# Retirees - model share portfolios



## brianwh (28 December 2009)

Have recently been reviewing the share portfolio of my SMSF and while my major holdings are mainly ASX top 20 blue chip, the weightings or proportions that each share holding makes up is quite different from for example from the ASX Top 20 or the top 20 holdings in some of the larger Australian Share Funds.

To what extent do others in a similar position use ASX Top 20 etc as a benchmark? Are there model portfolios that one can access without subscribing to a Newsletter?

This is particularly an issue for me at the moment as I'm currently about 40% invested in shares and am planning to take this up to 50% plus in the New Year which obviously would be a good time to address imbalances


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## gooner (28 December 2009)

brianwh said:


> Have recently been reviewing the share portfolio of my SMSF and while my major holdings are mainly ASX top 20 blue chip, the weightings or proportions that each share holding makes up is quite different from for example from the ASX Top 20 or the top 20 holdings in some of the larger Australian Share Funds.
> 
> To what extent do others in a similar position use ASX Top 20 etc as a benchmark? Are there model portfolios that one can access without subscribing to a Newsletter?
> 
> This is particularly an issue for me at the moment as I'm currently about 40% invested in shares and am planning to take this up to 50% plus in the New Year which obviously would be a good time to address imbalances




Not a retiree (got 13 years to go before I can access my super), but have similar shares. I put a bit more in the larger cap companies but also skew weightings towards those sectors or companies that I prefer. Personally I would not worry about having weightings different to ASX 20 - you may overperform slightly or underperform slightly. Personally I am underweight banking as I think more regulation and increased competition once crisis eases will restrict growth for the majors.

My SMSF portfolio with weightings is

WPL	Woodside Petroleum	9.0
STO	Santos	6.0
OSH	OIL Search	5.0
ORG	Origin Energy	6.0
AOE	Arrow Energy	3.0
BHP	BHP	10.0
RIO	RIO	5.0
WES	Wesfarmers	5.0
CSL	CSL	4.0
COH	Cochlear	3.0
ANZ	ANZ	4.0
QBE	QBE	3.0
MQG	MQG	3.0
AGK	AGL limited	4.0
TLS	Telstra	6.0
SIP	Sigma	3.0
WDC	Westfield	5.0
WOW	Woolworth	5.0
TOL	Toll holdings	3.0
SHL	Sonic health care	3.0
	CASH	5.0


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## Julia (28 December 2009)

I'm only about 30% in shares and very gradually feeding more in.  Don't restrict myself to the top 100.  Some of my best gains have been from companies outside this.

Presently have:
BRG (this turned out to be a bad buy when the regulator denied the merger with GUD.  However, GUD have now extended the offer which I'll accept. Maybe they have some plan for getting around ASIC's objections.  Does anyone know any more about this?)

CBA
Campbell Bros Ltd
Monadelphous Ltd
Maquarie Group
Mac Services Group
Tox Free Solutions Ltd
The Reject Shop
United Group Ltd
WBC
Worley Parsons Ltd.

Will be adding RIO, BHP,WES, LEI, and maybe BKN, CPU as opportunities arise.


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## brianwh (28 December 2009)

gooner said:


> Personally I would not worry about having weightings different to ASX 20 - you may overperform slightly or underperform slightly. Personally I am underweight banking as I think more regulation and increased competition once crisis eases will restrict growth for the majors.




Its not only the ASX 20 that I'm at variance with G - I looked through the top 10 or 20 holdings of some of the major Australian Share Funds and find myself quite different from them too in the weightings.

Also, while I share enthusiasm for energy and resources, I would not be comfortable with this level of bias in a retiree fund. And to have such a relatively small holding in the banking sector seems fairly contrarian IMO. I'm underweight there too but am hoping to get up towards 25% as the opportunity arises.


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## gooner (28 December 2009)

Julia said:


> I'm only about 30% in shares and very gradually feeding more in.  Don't restrict myself to the top 100.  Some of my best gains have been from companies outside this.
> 
> Presently have:
> BRG (this turned out to be a bad buy when the regulator denied the merger with GUD.  However, GUD have now extended the offer which I'll accept. Maybe they have some plan for getting around ASIC's objections.  Does anyone know any more about this?)
> ...




Julia

Agree that best gains often come from outside top 100 companies. As do worst losses  The challenge is picking the winners and not the losers.

AFR had Campbell Bros as one of its "top 10 stocks for 2020" the other day.


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## brianwh (28 December 2009)

Julia said:


> I'm only about 30% in shares and very gradually feeding more in.




I would have thought 30% a bit on the conservative side Julia. Do you have an uncomfortable feeling about the future course of the market?

As regards the shares you hold, they make sense to me. But its the weightings you have and the rationale behind them that I'm interested in. In my case the weightings have to a large extent been affected by the performance of the share prices since I bought them e.g. I bought WES very well and also bought into their capital raising and it is now my biggest holding at 12.6% - but do I want 12.6% of my share portfolio in WES?


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## gooner (28 December 2009)

brianwh said:


> I would have thought 30% a bit on the conservative side Julia. Do you have an uncomfortable feeling about the future course of the market?
> 
> As regards the shares you hold, they make sense to me. But its the weightings you have and the rationale behind them that I'm interested in. In my case the weightings have to a large extent been affected by the performance of the share prices since I bought them e.g. I bought WES very well and also bought into their capital raising and it is now my biggest holding at 12.6% - but do I want 12.6% of my share portfolio in WES?




If you are in pension phase and thus are not subject to capital gains tax then it is fairly cheap to rebalance - brokerage costs only. Certainly if I had made a very large profit on one stock and this had caused it to become a particularly large part of my portfolio, then I would personally look to sell some of it and rebalance.  However, CGT always makes this decision harder, although the 10% rate in SMSF's helps.


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## badger41 (28 December 2009)

Hmm, looks like I have a portfolio not dissimilar to Gooner (we share 8 stocks).

To the nearest 1%, my stocks are:

BHP 11 (average cost $12.48, now $42.47)
CSL 8 (bought for $$2.81 long, long ago, now $32.64)
WES 8 (average cost $9.83, now $30.25)
OST 8 (a/c $1.71, now $3.27)
LEI 8 (a/c $6.73, now $37.54)
STO 7 (a/c $6.43, now $13.99)
ANZ 6 (a/c $10.36, now $22.39)
WPL 5 (a/c $14.00, now $47.50)
NAB 5 (a/c $13.97, now $26.70)
WBC 5 (ex SGB takeover. a/c $6.02, now $25.39)
WOW 4 (a/c $23.62, now $27.42)
UGL 4 (a/c $12.27, now $14.21)
WAN 4 (a/c $5.06, now $8.10)
ASB 3 (a/c $1.30, now $2.24)
ORG 3 (a/c $11.75, now $16.38) 
FWD 3 (a/c $7.99, now $7.75)
ORI 2 (new purchase, plan to add. a/c $24.99, now $25.50)

Of the above, only FWD is currently showing a small loss. Cost prices include brokerage.

That's 94% of the portfolio, also hold small parcels of AWE, MCR, OZL, QHL (spec). These are all worth less than I paid, although in the case of OZL, well, at least it didn't "go to God".

Overall, the portfolio is in profit to the tune of 106% - roughly double cost. Many of the shares have been held for well over ten years. CSL, STO, WES were first purchased in 1995.

16% in banks looks okay to me. The portfolio has a resource/energy bias, also a WA bias. Nice to note that so far in this financial year I have recovered all of the losses of 2008/09. I'm about 75% shares, 25% cash. None held within superannuation, costs to high, too much legislative risk. Franking credits eliminate income tax, I think only once in recent years have I had to pay a small (>$1K) tax bill resulting from realised capital gains.

Fingers crossed for calender 2010.

Cheers, badger


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## condog (28 December 2009)

I suggest anyone contemplating a SMSF direct share portfolio at least read this article....Its not too dis-similar to those portfolios in here:

http://www.theage.com.au/business/the-complete-morons-guide-to-top-10-stocks-20091016-h1b6.html
Disclaimer: this is an external link to Sdney morning Herald article.....follow link at your own perril.This site an I take no responsibility ofr content beyonfd this post.

I think its a good starting point.....Have to agree with Julia, most my non-top stocks have been my star performers.....In relation to the risk though....risk is more a function to do with time and knowledge then the market cap of the company......B&B, Enron, Ansette, etc hmmmm not to safe, plus a few American and European banks....  do your research....knowledge lowers risk.

Badger the only stock you have I really dont like is WAN, its debt is way too high last time I checked...


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## Julia (28 December 2009)

brianwh said:


> I would have thought 30% a bit on the conservative side Julia. Do you have an uncomfortable feeling about the future course of the market?



Brian, I simply don't know what will happen.  I don't think anyone does.
I think there are still a lot of jitters around as can be seen by the fall in markets every time there is a slightly bad news announcement.

