Long term investors (retirees?) -- Stick with banks?

Muschu · 9 April 2008

Hi
I've been retired for a few years and we have about 25% of our portfolio with the banks.
Yes, their dividends are good. However, if I read the views of the experienced ASF contributors, I get the impression that the growth factor will be low for quite some years.
Are there any opinions out there along the lines of switching to other "solid" / low risk shares - ones which also have a good dividend return but with better growth potential over, say, the next 3-5 years? If so, which shares would you consider?
I would be interested in your views, whether you're retired or not. Most of you are far more knowledgeable than I am.
With thanks
Rick

josjes · 9 April 2008

HI Rick

I wouldn't say I am more knowledgeble than you. But I'd like to mention a few stocks that warrant consideration in your long term portfolio:
WES, QBE (at <$24 price), TAH all are paying > 5% fully franked dividend.
I don't think you can go wrong with these companies. I hold all three in my super. Have a look at the discussion thread of these 3 companies to get a glean at what people in this forum are saying, they currently all have issues that the market doesn't like, WES (high debt to pay in current tough credit condition), QBE (current financial crisis), TAH (perceived as consumer discretionary stock heading into economic recession) but in my view these issues are surmountable and with good management in place, I am sure they can ride them out.

Muschu · 9 April 2008

josjes said:
HI Rick

I wouldn't say I am more knowledgeble than you. But I'd like to mention a few stocks that warrant consideration in your long term portfolio:
WES, QBE (at <$24 price), TAH all are paying > 5% fully franked dividend.
I don't think you can go wrong with these companies. I hold all three in my super. Have a look at the discussion thread of these 3 companies to get a glean at what people in this forum are saying, they currently all have issues that the market doesn't like, WES (high debt to pay in current tough credit condition), QBE (current financial crisis), TAH (perceived as consumer discretionary stock heading into economic recession) but in my view these issues are surmountable and with good management in place, I am sure they can ride them out.

Many thanks for that. I already have WES and QBE. TAH has been suggested to me by a very experienced person. I was contemplating CTX but the thread discussion makes me hesitate. Other thoughts [of my own or other people] concerning shares I do not have include: LEI, WOR, WDC, TTS, TOL and TLS.
Any thoughts on switching from the banks though -- or just hold on for the ride?
Rick

nomore4s · 9 April 2008

Muschu said:
Many thanks for that. I already have WES and QBE. TAH has been suggested to me by a very experienced person. I was contemplating CTX but the thread discussion makes me hesitate. Other thoughts [of my own or other people] concerning shares I do not have include: LEI, WOR, WDC, TTS, TOL and TLS.
Any thoughts on switching from the banks though -- or just hold on for the ride?
Rick

Rick just keep in mind alot of the discussions on the threads here are generally based on shorter timeframes.

If you plan on holding the banks for a number of years, I can't see any benefit in changing to the stocks mentioned especially if you original entry price on the banks is low.

My personal opinion is while there might be some downside and limited growth to the banks in the next 12-24 months, if you're willing to hold for 3-5 years the banks are a lower risk investment (depending on original entry price & things could always go wrong of course) also consider that they will have a pretty solid D/E during that time.

But please DYOR, this is for discussion only and is not advice in any way.

Muschu · 9 April 2008

nomore4s said:
Rick just keep in mind alot of the discussions on the threads here are generally based on shorter timeframes.

If you plan on holding the banks for a number of years, I can't see any benefit in changing to the stocks mentioned especially if you original entry price on the banks is low.

My personal opinion is while there might be some downside and limited growth to the banks in the next 12-24 months, if you're willing to hold for 3-5 years the banks are a lower risk investment (depending on original entry price & things could always go wrong of course) also consider that they will have a pretty solid D/E during that time.

But please DYOR, this is for discussion only and is not advice in any way.

Thanks for this. I got into ANZ and WBC at a lower price a few years ago. CBA and MQG were purchased last year and are significant losers right now.

MRC & Co · 9 April 2008

nomore4s said:
Rick just keep in mind alot of the discussions on the threads here are generally based on shorter timeframes.

If you plan on holding the banks for a number of years, I can't see any benefit in changing to the stocks mentioned especially if you original entry price on the banks is low.

First point is very true.

However, I personally would add more weight to the commodity bull, really a stage in the global economy unparalleled and great for commodities over the long-term.

Second point, I don't see the difference whether your original entry was low or not.....we are only looking at the future.

motorway · 9 April 2008

Second point, I don't see the difference whether your original entry was low or not.....we are only looking at the future.

If you bought the banks in the last crisis

eg WBC something like $3

Then it might be a consideration --------> Tax

Yes the future is what counts
But that is judged from one's own position and needs

motorway

tech/a · 9 April 2008

If you can handle the can handle the capital erosion?
If you firmly believe and am prepared to back that belief with your money (Not taking a loss doesnt mean you havent got one!).
You cant find better capital appreciation or at least minor erosion elsewhere.
Then stay as you are.

MRC & Co · 9 April 2008

motorway said:
Then it might be a consideration --------> Tax

Yes the future is what counts
But that is judged from one's own position and needs

Yes, tax considerations are needed.

I agree, best to judge from your own position and needs. I prefer capital appreciation (hence commodities), rick appears to enjoy his dividends.

Good luck!

nomore4s · 9 April 2008

MRC & Co said:
Second point, I don't see the difference whether your original entry was low or not.....we are only looking at the future.

As Motorway has said, tax might be a consideration. Also your D/E yield will be higher if you have a low entry price.

Muschu · 9 April 2008

MRC & Co said:
First point is very true.

However, I personally would add more weight to the commodity bull, really a stage in the global economy unparalleled and great for commodities over the long-term.

Second point, I don't see the difference whether your original entry was low or not.....we are only looking at the future.

