hoping Sirtex falls back toward that 15-18 dollar mark. If so, will add more.
Monday, 13 April 2015
Tuesday, 7 April 2015
Going Long
Going long - Arrium (ASX:ARI) and Mineral Resources (ASX:MIN).
Adding to my position in WDS Limited (ASX:WDS).
Got nothing but time!
Adding to my position in WDS Limited (ASX:WDS).
Got nothing but time!
Wednesday, 18 March 2015
Sirtex (ASX: SRX)
On the 17/3/15 Sirtex Medical released to the market their long awaited SIRFLOX trail results. At a glance, they noted that
1) SIRFLOX study does not show a statistically significant improvement in overall Progression-Free Survival. And;
2) SIRFLOX study does show a statistically significant improvement in Progression-Free Survival.
From my personal analysis 1) essentially says that SIR-Spheres in conjunction with Chemo does not improve ones overall PFS. However, 2) reinforces what the product was designed to do.
In the act of prudence, i locked in a sizable portion of my holdings a few days prior to the announcement for $39.10 per share (realising a capital appreciation of roughly 90%). This was entirely done to protect the downside.
To be continued...
1) SIRFLOX study does not show a statistically significant improvement in overall Progression-Free Survival. And;
2) SIRFLOX study does show a statistically significant improvement in Progression-Free Survival.
From my personal analysis 1) essentially says that SIR-Spheres in conjunction with Chemo does not improve ones overall PFS. However, 2) reinforces what the product was designed to do.
In the act of prudence, i locked in a sizable portion of my holdings a few days prior to the announcement for $39.10 per share (realising a capital appreciation of roughly 90%). This was entirely done to protect the downside.
To be continued...
Sunday, 8 March 2015
Is it time to realise some profits?
The ASX200 saw it's best February in history. Gaining over 8%, the index has almost reached that psychological 6,000 mark that many are fixated on. So i beg to question whether the market's valuations are stretched and if so, is it detrimental to our capital?
The ASX200 is trading at slightly above 16 times earnings, which is well above it's long-run average of about 14-14.5. While most question the extent of the P/E ratios validity, i believe it is telling us something (whether it's to act or to keep an eye out). As the P/E ratio continues to expand, it's important to take note of what is going on in the economy in order to help us determine if our capital is at serious long-term risk.
Petrol prices halved in February before rebounding slightly, interest rates are at record lows, the $A is also at low levels but the most recent reporting season erred towards the negative side. Given the benefits of the first three points are more likely to impact on the next reporting seasons, (and the ones going forward if they continue to decline) it must still be taken into account. One industry that recently saw a small surge was retail which might be a sign that the benefits are flowing through. However, given the importance of business investment which are at record lows for various reasons such as political ambiguity has resulted in lower confidence for these firms. These mixed factors may or may not justify sky high valuations, but it's hard to tell which is more prevalent. Given that markets can remain elevated for long periods of time, (longer than you can remain solvent to rephrase Kaynes) corrections may come, but may take a while. This also doesn't mean that our capital is at serious long-term risk, if you're investment horizon is, say, 10 years.
As some acclaim, the stock market is a leading indicator of the economy, (I don't totally subscribe to this view) this suggests that the near future should be bright. However, this may not be the case. It's interesting to see that the average hedge fund now has approximately 30% of their money in cash. This is up from the same time last year. More and more of the "smart money" is moving into the safety of cash. As Buffett says, cash is never a good investment, however cash may be used as a "parking vehicle" which is what i believe is happening. Some managers are moving to cash as value is becoming increasingly scarce. When value becomes more transparent, they're likely to buy back in.
The most recent reporting season saw some surprises on both the upside and downside. Some stocks have recently been bid up significantly, such as Domino's Pizza (ASX: DMP) and Sirtex (ASX:SRX). While i won't comment on whether this is justified or not, i will be locking in some of my profits for Sirtex shortly. This is not because I've lost confidence, but because i believe it's prudent to do so. On another note, despite potentially stretched valuations, i believe in the smaller end of town, there's still some there. In light of that, and some recent research I've undertaken on a particular company, i will also be going long on a stock. This company, which i have mentioned in the past, has grown from strength to strength (despite the fundamentals going through a relatively tough time recently) and dominates it's local market. I believe it has a strong competitive advantage and is priced reasonably.
To answer the heading's question, it's imperative to stick to facts and not necessarily follow the crowd. While it's hard to tell what will happen in the future (impossible, in fact) the benefit of hindsight will prove who was right and who was wrong. Whatever happens, always fall back to the fact that price and value may not be in tandem with one another. You need to assess this and act accordingly. Moreover, you must resist the temptation to become emotionally attached despite what others say or do.