My basic approach is to buy stocks in an uptrend and hold them until they turn.  There are not too many stocks in a confirmed uptrend at present.
Those real blue chips in my p/f I will hold through dips, but not the mid and small caps.

I've just put half my cash into a TD for five years at 8%.  I always keep that much approx in cash so am happy to lock it away for that time.  Even if the cash rate goes up considerably I don't think I'll be too disadvantaged with the 8%.  The balance of the cash is in an online at call a/c so up for feeding into the market if it stabilises.



> As regards the shares you hold, they make sense to me. But its the weightings you have and the rationale behind them that I'm interested in. In my case the weightings have to a large extent been affected by the performance of the share prices since I bought them e.g. I bought WES very well and also bought into their capital raising and it is now my biggest holding at 12.6% - but do I want 12.6% of my share portfolio in WES?



I simply don't focus much on weighting.  I may be wrong in this.  But I'm happy to have more in stocks which are performing well.
Roughly I have about double in stocks which fall into the top 100, compared to mid and small caps.
Exception is Worley Parsons with which I am very overweight due to its increase in SP.  I have no intention of reducing this unless something changes in the fundamentals.




gooner said:


> Julia
> 
> Agree that best gains often come from outside top 100 companies. As do worst losses  The challenge is picking the winners and not the losers.



Indeed, gooner.   Or, in my case, getting the timing right so as not to give back too much profit when selling.  This happened to me with Oakton (OKN) where I had over 100% profit in about five months, but when I sold that had reduced to about 80%.




> AFR had Campbell Bros as one of its "top 10 stocks for 2020" the other day.



Interesting.  But 2020?  Are you sure you don't mean 2010?  I hope the latter.
I've owned this twice.  Sold with healthy profit when the GFC was clearly going to happen and had concerns about their debt level for quite a while.




condog said:


> I suggest anyone contemplating a SMSF direct share portfolio at least read this article....Its not too dis-similar to those portfolios in here:
> 
> http://www.theage.com.au/business/the-complete-morons-guide-to-top-10-stocks-20091016-h1b6.html
> Disclaimer: this is an external link to Sdney morning Herald article.....follow link at your own perril.This site an I take no responsibility ofr content beyonfd this post.



Thanks for that, condog.  I'm always interested in Marcus Padley's views.
This is an extract from that article:


> The only stocks that don't get an automatic pick in the top 10 include Telstra and Wesfarmers. Telstra because the only sex it offers is a yield, and by rights no one should invest in equities for that.
> 
> Equities are for growth in capital - ask any Yank - and if it wasn't for the performance of a protected monopoly called the Australian bank sector that has spoilt us into thinking we can have income and capital growth, the Australian retail investor would realise that.
> 
> High yield means low growth, which means a dull share price. Utilities, regulated gambling, property trusts, food, infrastructure, health care. I rest my case.



I've long held this view and will never buy anything just for its yield.



> Wesfarmers doesn't get in because it's too complicated for most people. You'll find brokers very divided on Wesfarmers. Most are cautious about the big lash on Coles. That uncertainty, and the fact that it has about 10 different business units, puts it in the too-hard basket because no one really knows what it does. But the main bits are cyclical and I reckon that's enough at the moment.



Mr Padley's comment here about WES is interesting.   I've only put it into my "probably buy" category since the Coles make-over seems to be finally bearing fruit.  Looks as though they are on the right track at long last.
But against WES is possible downgrading of Bunnings when the new WOW owned hardware chain is up and running.



> I think its a good starting point.....Have to agree with Julia, most my non-top stocks have been my star performers.....In relation to the risk though....risk is more a function to do with time and knowledge then the market cap of the company......B&B, Enron, Ansette, etc hmmmm not to safe, plus a few American and European banks....  do your research....knowledge lowers risk.



Yes, I agree about this.  You were aware of some adverse reports which I missed re OKN, condog.  Had I been up to speed with these, I'd not have given back as much profit.  So, absolutely, timing is everything.


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## So_Cynical (29 December 2009)

Marcus Padley linked article said:
			
		

> High yield means low growth, which means a dull share price. Utilities, regulated gambling, property trusts, food, infrastructure, health care. I rest my case.




http://www.theage.com.au/business/the-complete-morons-guide-to-top-10-stocks-20091016-h1b6.html

Bollocks to you Mr Padley...i brought into HDF about 6 weeks before he wrote that article and im sitting on a capital gain of about 31% and getting a distribution yield of over 14% 

There are no absolutes....anyone sticking to the top 20 is missing out on the big moves and big yields, for the perception of safety.


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## gooner (29 December 2009)

Julia said:


> Interesting.  But 2020?  Are you sure you don't mean 2010?  I hope the latter.





Yes it was stocks to hold for 10 years from 2010 to 2020.


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## condog (29 December 2009)

So_Cynical said:


> http://www.theage.com.au/business/the-complete-morons-guide-to-top-10-stocks-20091016-h1b6.html
> 
> Bollocks to you Mr Padley...i brought into HDF about 6 weeks before he wrote that article and im sitting on a capital gain of about 31% and getting a distribution yield of over 14%
> 
> There are no absolutes....anyone sticking to the top 20 is missing out on the big moves and big yields, for the perception of safety.




Dont be so cynical.......lol
Im not suggesting everything he says is right, but merely suggesting its a great starting point for anyone setting up a SMSF equity portfolio....  

I agree that anyone sticking to the top 10 or 20 is missing out, but I also think that the best stocks from hte top 10 or 20 should make up a significant percentage of your equity portfolio. 

Its called the Moron portfolio, because by default any Moron can find good reasons to put these stock in there portfolio......and id extend on that and say any Moron cna find good reason to make them a significant part of their portfolio......

If your a far more experienced investor then these comments are not aimed at you......

This is not advice, just opinion. Do your own research blah blah blah....you no the rest, but its true.


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## brianwh (29 December 2009)

Hmmm. I am sensing a theme coming through replies to this thread and it is that most of you are experienced investors who have the skill and background to identify "non-moron portfolio" stocks and expect to be able to move in and out of them profitably. But I'm guessing that I'm not alone in seeking to avoid the clutches of the FP industry and as well enjoy having control over my own financial destiny in retirement but don't have the background referred to above. And while I don't expect this expertise will come without effort, I don't want to devote my waking hours getting this experience. And so my portfolio is fairly consistent with MP's "moron portfolio".

However I am enjoying what you are saying and have picked up some very insightful perspectives (on this and other threads in ASF). Thanks for your efforts.

Cheers


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## So_Cynical (29 December 2009)

brianwh said:


> Hmmm. I am sensing a theme coming through replies to this thread and it is that most of you are experienced investors who have the skill and background to identify "non-moron portfolio" stocks and expect to be able to move in and out of them profitably. But I'm guessing that I'm not alone in seeking to avoid the clutches of the FP industry and as well enjoy having control over my own financial destiny in retirement but don't have the background referred to above. And while I don't expect this expertise will come without effort, I don't want to devote my waking hours getting this experience. And so my portfolio is fairly consistent with MP's "moron portfolio".
> 
> However I am enjoying what you are saying and have picked up some very insightful perspectives (on this and other threads in ASF). Thanks for your efforts.
> 
> Cheers




That's a very non-moron post brianwh  and going on the insight displayed in that post im sure you will successfully manage your portfolio and grow your experience....one theme that comes through strongly on this forum is
the need for investors to make better decisions, even if that's simply to get a better FP or a second or third opinion.

Retirement now days can go on for 30 or 40 years, its a long time to be retired and i would think managing your investments and thus income would be a great way to keep the mind active while maximising your returns and minimising your risk.


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## brianwh (30 December 2009)

Thanks for the encouraging words So_Cynical. The issue I have which would have come through from my posts above is that I have a portfolio of a dozen plus blue chips which I have for the most part bought quite well but I don't have a rationale for what I am doing that I am comfortable with. I have shares across the main sectors but the balance is by default - I didn't plan it, it has just happened. And I have never sold all or part of a blue chip holding. And I am finding now that the blue chips I want more exposure to eg banks are getting expensive.

Perhaps this is how many retirees operate the equities part of their SMSF. As I said earlier, I get the impression that the people posting on these forums are very competent and experienced but I do wonder if there is another large sector out there who would like the assurance of some model or guidelines on which base their portfolios.

Cheers


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## Julia (30 December 2009)

brianwh said:


> Thanks for the encouraging words So_Cynical. The issue I have which would have come through from my posts above is that I have a portfolio of a dozen plus blue chips which I have for the most part bought quite well but I don't have a rationale for what I am doing that I am comfortable with. I have shares across the main sectors but the balance is by default - I didn't plan it, it has just happened.



OK.  So now that it has happened, are you unhappy with what you are holding?  Is the SP of these companies increasing at a rate you are happy with?

To go back to the beginning, what do you need your p/f to do for you?
Is your primary aim to grow your capital, or to provide an ongoing income?
(the latter could be derived either from cashing in some of your capital gain, or from dividends and franking credits).

Presumably you are using the tax advantages of super to maximise your returns?

Is the p/f satisfactorily achieving this/these requirements?

Looking at the fundamentals of each of the companies you own, do you have any concerns or reservations about any of them?

Does the p/f allow you to sleep at night?

In other words, are you actually unhappy with what you are doing, or are you rather trying to address some vague feeling that you could be doing things better?



> And I have never sold all or part of a blue chip holding. And I am finding now that the blue chips I want more exposure to eg banks are getting expensive.



The inference from this is that to buy the banks e.g. you would need to sell some of your existing holdings?

Re how expensive any stock is at present, I imagine someone would have said that about e.g. CBA when it was $10.  Just think about it.  You seem to have a very long term approach.



> Perhaps this is how many retirees operate the equities part of their SMSF. As I said earlier, I get the impression that the people posting on these forums are very competent and experienced but I do wonder if there is another large sector out there who would like the assurance of some model or guidelines on which base their portfolios.



None of us were experienced when we first started out, Brian.  Maybe if you address the questions above, you will provide for yourself the first step in moving ahead if that's what you want to do.
I have sent you a PM.


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## brianwh (31 December 2009)

Julia said:


> OK.  So now that it has happened, are you unhappy with what you are holding?  Is the SP of these companies increasing at a rate you are happy with?
> 
> To go back to the beginning, what do you need your p/f to do for you?
> Is your primary aim to grow your capital, or to provide an ongoing income?
> ...




Just to place my comments in a perspective I am a retiree fully self-funded taking an accounts based pension from my SMSF since Sept 08. I have a bit over 40% of my holdings in Australian equities and the rest in TD's and cash.

In a relative sense I am happy with my share portfolio as our SMSF has increased in value by some 10% in that time after taking the pension. This increase has been from the share portfolio as everyone knows how much TD's were paying until recently.

But because I am doing OK doesn't mean others aren't doing a lot better. And I was really trying to get a handle on the rationale behind the way people structure their share portfolios. 

It seems from what is being said here, that structure is not the issue, but rather the focus is on individual shares - if you are confident of the capital growth and income prospects of a share and you have themoney, buy it then hold until you either need the money or see a better option.


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## condog (1 January 2010)

brianwh said:


> Just to place my comments in a perspective I am a retiree fully self-funded taking an accounts based pension from my SMSF since Sept 08. I have a bit over 40% of my holdings in Australian equities and the rest in TD's and cash.
> 
> In a relative sense I am happy with my share portfolio as our SMSF has increased in value by some 10% in that time after taking the pension. This increase has been from the share portfolio as everyone knows how much TD's were paying until recently.
> 
> ...




Structure and focus on shares are both important...as an example imagine if you where in the US and held all bank stocks, because they where the best individual stocks you could identify at a given point in time prior to them going bad.... but on the flip side you can diversify (wosify) so much that you end up holding stocks that dont pass the most fundamental tests......

So ino roder to work out whats best for you you really need to as a starting point:
1. Whats your time frame for the money....or income... If its a short time frame , it shouldnt be in equities or it should be returned immediately in appropriate dividend streams...
2. Assess your own behaviours and attitudes to risk - eg: if you bought 10 stocks today and they went down by 50% tommorrow just because of market sentiment what would your reaction be.....if it is to panic and sell your probably not best suited to being a direct equity investor....if your reaction is to ride it out or find some money to buy more while they are a bargain..... your risk profile is proabably suitable....
3. Whats your investment goals for this money your investing.....Do you need / want growth, income, tax free income, overseas exposure.... If you need tax free income then you need to stick to 100% franked Au shares with good yeild and a history of increasing income and stable / increasing ROE eg the banks etc and most those in the moron portfolio. If its growth you may be more inclined to go with stocks like JBH, BHP, WOW, ORL, Reece, etc that have higher growth profile ....  
5. Whats your wealth preservation / insurance strategies / needs.
6. How will this structure affect your tax, social security/ pensions, health care cards, and living standards....

7.  this one I like to chuck in......if you worked casually just a few hours or days per week in a job or business / paying hoby you love to do....how could that massively accellerate your: retirment / semi-retirement / standard of living in retirement / enjoyment of retirement / social interactions

This is by no means exhaustive or detailed, but if you at least think about these items and then use this knowledge as a starting point for further investigations and learning you will be on the right track.

As always seek expert advice, and dont act on this information..it is not specific and does not toake your circumstances into considration...


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## brianwh (1 January 2010)

Hi Condog

While I see what you are saying as good advice in a general sense, a lot of it does not apply to me. I am a fully self-funded retiree and therefore pay no tax and do not have to worry about aged pension and other social services eligibilty.

In an attempt to clarify still further what I'm trying to understand, consider the following. Every day (almost) I check the markets and have noted that using the percentage movement in the ASX 200 as a bench mark, my share portfolio underperforms more often than not. For example yesterday, the ASX 200 rose 0.77% and my portfolio rose 0.44%. I know that there are other factors that may offset this descrepancy and I would need to do a more precise analysis to be sure of my facts.

Perhaps I have answered my own question. Have a benchmark against which to measure your portfolios performance and make periodic adjustments accordingly. In my case this will mean increasing exposure to the banks and RIO and BHP.

I hope my questioning is not coming across as too naive - please, any flawed logic, point it out.

Cheers


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## Julia (1 January 2010)

Brian, what stocks are in your p/f?


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## brianwh (1 January 2010)

Hi Julia

WES (12%) 
LEI (11%) 
TOL (9%) 
TLS (9%) 
ASX (7) 
QBE (7%)
WPL (7%) 
WBC (6%) 
SHL (6%) 
BHP (6%) 
ORG (5%) 
WDC (4%) 
TAH (3%) and some smaller holdings in IAG APA NHC CFX and TFC.


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## awg (1 January 2010)

Hi BrianW,

Always interesting to see others portfolios

As you made reference to portfolio volatility compared to ASX200

By way of comment, you hold no STW, (or ETF or LIC) which can simplify and smooth returns for retirees.

BHP is the behemoth of the ASX, 11% of the XAO, I would be just as happy overweight than under.

As I think you mentioned RIO is hard to ignore


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## Julia (1 January 2010)

brianwh said:


> I bought WES very well and also bought into their capital raising and it is now my biggest holding at 12.6% - but do I want 12.6% of my share portfolio in WES?



This is not advice, etc etc., but if I'd bought WES at the March low and seen the steady uptrend since then, I'd be letting my profits run.
Others will disagree and take part profits.  Only you can decide.



brianwh said:


> Every day (almost) I check the markets and have noted that using the percentage movement in the ASX 200 as a bench mark, my share portfolio underperforms more often than not. For example yesterday, the ASX 200 rose 0.77% and my portfolio rose 0.44%.



OK, consider perhaps that the ASX 200 will include some smaller cap stocks which have enjoyed a greater increase in the SP than some in your p/f.

You seem to be well diversified across sectors.  This is really important to some people.  It's not to me.  I'd prefer to be in sectors (or individual stocks) which are doing well at a given time, and don't have a problem with not being diversified.



> Perhaps I have answered my own question. Have a benchmark against which to measure your portfolios performance and make periodic adjustments accordingly. In my case this will mean increasing exposure to the banks and RIO and BHP.



That's one approach.  A lot of people find it necessary to work in conjunction with a public benchmark.  Personally I don't care.  My aim is to provide a comfortable living from my capital, whether fully or partly from shares.
If I do that, then it's immaterial to me whether I am above or below any benchmark.  

I have a relative who has sufficient capital to just stick it in term deposits.
Even if it earned nothing he would have more than enough to live on just using up the capital for the rest of his life twice over.
So, depending on how much capital you have, you may choose to be very conservative, or more aggressive. If you have a large margin of more than you need to live on with the way you are set up at present, then if you're not particularly interested in the market, fiddling about with the pF is probably unnecessary.

 I've had periods of needing to be quite aggressive in approach to grow my capital.  At present I'm happy to stand partly aside until there is more consistency.  i.e. avoid the anxiety that the market could still take another large dive.



brianwh said:


> Hi Julia
> 
> WES (12%)
> LEI (11%)
> ...




OK, as above, that's a diversified p/f.  However, it doesn't contain any standout high performers,other than WES,  and does contain a few which are doing nothing in particular, almost flat effectively.
Perhaps you bought these for the yield, though I haven't checked what that is.

You earlier mentioned you wanted more exposure to the banks.  Is there any particular reason for this?

As an exercise, and taking into account your wish to own more banks, if you go through the charts of your above list, thinking to cull say three companies in order to buy three banks, which would you drop?

Others following this thread may also like to suggest which could be dropped from Brian's list and replaced with ???

Of course, no obligation to do any such exercise.  All I'm trying to do is extend the discussion for the benefit of all of us, and maybe clarify your own thinking.