The ASX200 is trading at slightly above 16 times earnings, which is well above it's long-run average of about 14-14.5. While most question the extent of the P/E ratios validity, i believe it is telling us something (whether it's to act or to keep an eye out). As the P/E ratio continues to expand, it's important to take note of what is going on in the economy in order to help us determine if our capital is at serious long-term risk.
Petrol prices halved in February before rebounding slightly, interest rates are at record lows, the $A is also at low levels but the most recent reporting season erred towards the negative side. Given the benefits of the first three points are more likely to impact on the next reporting seasons, (and the ones going forward if they continue to decline) it must still be taken into account. One industry that recently saw a small surge was retail which might be a sign that the benefits are flowing through. However, given the importance of business investment which are at record lows for various reasons such as political ambiguity has resulted in lower confidence for these firms. These mixed factors may or may not justify sky high valuations, but it's hard to tell which is more prevalent. Given that markets can remain elevated for long periods of time, (longer than you can remain solvent to rephrase Kaynes) corrections may come, but may take a while. This also doesn't mean that our capital is at serious long-term risk, if you're investment horizon is, say, 10 years.
As some acclaim, the stock market is a leading indicator of the economy, (I don't totally subscribe to this view) this suggests that the near future should be bright. However, this may not be the case. It's interesting to see that the average hedge fund now has approximately 30% of their money in cash. This is up from the same time last year. More and more of the "smart money" is moving into the safety of cash. As Buffett says, cash is never a good investment, however cash may be used as a "parking vehicle" which is what i believe is happening. Some managers are moving to cash as value is becoming increasingly scarce. When value becomes more transparent, they're likely to buy back in.
The most recent reporting season saw some surprises on both the upside and downside. Some stocks have recently been bid up significantly, such as Domino's Pizza (ASX: DMP) and Sirtex (ASX:SRX). While i won't comment on whether this is justified or not, i will be locking in some of my profits for Sirtex shortly. This is not because I've lost confidence, but because i believe it's prudent to do so. On another note, despite potentially stretched valuations, i believe in the smaller end of town, there's still some there. In light of that, and some recent research I've undertaken on a particular company, i will also be going long on a stock. This company, which i have mentioned in the past, has grown from strength to strength (despite the fundamentals going through a relatively tough time recently) and dominates it's local market. I believe it has a strong competitive advantage and is priced reasonably.
To answer the heading's question, it's imperative to stick to facts and not necessarily follow the crowd. While it's hard to tell what will happen in the future (impossible, in fact) the benefit of hindsight will prove who was right and who was wrong. Whatever happens, always fall back to the fact that price and value may not be in tandem with one another. You need to assess this and act accordingly. Moreover, you must resist the temptation to become emotionally attached despite what others say or do.
Friday, 20 February 2015
My personal portfolio performance (since inception)
In this post i will talk about my portfolio and how it has performed over
the year. I will also briefly talk about my positions and some of the risks
they may entail. I will be writing another post soon about the reporting season
and more details about how i think companies have done.
It has been one year from today since i started my portfolio. I discovered my passion (investing) after reading One up on Wall Street by the pioneer mutual fund manager Peter Lynch. The book was recommended to me by one of my lectures and it changed my life. After reading that book i started to read about Warren Buffett and came across Ben Graham and the like. Their investment philosophy instantly made sense to me and i haven't looked back since.
When i first started i tried to sought out stocks solely trading at discounts to net tangible assets or net assets. With that, i bought my first stock Aveo Group (ASX: AOG). At the time i thought it was a great idea. However, upon closer inspection of the numbers, the business wasn't one of quality and so i sold. As i read more and more about investing i began to search for businesses of higher quality as opposed to "troubled" ones. That, in a nutshell has summed up my transformation. I search for "value growth" stocks where i try and find companies that intersect both categories and try and meet in the middle. To sum it up in a quote it is the act of "buying good businesses at fair prices". My "value growth" fund is a high conviction fund where i allocate large portions of total funds in a small number of companies. These companies are researched quite heavily and detailed analysis is undertaken (at least i think so). I attempt to make outsized risk-adjusted returns which is uncorrelated with the general market. This also entails little attention to market analysis (interest rate forecasting and the like) but rather, i attempt to gain a serious level of understanding of the underlying companies and their futures. This method, i believe provides a good level of downside protection with the potential for triple digit percentage gains.