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## condog (2 January 2010)

As Julia said are we dealing with ample / adequate or barely adequate $$$, it makes a big difference...

Many of your stocks are largish in the ASX and thus simlpy because of thier immense size will rize and fall (generally speaking) less then there smaller counter parts....

Similarly because they are huge mature companies, growth opportunities are less then some of the up coming asx200 inclusions eg: JBH etc which is still rolling out 22 stores per annum using its high ROFE and ROE formula

This limited growth is not such a bad thing depending on your investment goals....it looks like your a bit of a yeild chaser which also severely limits volatility as most the share holders couldnt care less about the share price, they just want the dividends to keep rolling in.....

Additionally theres an old formula....its not always true, but its true the majority of the time......

You cant have low risk, high yield and high growth......you can usually get two of the three though......

In chasing high yeilding stock sometimes you get caught with a slow growing portfolio

Harpoons will get shot at me for this comment, as everyone likes to think they can get all 3.....and sure you could in june last year when great stocks where cheap, but the risk was through the roof....and even though I was in there buying, there where a lot of unknowns at the time...

And yes there will always be isolated times and cases where people pick up great stocks cheap and get all three, but generally the market prices this in and its not generally available... 

The market like to price it so most big stocks come out close in the long run, so growth stocks operate on low yeilds, high yielders generally have low growth and risky stocks can usually provide growth and yield...

You seem to be predominatly in the yeld camp...thus less growth...


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## brianwh (2 January 2010)

Julia said:


> OK, as above, that's a diversified p/f.  However, it doesn't contain any standout high performers,other than WES,  and does contain a few which are doing nothing in particular, almost flat effectively.
> Perhaps you bought these for the yield, though I haven't checked what that is.
> 
> You earlier mentioned you wanted more exposure to the banks.  Is there any particular reason for this?
> ...





Thanks for your thoughts Julia. Here's my response

As you said WES has been a very good performer but have also had around 70% gains from LEI, TOL and WPL. TLS was probably largely a yield play but in general I am agreeing with Condog that yield is only one factor in picking a stock and not the main one at that - perhaps a good lesson here, I'm down 10% on TLS play.

The banks. Ugh! If you remember back to the March lows, there was a lot of negative sentiment about banks. I held off waiting to see what was going to happen. This was reinforced around this time by the Intelligent Investor which came out with a lead article saying why people should sell down their bank holdings. And of course, as they say, the rest is history. I've been looking for an entry point ever since. I think I have let this episode get into my head a little bit (I know, I know - emotion and investing is a very bad mix!).

Love your suggestion Julia about 3 stocks to cull - in fact have been thinking along these lines but I'm still seeing upside in the good performers especially if predictions for strengthening domestic and world economy are near the mark. Perhaps a starting point for me would be sell down some WES. And then there is TLS! TAH has been a poor performer and I'm not sure how much upside is in it. But the propsects for the others seem positive and the opportunity cost of selling one or several down and replacing them with bank stocks seems questionable - but I have been saying this sort of thing about banks since early 09!!!

Cheers


----------



## brianwh (2 January 2010)

awg said:


> Hi BrianW,
> 
> Always interesting to see others portfolios
> 
> ...




Hi AWG

I hold 3 of the more popular LIC's - AFI, ARG and MLT and have been happy with their performances. My comments here have been in relation to a direct share portfolio which I have as an alternative to something like STW.

Agree with BHP and will be looking for an opportunity to increase my holding there - probably will get more BHP rather than add RIO.


----------



## condog (3 January 2010)

brianwh said:


> Hi Julia
> 
> WES (12%)
> LEI (11%)
> ...




Hey Brian my opinion on these - 
WES - paid far too much at peak for coles - combined cap of $51B at time of sale, $15 B at bottom, have recovered to $30B.... they are successfully truning coles around.... now is not the time to be selling WES especially if you bought it at the sill highs....WES is slowly showing signs of becomming a buy...and possible out performer in the future...not yet though
LEI - love it but in a cyclical dip due to GFC slowing of private sector contracts, should start to kickk on soon
TOL - not good enough for me to look at, but a macro view they are in a good sector with increasing eco activity and increasing population...
TLS appears to be returning to profitability , I bought them on posiitive signs, but then they came out with a 12 month flat outlook...so i sold them and put the money in JBH which has a 20% growth forcast...why the hell does a company with such huge free cash flow need 128% debt to equity on a big equity base....it defies logic and smells of a rat....definitely a big concern...
ASX has a monopoly and reasonable fundamentals....good stock to hold
QBE - prime take over target, reasonable stock in a good sector
WPL is expensive, but once pluto and other Nth West Shelf ventures come online should be much better....good stock
WBC - diluted its holdings far too much. im in the process of swaping to CBA 
BHP - love it, cashed up, probably should have bought more assets during GFC, time will tell, good sector for the med term
WDC - at bottom of cycle, very positive outlook if US continues to recover
, if US falters ???
TAH - nice yeild, lots of headwinds curbing growth....loss of VIC licence will hurt badly...I got out
IAG - yuk
Others not sure

RIO - have proven to have terrible managment - got themselves in debt strife, did not sell at peak of market, sold prime assets at absolute bottom of market.....dumb dumb dumb on all accounts....a company with excelelnt assets in a great sector, BUT not smart enough for my cash...I will trust BHP for now....stupidly RIO's sp has recovered, but thier earnings potential is decimated compared to pre GFC

Some crackers you missing and could consider - CBA, CSL, Cochlear, Platnum Asset Mgt, JBH, WOW
WOW ad JBH are relatively cheap at present valued around $31ish and $23.50ish with a 14% RR, the others are always exp from a fundamentals point...and are currently expensive

In tersm of banks, they have good market share and lots of pricing power for now... they are risky by nature....WBC ANZ and NAB have heavily diluted shareholders equity and ROE's look set to plumit for some time....CBA looks to be in a much better way going forward...

I am not a broker, these are only opinions and in no way consider your circumstances , seek expert advice...


----------



## brianwh (3 January 2010)

Agree nearly 100% with everything you say here Condog and appreciate the effort you have made to put these comments together. My near term plans are (which you will see are pretty much in line with your thoughts):

Sell TAH - paid $7.05 so will try to get square here. Not only is the loss of the Vic licence a prob but some of the on-line betting agencies might pose some sort of threat to growth.

In the process of selling a WOW hybrid (WOWHB) and will use at least part of the proceeds to get into WOW. 

TLS - I have listened to and read more commentary on this stock than nearly all others combined and still don't know. I am very uncomfortable with this Minister but will probably hang on.

BHP - definitely will be adding to this.

Banks??? - I don't want to think about them. I do have a holding NABHA which I might think of as a surrogate for a while.

Cheers


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## Julia (3 January 2010)

brianwh said:


> Thanks for your thoughts Julia. Here's my response
> 
> As you said WES has been a very good performer but have also had around 70% gains from LEI, TOL and WPL. TLS was probably largely a yield play but in general I am agreeing with Condog that yield is only one factor in picking a stock and not the main one at that - perhaps a good lesson here, I'm down 10% on TLS play.
> 
> ...



Thanks for the above, Brian.  Really, we are only being very picky in asking for three of the stocks you own to be culled.  It's an interesting exercise, though.

I pretty much agree with Condog's summary.  If I had to sell three of your stocks to buy something I thought had more potential, those three would be TLS, WDC and TAH.
Now, of course, they will all turn around and shoot up!

It's a worthwhile thread.  FWIW I share your ambivalence about the banks, other than MQG in which I have a lot of confidence.

Re BHP v RIO, perhaps BHP's management is more competent.

Hope you will keep us posted on what you decide to do.


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## Muschu (6 February 2010)

A reminder [as disclosed on the NVT thread] that I hold this stock, one that has attracted more media attention this year.  Since January they have announced 5 more University partnerships - 4 in the USA and 3 of these in Boston, a world University centre.
Their recent report indicated profit after tax up almost 45% and ff dividends up 47%.
SP 2 months ago was $4.24 and is now $4.87. [It was actually about $2 in January 2008].  The SP actually came back 8c on Friday -- which was hardly an up day and 8c is the amount of the dividend which has a record date of this coming Monday.  So I have received growth + dividend.
Right now this is the only stock I hold, having sold everything else in late January.  I sold SUN with some reluctance as it has been very resilient these past months, but I hope to get back in later.
Thought, as a retiree, I'd share this info  but [the usual and worthy recommendation remains]  do your own research.
Apart from NVT I plan to sit on the sidelines for a while and enjoy our caravan where I am right now on the ocean front.  For what it's worth I am watching [apart from NVT] SUN and LYL which I also sold with hesitation] in particular.
Enjoy the weekend.
R

PS - I'd post an NVT chart but am not sure how to do this.


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## ROE (6 February 2010)

I'm all quality small cap and medium cap that I understand well... and I buy lot when Mr Market go jittery and dump these stocks like last 2 years...

CCP
NVT
DMP
SUL
CAB
FGE
CCV
RPX
CIL
TAH
WWA
XRF 
ALL

and just one WDC for the biggy 

These will be bluechip one day when I retire, I search high and low and most of them I buy before it get mentioned in the paper or anyone notice them 
NVT, DMP, WWA and FGE etc..and such not much fanfare but solid performer and got in when people said what's IBT education? (now NVT)

Surprisingly these stocks give out consistent dividend and rising in all cycles beat most bluechip stocks 

and I also looking for once Darling that got discard by the market as a dog and load up like CCP


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## So_Cynical (6 February 2010)

ROE said:


> I'm all quality small cap and medium cap
> 
> XRF
> 
> ...




XRF has a Market Cap of less than 14 mill so qualifies as Micro cap IMO and
would be a million to 1 chance of ever being a ASX100 'Bluechip'

Still an interesting Portfolio.


----------



## ROE (7 February 2010)

So_Cynical said:


> XRF has a Market Cap of less than 14 mill so qualifies as Micro cap IMO and
> would be a million to 1 chance of ever being a ASX100 'Bluechip'
> 
> Still an interesting Portfolio.




Market cap isn't my concern, business model, capital, balance sheet and various other metrics are my main concern 

I can buy stock as low a few million market cap if ticks all the box and I wont touch stock with market cap of a few Billion if the boxes doesnt ticks.

There are dozen of billion market cap stock and I wont go any where near it. 

Plus quality small caps, micro cap or mid cap whatever people call it, all you need is pick a good few and it could deliver you the return of all your combine stocks in portfolio -

I have a few such stocks and a single stock deliver 2 times the return of combine of all the other stocks 

Like Uncle Ben Graham his GEICO investment deliver more return then all his holding together over 20 years period


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## Muschu (7 February 2010)

Interesting stuff to think about and investigate there Roe - thanks. One difference is that I am already retired [and in the pension phase of a SMSF while still doing some casual consulting].

My ASX investments tend to more conservative but I do take the occasional "punt".  I will look at your portfolio carefully -- thanks.

Sounds  like XRF has been kind to you?  I've never heard of it but will have a look right now.

Regards

Rick


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## brianwh (7 February 2010)

Muschu said:


> Right now this is the only stock I hold, having sold everything else in late January.




Rick - point of clarification. Does your NVT holding make up your entire equities portion of your SMSF?


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## Muschu (7 February 2010)

brianwh said:


> Rick - point of clarification. Does your NVT holding make up your entire equities portion of your SMSF?




As at today we hold NVT and cash in our SMSF Brian - that's it.

Until late Jan we had
NVT
BHP
WPL
WOW
WES
SUN
WBC
JBH
LYL
CBA
SMX
AXO
SAI
CNX
[all sold at various degrees of profit]
and obviously less cash.

I'll be back into the market when the time appears right.  

Regards

Rick


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## Muschu (7 February 2010)

brianwh said:


> Rick - point of clarification. Does your NVT holding make up your entire equities portion of your SMSF?




Brian perhaps I should have added that I am not into a buy and hold strategy at this time.  Most of the stocks above [except NVT] were acquired in March 2009.  I've essentially cashed out 3 times in the past couple of years.  I have also held very small quantities of a variety of other growth stocks.


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## ROE (7 February 2010)

Muschu said:


> Brian perhaps I should have added that I am not into a buy and hold strategy at this time.  Most of the stocks above [except NVT] were acquired in March 2009.  I've essentially cashed out 3 times in the past couple of years.  I have also held very small quantities of a variety of other growth stocks.




You doing well if you can time the market like that.
I'm pretty bad at timing the market  I haven't sold any since I bought the majority of them between  2008 - April 2009

Couple of time I want to exit a few stocks like NVT and CCP but went over the figure again and decided to hold ....a few baggers in a short time is tempting position in deed and knowing my bad timing I usually sold them too early ... like FLT a 50% profit but it could have been a 4 bagger 

that go down as the most stupid decision or reason ever for me to exit a stock ... I shall not forget it and every time I go shopping and see a Flight Centre sign I wont let it forget me...

maybe one day Mr Market will give me another shot at FLT  and redeem my mistake ..it happened twice before ..I'm counting it will happen again....

FLT mistake made me hold on to NVT and CCP for many more years yet 

I have confident NVT will deliver me multi-baggers  having gone through its business model and I cannot find one stock on the ASX with better business model ..this is an exceptional rare beast..

A similar beast to NVT has exhibited in the US many years ago, at the time I'm in high school 

this beast delivers a 60 baggers without counting the split, add in the 6-7 times split you looking at a few hundred baggers for the one with the nerve to hold..

http://www.google.com/finance?q=NASDAQ:APOL

and the only stock I add in the last few months is RPX 
seem to survive the recent correction ok, time will tell..
and should Mr Market mark it down to 60 cents I wouldn't
mind buying more off Mr Market..


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## Muschu (7 February 2010)

ROE said:


> You doing well if you can time the market like that.
> I'm pretty bad at timing the market :
> 
> Hi Roe
> ...


----------



## brianwh (8 February 2010)

Rick - I'm impressed. Would be interested in more details on your "guide". I had been toying with the idea of lightening up my share portfolio from late last year but events seemed to have crept up on me and I'm wondering whether I may not have missed the boat a bit. But I was never going to sell down everything. If the article by Bill Bonner in todays edition of the Daily Reckoning proves accurate you might be very pleased with your decision. Here's a quote from it:

_"If tomorrow is another bad day - as it probably will be - then it will be clear that the last stage of the bear market has arrived. This should be the final drop...when stocks should go down to their ultimate bear market low.

Where will that be? We don't know. Maybe Dow 5,000. Maybe lower. One way or another every major bull market needs a major bear market. The two go together like yin and yang, Abbott and Costello, or gin and tonic. Take one out of the picture and the other one no longer makes any sense.

We've had our bull market. It took the Dow from under 1,000 to over 14,000 in the space of 26 years. We've had a bubble too. The party was a lot of fun for everyone.

Now, it's time to clean up. It's time for the bust in the economy...and the bear market in stocks. That's just the way it works. Sorry."_


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## Julia (8 February 2010)

Perhaps I'm just ignorant, but I've never heard of "The Daily Reckoning".

He could be right.

As I've said before, I sold my whole p/f in January 08, essentially to preserve my capital.  Felt good as the market plummeted.

However, I paid a fair bit of CGT, and of course, didn't get the dividend and franking benefits.

Then when I was sufficiently confident to buy back in (though only in a fairly small way), the rally was quite well under way.  Some of the stocks were well on the way back to where they'd been when I sold.

So I've questioned the strategy as far as blue chip companies are concerned.

The other factor of course is deposit rates while sitting in cash.
The 8% available on a TD from Westpac and St. George (and SUN if you ask) is reasonably attractive.

Benefits and disadvantages in both approaches.


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## ROE (8 February 2010)

Plenty of commentators in the market place, some bear, some bull, some dont know whether they bear or bull and some are just clueless 

they all want to use their special commenting skills to sell people something

it's sure way to get pay and hell alot safer than apply their commenting skills
to invest in stocks or other assets 

If I can tell everyone to buy a stock X and everyone give me 10 cents
it's a risk free way for me to make money, comparing to putting X amount of money in that stock


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## Muschu (8 February 2010)

brianwh said:


> ...Would be interested in more details on your "guide"................




Sent you a PM Brian


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## brianwh (18 February 2010)

The latest podcast on the ASX website addresses issues related to this. I found it interesting although for me it left a few unanswered questions.


----------



## Julia (18 February 2010)

Brian, for those of us not into podcasting, could you perhaps expand a bit on your above post?


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## Muschu (18 February 2010)

brianwh said:


> The latest podcast on the ASX website addresses issues related to this. I found it interesting although for me it left a few unanswered questions.




Yes I'd be interested too Brian.

Regards

Rick


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## sails (19 February 2010)

Maybe this is it?  http://www.asx.com.au/resources/podcast/2010.htm


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## brianwh (19 February 2010)

Thanks S - that is the page. I was a bit hesitant to post the link as my skills in that respect are a little undeveloped and I could have been misleading.  And you don't have to listen as a podcast - I think it works OK if you just click on the link. Would be interested to know if others found the presentation useful.

Cheers


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## Julia (19 February 2010)

Brian, that link goes to three separate podcasts/audios.  Which one do you mean?  They are all 45 mins in duration or more.  Too much time.
Can't you outline the essence of what you heard and your reservations about it?