To the contrary, i also have a "contrarian" fund whereby i seek out terrible business trading at extreme discounts to intrinsic value. While Ben Graham would disagree with my "split" investing styles, my aim is to prove it can work. This style of investing is deemed "scary" and there are very, very few people who can actually allocate money to the companies i look at in this space. You essentially, buy into companies who loss are making (not necessarily) and are typically in industries which are struggling and there is ample negativity sourronding such stocks in the media (if they're even mentioned). More on this when i develop this fund further and have more positions. The two styles seem contradictory, and to an extent they are, but make no mistake, they produce shareholder returns like no other.
When i first made my purchase of Aveo i had the aim of achieving a one year return net of costs of 15%. This was an ambitious target but I tried anyhow. The 2014 calendar year was a terrible year for the ASX200 rising approximately 1.6% in value. With that said, I believe my returns have been relatively good. My portfolio from 22/2/14 to the 22/2/15 had a total return (capital growth and dividends) of 17.91%. This return is net of all costs (brokerage fees).
Most of this performance was driven by capital growth as most of the stocks i own pay next to none in dividends (which makes sense given the nature of value growth investing). My biggest loser in terms of percentage loss and weighting was G8 Education (ASX: GEM). Diminishing by about 25% over the year, it definitely took a toll on my return. To the contrary, my biggest winner in terms of both percentage gain and weighting was Sirtex Medical (ASX: SRX). Surging about 57%, it was a star performer.
In response of what has been said, (and other reasons) I have sold out of G8 Education, as their results were much lower than expected, and I seriously begun to question the premium for this company. While i still believe it is undervalued, I am not comfortable in holding this company and so i sold out. I actually have a price target of just under $8 for this stock but i have revised it down due to their (in my opinion) disappointing results.
On the other hand, Sirtex Medical is a company i have valued using two different methods of valuation. Using one of them, I have a growth value per share of about $26-28. This number is barring the consequences of their upcoming SIRFLOX study. If the results come out positive and the respective uptake in SIR-Spheres eventuate, I have a growth target of about $95. I also have a bear case of about $10-12. This is an interesting one to watch unfold.
I'd like to point out that the other companies in the portfolio haven't been mentioned. I also computed a weighted average beta, which is lower than the market. I may also compute a Sharpe and st dv of my portfolio. This was done to justify the lower risk i mention in the open. Although i don't use these metrics ever, i have as they are conventional measures of risk.
Once again, for the upcoming year I will aim to achieve a 15% return net of costs. It's important to emphasize the fact that this only a one year record of performance. This is usually not a good indicator of future performance. A much more useful time period is between 5-10 years. I’d like to express my gratitude toward my lecturer Lindsay Stubbs, who without his guidance which led me toward the likes of Peter Lynch, this wouldn’t have been possible.
It has been one year from today since i started my portfolio. I discovered my passion (investing) after reading One up on Wall Street by the pioneer mutual fund manager Peter Lynch. The book was recommended to me by one of my lectures and it changed my life. After reading that book i started to read about Warren Buffett and came across Ben Graham and the like. Their investment philosophy instantly made sense to me and i haven't looked back since.
When i first started i tried to sought out stocks solely trading at discounts to net tangible assets or net assets. With that, i bought my first stock Aveo Group (ASX: AOG). At the time i thought it was a great idea. However, upon closer inspection of the numbers, the business wasn't one of quality and so i sold. As i read more and more about investing i began to search for businesses of higher quality as opposed to "troubled" ones. That, in a nutshell has summed up my transformation. I search for "value growth" stocks where i try and find companies that intersect both categories and try and meet in the middle. To sum it up in a quote it is the act of "buying good businesses at fair prices". My "value growth" fund is a high conviction fund where i allocate large portions of total funds in a small number of companies. These companies are researched quite heavily and detailed analysis is undertaken (at least i think so). I attempt to make outsized risk-adjusted returns which is uncorrelated with the general market. This also entails little attention to market analysis (interest rate forecasting and the like) but rather, i attempt to gain a serious level of understanding of the underlying companies and their futures. This method, i believe provides a good level of downside protection with the potential for triple digit percentage gains.
To the contrary, i also have a "contrarian" fund whereby i seek out terrible business trading at extreme discounts to intrinsic value. While Ben Graham would disagree with my "split" investing styles, my aim is to prove it can work. This style of investing is deemed "scary" and there are very, very few people who can actually allocate money to the companies i look at in this space. You essentially, buy into companies who loss are making (not necessarily) and are typically in industries which are struggling and there is ample negativity sourronding such stocks in the media (if they're even mentioned). More on this when i develop this fund further and have more positions. The two styles seem contradictory, and to an extent they are, but make no mistake, they produce shareholder returns like no other.
When i first made my purchase of Aveo i had the aim of achieving a one year return net of costs of 15%. This was an ambitious target but I tried anyhow. The 2014 calendar year was a terrible year for the ASX200 rising approximately 1.6% in value. With that said, I believe my returns have been relatively good. My portfolio from 22/2/14 to the 22/2/15 had a total return (capital growth and dividends) of 17.91%. This return is net of all costs (brokerage fees).
Most of this performance was driven by capital growth as most of the stocks i own pay next to none in dividends (which makes sense given the nature of value growth investing). My biggest loser in terms of percentage loss and weighting was G8 Education (ASX: GEM). Diminishing by about 25% over the year, it definitely took a toll on my return. To the contrary, my biggest winner in terms of both percentage gain and weighting was Sirtex Medical (ASX: SRX). Surging about 57%, it was a star performer.
In response of what has been said, (and other reasons) I have sold out of G8 Education, as their results were much lower than expected, and I seriously begun to question the premium for this company. While i still believe it is undervalued, I am not comfortable in holding this company and so i sold out. I actually have a price target of just under $8 for this stock but i have revised it down due to their (in my opinion) disappointing results.
On the other hand, Sirtex Medical is a company i have valued using two different methods of valuation. Using one of them, I have a growth value per share of about $26-28. This number is barring the consequences of their upcoming SIRFLOX study. If the results come out positive and the respective uptake in SIR-Spheres eventuate, I have a growth target of about $95. I also have a bear case of about $10-12. This is an interesting one to watch unfold.
I'd like to point out that the other companies in the portfolio haven't been mentioned. I also computed a weighted average beta, which is lower than the market. I may also compute a Sharpe and st dv of my portfolio. This was done to justify the lower risk i mention in the open. Although i don't use these metrics ever, i have as they are conventional measures of risk.
Once again, for the upcoming year I will aim to achieve a 15% return net of costs. It's important to emphasize the fact that this only a one year record of performance. This is usually not a good indicator of future performance. A much more useful time period is between 5-10 years. I’d like to express my gratitude toward my lecturer Lindsay Stubbs, who without his guidance which led me toward the likes of Peter Lynch, this wouldn’t have been possible.
Saturday, 7 February 2015
General commentary
Governor of the RBA, Glenn Stevens, made the call to cut the cash rate this week. The move sparked an immediate 30 point jump in the ASX200, which has now reached levels not seen until pre-GFC. The typical yield paying stocks saw continued share price appreciation. With the oil price rebounding about 10% this week, most energy stocks also saw a rebound. Virgin came out this week with a profit guidance stating that it will see a "PBT of $5.3 million for the second quarter of the 2015 financial year, representing a $47.6 million improvement over the prior corresponding period. For the financial year-to-date ending 31 December 2014, this equates to an Underlying Profit Before Tax of $10.3 million". Qantas is also set to see profits as well if not now then very soon. While the share price of both stocks have surged, especially Qantas and optimism surrounding these stocks are high, it'll be interesting to see how it will play out over the next few years (or potentially longer, depending on how long the oil price will remain at these depressed levels).
While interest rate cuts are great for people with mortgages, (questions about whether real estate is over/under valued will not be discussed here) businesses and consumer sentiment, we mustn't forget why interest rates get cut. They usually get cut due to poor economic conditions which is one of the reasons Mr Stevens provided this week when he made his decision. When deciding what to do, I'd remind you to be "greedy when others are fearful and fearful when others are greedy." Despite, what share prices might do going forward and the potential superficial boost some stocks may be getting, prices in the long run reflect fundamentals, don't forget that.
In other news, as I mentioned in some previous posts, my first year of holding a portfolio is just under 2 weeks away. I've separated my portfolio into two different "funds". One a value growth and the other a contrarian fund. They will be talked about separately going forward (but i will mention each accordingly when spoken about). When i started out i set a target return on investment of 15%. This is still my target and I'll update the real performance in due course. Happy hunting over the reporting season.
While interest rate cuts are great for people with mortgages, (questions about whether real estate is over/under valued will not be discussed here) businesses and consumer sentiment, we mustn't forget why interest rates get cut. They usually get cut due to poor economic conditions which is one of the reasons Mr Stevens provided this week when he made his decision. When deciding what to do, I'd remind you to be "greedy when others are fearful and fearful when others are greedy." Despite, what share prices might do going forward and the potential superficial boost some stocks may be getting, prices in the long run reflect fundamentals, don't forget that.
In other news, as I mentioned in some previous posts, my first year of holding a portfolio is just under 2 weeks away. I've separated my portfolio into two different "funds". One a value growth and the other a contrarian fund. They will be talked about separately going forward (but i will mention each accordingly when spoken about). When i started out i set a target return on investment of 15%. This is still my target and I'll update the real performance in due course. Happy hunting over the reporting season.
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