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## brianwh (20 February 2010)

Hi Julia

The presentation I was referring to was the one by Mike Hawkins from Evans & Partners. I don't have time to listen again but here are a couple of points from memory:

Brought several points into focus for me eg a portfolio is not a bunch of shares that a broker has recommended (or you have accumulated) over time but rather a package that has a bottom line and any activity you undertake should be aimed at improving that bottom line. Obvious perhaps but by articulating it, it made me more aware of "whole portfolio". Another point I recall was on "alarm bells" where among other things, he suggested that when all the brokers have a *buy * on a stock, that is a time to consider bailing. 

In terms of reservations, he said a lot of things that are obvious but easier said than done - "buy at the bottom and sell at the top" type of statements.
And lastly his suggested portfolio of 20 stocks surprised me a little although that is not to say I would be able to criticise it very validly and he gave no indication of weightings so what it told me was limited.

On balance, I found it a worthwhile exercise. I downloaded the pdf file with the slides and followed it through as I listened to the audio.


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## Julia (20 February 2010)

brianwh said:


> And lastly his suggested portfolio of 20 stocks surprised me a little although that is not to say I would be able to criticise it very validly and he gave no indication of weightings so what it told me was limited.



I flicked through the slides.
Below is screenshot of his suggested stocks.  They seem pretty much in line with what most analysts would recommend in a standard p/f.
If he's giving no idea of weightings, I suppose you'd have to consider he was suggesting equal weightings?  
Don't know.  I wouldn't buy too many of those stocks and would certainly not give them equal ratings.

Anyway, it's just another opinion from someone most people have never heard of.


----------



## So_Cynical (20 February 2010)

Overall that's an interesting presentation with some very logical assumptions and conclusions, however its fair to say Evans & partners have a very conservative approach when it comes to portfolio construction.

here's a link to the presentation (Flash streamed both slides and audio) http://boardroom-pc.streamguys.us/files/ASX/1ASX20100204/ 

Still reckon that any portfolio that ignores the resources super cycle and pretty much excludes oil, gas, gold and property...is a little to conservative, even though on the audio the presenter gives valid reasons for excluding those stocks.


----------



## gooner (20 February 2010)

Julia said:


> I flicked through the slides.
> Below is screenshot of his suggested stocks.  They seem pretty much in line with what most analysts would recommend in a standard p/f.
> If he's giving no idea of weightings, I suppose you'd have to consider he was suggesting equal weightings?
> Don't know.  I wouldn't buy too many of those stocks and would certainly not give them equal ratings.
> ...




Very surprising to see only one resource stock on the list, given we are in Australia. Maybe they are thinking of a large weighting to BHP. Personally I would put some in BHP and some in RIO. Think my SMSF is about 10% BHP and 6% RIO


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## Muschu (20 February 2010)

Haven't checked the podcast yet as I am travelling -- but will do so when I get home.

I did hold 3 of the above 20 stocks until recently [BHP, WBC and CBA] when I left the market -- keeping only 1 stock.  

Thanks Brian, Julia and others.

Rick


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## BuffettFan (24 February 2010)

*My experience at designing a model porfolio.*


I created my own indexed fund in 1993 when I was too busy at work to devote the time to investing. I just bought the top 10 stocks and made their weighting in my portfolio proportional to their market capitalisation. I hardly ever sold anything, just rebalanced by buying when I added more money. It worked a treat, followed the All Ords closely enough and I could control the capital gains tax effect of sales. After taxes and fees, it beat most of the fund managers year in year out. I (modestly  ) think it has to be the best return per hour of your time spent of all the investing techniques. 

(Since retirement I have leaned more towards the Buffett approach as it seems to beat the index over the long run.)

Has anyone else tried this?


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## Pivotonian (24 February 2010)

ROE said:


> I have confident NVT will deliver me multi-baggers  having gone through its business model and I cannot find one stock on the ASX with better business model ..this is an exceptional rare beast..
> 
> A similar beast to NVT has exhibited in the US many years ago, at the time I'm in high school
> 
> ...




NVT and APOL are quite different businesses and operate in very different markets - I think you're asking for trouble if you think NVT will follow a similar path because of the "similarity" in their business models.

I also think there's significant risk to NVT in the short-medium term from the current international student issues (India, govt changes to the permanent residency rules, US starting to open up).

That said, NVT is still a solid business and is well run, so not a terrible stock to be in.  Would be interested to hear why you think it has the best business model on the ASX though ... seems a bit over the top to me.


----------



## ROE (24 February 2010)

Pivotonian said:


> NVT and APOL are quite different businesses and operate in very different markets - I think you're asking for trouble if you think NVT will follow a similar path because of the "similarity" in their business models.
> 
> I also think there's significant risk to NVT in the short-medium term from the current international student issues (India, govt changes to the permanent residency rules, US starting to open up).
> 
> That said, NVT is still a solid business and is well run, so not a terrible stock to be in.  Would be interested to hear why you think it has the best business model on the ASX though ... seems a bit over the top to me.




well that where we differ I could be asking for trouble but when I do buy something I like it alot and no one can change my conviction doesnt matter how doom day the scenario maybe 

different people see it differently, you neither right or wrong because people disagree with you...you are right because of your conviction in your research is right 

and the migration stuff, I know enough about NVT business to safely say it's a non-event  and next why is it the best? 

is there any business on the ASX where customers fund all your capital requirement upfront  then what left over you profit?

it's like I go to HVN and buy a TV and I say here have my $4000 bucks keep it in the bank go buy your TV,pay your staffs, pay your rent, pocket your profit and then give it to me next semester 

Chance are HVN has to fund the purchase of the TV first, pay their staff, rent
and hopefully they can off-load the TV before it gone out of fashion 

that why NVT is the best, it can grow with little capital requirement at the same time pay out massive dividend, if you dont think it's the best business model  go get something better.


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## BuffettFan (24 February 2010)

Re NVT

I've only done very brief research and it does appear to be a great company. However, it has only a very short history as a listed company. I'm a bit reluctant to put money into something with less than ten years' track record.

The main problem is that I believe it is currently way over priced. Check the P/E and P/B ratios for a rough idea, and then do an intrinsic value calculation.


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## Muschu (24 February 2010)

BuffettFan said:


> Re NVT
> 
> I've only done very brief research and it does appear to be a great company. However, it has only a very short history as a listed company. I'm a bit reluctant to put money into something with less than ten years' track record.
> 
> The main problem is that I believe it is currently way over priced. Check the P/E and P/B ratios for a rough idea, and then do an intrinsic value calculation.




I've been with NVT since the float. Prior to that it began with one University Partnership in Perth.  Before and since floating NVT has regularly expanded into new markets. Prior to this year that included the UK, Canada, Africa etc..  With no debt and very professional leadership the number of students, and hence income, continues to grow.

But, imo, this year's entry into the absolutely massive US market in several partnerships which have included world leaders and locations in University education is evidence of exceptional progress.  NVT has developed a reputation that has easily weathered the storms in international student issues because it ties itself to established and reputable Universities rather than flying solo.

This is the only share I hold at this time. It began 2010 at $4.10.  Today, in a down market, it went up to finish at $4.78.

Of course the SP will fluctuate, but this is a very resilient stock. 

I also support technical analysis but consider this an unusual case where the fundamentals are of more importance. I suspect NVT needs to be analysed a little differently to many other stocks because of the nature of its speciality.

The opportunities for further growth of this business are, in my view, more than significant.


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## ROE (25 February 2010)

BuffettFan said:


> Re NVT
> 
> I've only done very brief research and it does appear to be a great company. However, it has only a very short history as a listed company. I'm a bit reluctant to put money into something with less than ten years' track record.
> 
> The main problem is that I believe it is currently way over priced. Check the P/E and P/B ratios for a rough idea, and then do an intrinsic value calculation.




Just because something is trades at high multiple it doesnt mean it's expensive and i'm not saying NVT is cheap but I have it like risk62 many year ago...can I get anything better than NVT if I was to sell it? probably not so better leave it alone 

the key is you understand enough about the business to predict
with some certainty the business will continue to create sustainable
future profit and grow, from that it's pretty easy to work out its
intrinsic value. 

then you pound when  it trades lower than intrinsic values factor in
margin of safety.

Figures tell you one story but without understand the business you will get it wrong.

say I got 2 students who deliver me similar tops mark...which one do I pick?
one is natural smart and dont study much and the other study hard each day
anything new come up he take time to understand it and work at it and in the end it

achieve him the result...after looking at this background I pick student number 2  knowing anything new hit him,  he has the patient and time to digest and get results.

Companies are the same, some are lazy and has fancy model but with luck it delivers them decent results..the other work on their business, manage their cost, capital structure etc.. 

when **** hit the fan I know the one that works hard on their business will prosper and I have a very good night sleep each day.

GFC hits I have very sound sleep only to get up every day to see what other bargain I can acquire  

has JB hi-fi ever trades on the Cheap? has The Reject Shop has ever
trades on the cheap? has Dominos, Blackmore, Flight Centre, has WOW ever trades on the cheap?

I be missing out lot and lot of money if I wait for them to trade cheap.

but then when awesome business trades on the cheap people abandon them
like FLT or CCP citing various threats  go figure!

I do both good companies when abandon by the mass and good company
trades higher than market multiples as long as I can come up with a ball park figure about their intrinsic values.

I have a stock I'm accumulating now that doesn't trades on a cheap.
in fact it only cheap on the year it listed, it price much higher than
when it was listed, do I think it's expensive ? hell no, because my
intrinsic values tell me it's trades 40% below its true value.

A few more years time with a few more double digit results, it will
get attentions.

like NVT gets now but no one know when it trades under a boring name
like IBT education

Picking stock is half art half science so you sometimes get it wrong
but with a strong frame work and discipline you got right a lot more time
than you got it wrong and you don't need to pick many.

sometimes it takes me 1 year to buy just one stock other times
I just dont buy anything new and add more to what I got when market panic
and trigger business I already know very very well selling really really cheap.

Discipline, margin of safety and conviction easy said, hard in practice.
and until you practice it you tend to get less than desirable results.

and you see that Warren Buffett buy GEICO when it has a short listed life after he identify it has  a
supreme business model  and he can predict with confident its earning due to its model


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## Pivotonian (26 February 2010)

ROE,

Clearly you're completely sold on NVT, and I'm not trying to change your mind.  I admire NVT - its a very strong business run by some smart operators.  I really like its recent US expansion too, pretty smart if they can make it work considering the upside opportunity there and the risks facing its domestic business.

All I am saying is that:

1. Its very different to APOL.  About the only thing they have in common is that they're both education businesses, but they use very different business models and operate in very different markets.  So NVT might end up with a similar growth profile to APOL, but certainly not for the same reasons.

2. Despite its international expansion it remains highly exposed to the international student sector here in Australia, which is facing some pretty big risks right now due to India issues, changes to visa requirements and even capacity constraints at universities.


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## Muschu (26 February 2010)

From NVT's report of 31 December:

"_Up to 10 more new UP college agreements could be executed over the next 12 months
•
Negotiations are underway in Australia, the UK, Canada and the USA"_

I think 5 new agreements have already been signed this year.  To get into Massachusetts, the home of Harvard, is a staggering achievement in my view. 

Since the float, to my knowledge, there has been no report that has not been better than the one previous.

And, as indicated above, it is my view that NVT's links with Universities of high repute have supported its reputation with students from all over the world.  Student numbers just continue to grow.

A good read of that December report may be of interest to others.

Regards

Rick


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## BuffettFan (26 February 2010)

Re: NVT
Obviously, I didn't explain my point very well.

For a retiree's model share portfolio, I believe that the best chance of success is to follow the Buffett approach, which is to use fundamental analysis in the following way:

Step 1: find companies with good fundamentals, good management etc in an industry that you understand ( many of the previous comments seem to agree that NVT falls into this category, and I see no reason to disagree).

Step 2: buy it when the price is below the intrinsic value (the difference is called the margin of safety). I believe that NVT fails this test at current prices. If you disagree, please post your intrinsic value calculation for the rest of us to review.

If a company doesn't pass both steps, find one that does.


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## Muschu (26 February 2010)

BuffettFan said:


> *My experience at designing a model porfolio.*
> 
> 
> I created my own indexed fund in 1993 when I was too busy at work to devote the time to investing. I just bought the top 10 stocks and made their weighting in my portfolio proportional to their market capitalisation. I hardly ever sold anything, just rebalanced by buying when I added more money. It worked a treat, followed the All Ords closely enough and I could control the capital gains tax effect of sales. After taxes and fees, it beat most of the fund managers year in year out. I (modestly  ) think it has to be the best return per hour of your time spent of all the investing techniques.
> ...




Hi BF

I'll think on your latest post but I tend to think I manage our super fund rather differently.

I am OK with trading regularly -- don't love it but do it. 

If you have held the top 10 stocks since 1993 then clearly you have done well.  No question.

At the same time if you had sold these in January 2008 and bought them back in March 2009 then perhaps you would have done even better and hold many more of the same shares.

I have essentially left the market 3 times and re-entered later.  NVT is the only stock I have always held some of but I buy and sell this one too.  It's a low volume trading stock and I watch the swings closely.  

NVT floated at $1 in December 2004 and is now almost $5.

In comparison, as examples of much larger companies [which you may have included in your top 10] in that period:

BHP has gone from $20 - $40
CBA from $36 to $51
WES from $36 to $32
WOW from $15 to $27
TLS from $5 to $3
QBE from $15 to $24.

Someone [and they are out there] who retired in late 2007 and bought the top10 may not be a happy chappy at this moment in time.

But, at the end of the day, it is all a matter of personal preference. I'd be delighted to buy and hold but, right now, don't see sufficient advantage.

Thanks 

Rick


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## ROE (27 February 2010)

BuffettFan said:


> Re: NVT
> Obviously, I didn't explain my point very well.
> 
> For a retiree's model share portfolio, I believe that the best chance of success is to follow the Buffett approach, which is to use fundamental analysis in the following way:
> ...




I think this thread is getting out of hand of the retiree portfolio

it's probably my fault so I post for the last time on this and let
retiree continue their discussion

I'm 30 years away from retirement.

If you read my previous post I said at this price NVT isnt cheap and I doubt it get any cheaper if it continue delivers growth in the next couple of years

and then again it could reduce earning and price plummet, no idea where it is
heading and that the risk reward ratio of the market.

Everyone has reasons to sort out the best from the ordinary and 
people can be in disagreement but doesnt mean either of them 
right or wrong just different ways at looking at the same stock... 

The reasons I hold NVT because there is little incentive for me to sell
or many good reasons to do so.

1. Right now the yield is very good with the initial purchase price

2. I sell it I get capital gain tax and I end up with a $4 stock 
   or under after tax is paid

3. NVT can go down to $4 and I can wear it easy and maybe increase  
   holding depending on how I see it then. 
   Selling now is the same as holding it hitting $4 or lower, so no benefits

4. There isnt many stock I can find now that i could put my NVT 
    money toward and I got enough dividend and income from other sources  
    keep pile up for me not to worry about selling NVT if i find 
    a compelling stock and need the money.

5. I will sell most of my stocks one day but not in the near future 

6. I'm not a trader, I'm an investors in quality business and as long as the
    business remains a quality business I'm remain a holder. 

   buy and hold doesnt apply any more and all sort of noise around it but I'm
   a different beast

   I do according to my rules not some newspaper/magazine rules.

   I find that if i dont have strong framework to stand behind me I get
   sleepless nights from the noise and my decision easily get distracted...

   I dont always make the right decision but I stick with it thick and thin   
   and  I have my own benchmark when I think I made a booboo 
   decision and withdraw and try to learn from the mistakes.

   I dont think I ever stop learning, not now, not when I retire...

   a decision hasn't been stella is CAB I bought a fair bit with average price
   $5.50 some 8 months ago,  it under-perform the benchmark in that time   
   but should I sell when it hits $6  no too sort of a timeframe for me to 
   judge....
   In a few years I either learn to regret the decision or party with rewards.
   Till then I collect 34 cents dividend a share, better than cash in the bank 
   and that is good enough for me right now till CAB sort out their mess :=)


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## BuffettFan (28 February 2010)

Re NVT: my previous comments were aimed at someone purchasing for a retirement portfolio. Yes, I agree that if you already own the stock and you aren't retired (ie paying higher tax rates) the capital gains tax is a significant factor to take in account.

As my final comment for this thread, I repeat my major point: I believe it is vital to include some sort of intrinsic value calculation before buying (or selling) a stock - does anyone do it? If you do, I would like to learn more about the pros and cons of the various techniques.


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## Muschu (28 February 2010)

BuffettFan said:


> Re NVT: my previous comments were aimed at someone purchasing for a retirement portfolio. Yes, I agree that if you already own the stock and you aren't retired (ie paying higher tax rates) the capital gains tax is a significant factor to take in account.
> 
> As my final comment for this thread, I repeat my major point: I believe it is vital to include some sort of intrinsic value calculation before buying (or selling) a stock - does anyone do it? If you do, I would like to learn more about the pros and cons of the various techniques.




Well BF, a brief response to your final comment on this thread:

I am retired, in the pension phase of our SMSF, and tax is not an issue.

I am an investor who chooses to use professional support to select stocks for investment.   As I lean significantly more towards technical analysis I use the services of a professional chartist.  For intrinsic value I seek the views of an experienced investor who understands this area far better than me.  Neither is a financial planner or broker. 

As for an actual calculation of intrinsic worth the following website might be of  interest to some others. And it might not.

http://www.moneychimp.com/articles/valuation/buffett_calc.htm

In terms of a model portfolio in this currently shakey period my personal view is that cash holds the highest intrinsic value.  This and NVT constitute our SMSF. [NVT has its own thread and need not be investigated here any further unless others continue the discussion]. 

I will re-enter the market when advised that the timing is right and when advised which stocks represent best value.

As I have tried to say - this is the approach that best suits me and of course others elect different paths.  I am certainly not saying that my way is any better than those chosen by others. 

Regards

Rick


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## Julia (28 February 2010)

BuffettFan said:


> Re: NVT
> Obviously, I didn't explain my point very well.
> 
> For a retiree's model share portfolio, I believe that the best chance of success is to follow the Buffett approach, which is to use fundamental analysis in the following way:
> ...




I don't really see why a retiree's p/f should be particularly different from a p/f at any other stage of life, apart from keeping at least three years' income in cash at all times.  And always having as a priority the preservation of capital in any significant downturn.

 Assuming the retiree to be self funded, you need to keep the invested capital growing to cover inflation and the increasing costs of getting older.

I appreciate that many people favour the intrinsic valuation approach.
Personally, I prefer to follow the price action, buying into uptrends and selling when they are exhausted.

Rick has explained why he is so happy with NVT.  The SP has grown so he has made a good profit.  There really doesn't have to be anything more to it than that.

You can own companies with the greatest fundamentals in the world, but if market sentiment isn't with them, you are simply not going to make money.


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## Muschu (1 March 2010)

Nice summary / encapsulation Julia.  Thank you.


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## Muschu (25 April 2010)

Just fillling a few quiet moments with a bit of basic research.  I was trying to identify stocks that have shown growth of 10% or more AND a reasonable
[4%+ say] ff dividend since January of this year.

There is probably a simple way to do this [and if you know of one then please advise ] but I came up with 4 such stocks.

These were 

CTX
NVT
ANZ [just] and
LYL.

The first 3 of these I hold.  LYL I sold and wish I had not.....

I'd be interested in any additions others may be able to include in such a list..

Rick


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## So_Cynical (25 April 2010)

Muschu said:


> Just fillling a few quiet moments with a bit of basic research.  I was trying to identify stocks that have shown *growth* of 10% or more AND a reasonable
> [4%+ say] ff dividend since January of this year.




Growth as in share price growth or do you mean revenue or profit?


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## Muschu (25 April 2010)

So_Cynical said:


> Growth as in share price growth or do you mean revenue or profit?




Sorry SC - I meant SP growth.


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## So_Cynical (25 April 2010)

Muschu said:


> Sorry SC - I meant SP growth.




Ok so in that case then you can probably add HDF to your list, average SP in Jan was about 1.17 and now 1.37 and pays a 3 cent divi 4 times a year....Also VRL would prob qualify, average SP in Jan was about 2.15 and now 2.46 paying FF divis twice a year.

Should also disclose that i hold both and have done since mid/late 09...and while were at it, on the smaller cap front i hold another that qualifies, SND was around 38 cents in Jan and now is 43 cents, pays 2x ff divis...also SIV - Silver Chef, would easily qualify. (don't hold)


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## awg (25 April 2010)

here are some that appear to meet your stated criteria.

( >10% SP rise in last 3 months & Div > 4% @100% FF )

cna... one that got away

fri, rhl, smx, ahe, sev, vrl, boq, abc


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## Muschu (25 April 2010)

Thanks for the replies - gives me some research to do.

SMX is another one I had and let go -- pity.


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## Julia (25 April 2010)

Muschu said:


> SMX is another one I had and let go -- pity.



Rick, I did the same.


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## Muschu (25 April 2010)

Julia said:


> Rick, I did the same.




The wisdom of hindsight Julia... But we can't win 'em all can we?   

LYL is the one I really wish I'd held.  The chart seems solid but just going sideways now.  

[I don't mean to suggest that dividends "rule" our portfolio by the way.  Most of the stocks we presently hold pay no dividends at all.  But if you can get dividends + SP growth in retirement (when no other income is regularly received) then that is "nice".... although expectations need to be reasonable - with time left for other interests or an afternoon nap....]

R


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## Muschu (26 April 2010)

awg said:


> here are some that appear to meet your stated criteria.
> 
> ( >10% SP rise in last 3 months & Div > 4% @100% FF )
> 
> ...




FRI in particular looks interesting.  Seems to be near an all time high and spiked in April after an announcement.  Housing construction in mining areas is an appealing sector.  There's also a gap in the chart.  If this became available under $1.15 I'd be attracted to it.

Thanks again.


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## brianwh (9 May 2010)

Intersted to know how SMSF holders are responding to this latest correction in the equities market. I imagine some have been quick enough to lighten up before the fall. Are others still considering selling further? Or is this buy time?


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## Muschu (9 May 2010)

brianwh said:


> Intersted to know how SMSF holders are responding to this latest correction in the equities market. I imagine some have been quick enough to lighten up before the fall. Are others still considering selling further? Or is this buy time?




Started going significantly further into cash 2 weeks ago Brian.  Expect to continue to do so short term.


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## Julia (9 May 2010)

What is your own view, Brian?


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## brianwh (9 May 2010)

Julia said:


> What is your own view, Brian?




Had planned to sell down (by about half) holdings in ORG, STO WES & WPL and all of IAG and TAH - but dithered and now think I'll take the risk that the market has overreacted and long-term fundamentals are still OK. Still want to sell into a rally if there is one in the near future and will be looking particularly at anything whose price is vulnerable to Govt regulatory change.


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## Julia (9 May 2010)

brianwh said:


> Had planned to sell down (by about half) holdings in ORG, STO WES & WPL and all of IAG and TAH - but dithered and now think I'll take the risk that the market has overreacted and long-term fundamentals are still OK. Still want to sell into a rally if there is one in the near future and will be looking particularly at anything whose price is vulnerable to Govt regulatory change.



I understand what you mean about the dithering:  I had a fairly fraught 24 hours before deciding to sell everything except CEY and MND mid last week.
Subsequently sold those as well.
My basic plan is to always protect profits and preserve capital.
Many other approaches which are also valid, and my timing may turn out to be quite wrong.


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## Muschu (9 May 2010)

I think the hardest lesson I have learned is that sometimes it is best to sell at a loss - before it becomes a bigger loss.

So I offset profits against losses and hope to come out in front.

Brian,  I sent you a detailed PM about my approach.  I suspect we need to all develop a basic strategy - especially as we _gently_ age [I'm almost 65].  

Julia taught me a great amount and we each need to find our own path.  I think mine and Julia's share some similarities.  

These are exceptionally volaltile times -and I suspect nothing is about to change soon.

If you can grow your capital then that is great.   Next best is to preserve it through cash.  

Holding losing stocks will, in my view, only preserve stress .

I have many friends who have left their money with percentage based financial advisors since the crash began.   That's not my scene anymore.  

I have a strategy in mind when I no longer want to give the time to swing trading. And I may need to adopt that soon as there is far more to life than money.

Maybe you need need to be definitive in your approach?  [I hope it is OK for me to say that].

Best wishes

R


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## brianwh (10 May 2010)

Julia & Rick

It is clear to me that I need to understand or deal with the "sell" part of operating in the equities market. I have recently read Weinstein's book and found it giving excellent insight but as yet haven't developed a "strategic plan".

Today's bounce has destressed me a little bit but I still plan to lighten up on some of my holdings.

Thanks for your replies. Cheers


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## Muschu (10 May 2010)

brianwh said:


> Julia & Rick
> 
> It is clear to me that I need to understand or deal with the "sell" part of operating in the equities market. I have recently read Weinstein's book and found it giving excellent insight but as yet haven't developed a "strategic plan".
> 
> ...




Thanks Brian.  Read Tech/a's post today on the XAO thread.  I'm not saying he is right but I agree with him.  Could be wrong of course --  there is no certainty in this business.

At the time of sending this it appears the DOW will rise tonight.... for how long I have no idea.

Regards

R


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## cutz (10 May 2010)

Muschu said:


> Thanks Brian.  Read Tech/a's post today on the XAO thread.  I'm not saying he is right but I agree with him.  Could be wrong of course --  there is no certainty in this business.




The bit about a short squeeze then back down to 4100 ?


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## So_Cynical (10 May 2010)

The charts over in that thread also show 8 to 10 weeks between the tops.

If you concentrate on the bottoms and the negativity you miss the tops...and it becomes all about the bottoms and hanging on to what you have, and not taking advantage of the market machinations.

The market is just as likely to see 5100 before it sees 4100...but if all your attention is on the 4100 you have no hope in hell of getting anything out of the 5100.


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## Muschu (10 May 2010)

cutz said:


> The bit about a short squeeze then back down to 4100 ?





Yes.  

Whether the next move is towards 4100 or 5100 [crystal ball misplaced] I figure, and this suits our position but not everyone's natuarally, that being predominantly in cash leads to a better sleep pattern.

SC - I gather you did read my reference to there being "no cartainty"?


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## cutz (10 May 2010)

Gotcha Rick,

I guess it's always important to assess the downside and hold a position that's best suits the individual.


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