Thanks for all the contributions / comments. I probably should have outlined the rest of the portfolio, but it is strong and still profitable in BHP, RIO, NVT, WPL and WOW in particular. These five [plus QBE, WES and OXR - more recent acquisitions] make up the other 75% of our SMSF.

Looks like I'm in for a ride with the banks... thanks everyone.

Julia · 9 April 2008

Muschu said:
CBA and MQG were purchased last year and are significant losers right now.

I wouldn't regard CBA and MQG as being in the same category.

Muschu · 9 April 2008

Julia said:
I wouldn't regard CBA and MQG as being in the same category.

Me either Julia. And they weren't intended to be. My typing finger was getting tired.....
Ta
Rick

Julia · 10 April 2008

josjes said:
WES, QBE (at <$24 price), TAH all are paying > 5% fully franked dividend.
I don't think you can go wrong with these companies.

Depends why you are buying them, josjes, perhaps? If it's for the dividend/franking, yes, quite good, but not for the capital gain going by the last couple of years. Even before the debt became an issue for WES, the SP wasn't doing much.
Re TAH, ditto re the SP, though it has actually being steadily dropping for most of the last year. If there's a recession, there's a school of thought that says that - although, yes you're right, it is consumer discretionary - sometimes in economic downturns gambling does very well as people seek escape from financial anxiety.
QBE has also been disappointing this year, but I'm still holding this.
Wouldn't have the other two.

And back to the original question: here are some further negative remarks about the banks.
http://business.smh.com.au/banks-become-haves-and-havenots/20080409-24wp.html?sssdmh=dm16.310158

Maybe have a look at some of the coal companies, Rick?

Muschu · 11 April 2008

And back to the original question: here are some further negative remarks about the banks.
http://business.smh.com.au/banks-bec...mh=dm16.310158

Maybe have a look at some of the coal companies, Rick?

Thanks Julia. Got any in particular in mind?
My thinking was more along the lines of what "blue chip" companies to invest in, other than the financial sector / banks, for the next several years? I'm already heavily into BHP and, to a lesser extent, RIO and WPL. Also WES - where there is a coal component.
Short-list is leaning me towards one of LEI, WOR, WDC, TOL -- or to further top-up QBE. [Why do I keep liking CTX?]
Anyway, I really don't know enough yet and will probably observe for a bit longer - checking for further experienced comments.
Rick

Judd · 11 April 2008

You could always just buy the index where you get the good, the bad but not the ugly as they drop out of the index. Have a look at STW. Total of last two distributions was $3.29 per unit.

I don't have access to a computer during my working day (flog groceries at the inverted M), so I don't have time to look at individual shares. I simply buy index funds or LICs when we have the money (send off an email in the morning and hope! )

Julia · 11 April 2008

Muschu said:
Thanks Julia. Got any in particular in mind?
My thinking was more along the lines of what "blue chip" companies to invest in, other than the financial sector / banks, for the next several years? I'm already heavily into BHP and, to a lesser extent, RIO and WPL. Also WES - where there is a coal component.
Short-list is leaning me towards one of LEI, WOR, WDC, TOL -- or to further top-up QBE. [Why do I keep liking CTX?]
Anyway, I really don't know enough yet and will probably observe for a bit longer - checking for further experienced comments.
Rick

Any particular reason it has to be blue chip?

Re coal: discussion on this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=2294&highlight=Coal

Take a look at FLX e.g. - (Noirua: thanks for comments).

Whiskers · 11 April 2008

Good Question!

My Mother is retired and has about 1/3rd of her portfolio, in banks.

I've been scrounging around some research for my mother (ASPECTHUNTLY - Etrade) and noticed, BBI - Babcock & Brown Infrastructure and ENV - Envestra, both > 12% dividend yield and HDF - Hastings Diversified Utilities > 10%, current and estimated.

I don't know much about these, in fact only heard of BBI, cos I focus mainly on small cap mining stocks... the other end of the volatility spectrum.

My Mother has no other income so tax won't be a problem.

Any Experience with these, anyone?

Muschu · 11 April 2008

Julia said:
Any particular reason it has to be blue chip?

Re coal: discussion on this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=2294&highlight=Coal

Take a look at FLX e.g. - (Noirua: thanks for comments).

Well it's prettier than red,Julia. No, seriously: by the quote marks that I put around the words "blue chip" I guess I meant something along the lines of lower [not zero] risk. I don't want speculative stocks for the major part of our retirement portfolio.

I've been doing some very basic research, partly using FNArena that a very kind person put me on to, and TOL, LEI, WOR, NWS, QBE [which I have and could increase] and even CTX look good.

I now need a prophet to tell me where the "bottom" is. All of these stocks are, to varying degrees, quite a lot above their 12 month lows.

Thaks for FLX - will check it out!

Rick

Aussiejeff · 11 April 2008

Julia said:
Depends why you are buying them, josjes, perhaps? If it's for the dividend/franking, yes, quite good, but not for the capital gain going by the last couple of years. Even before the debt became an issue for WES, the SP wasn't doing much.
Re TAH, ditto re the SP, though it has actually being steadily dropping for most of the last year. If there's a recession, there's a school of thought that says that - although, yes you're right, it is consumer discretionary - sometimes in economic downturns gambling does very well as people seek escape from financial anxiety.
QBE has also been disappointing this year, but I'm still holding this.
Wouldn't have the other two.

And back to the original question: here are some further negative remarks about the banks.
http://business.smh.com.au/banks-become-haves-and-havenots/20080409-24wp.html?sssdmh=dm16.310158

Maybe have a look at some of the coal companies, Rick?

TAH down over 20% today on news the VIC Gov't has broken the pokies duopoly enjoyed by TAH and Tattersalls. TAH apparently going to try and sue for $1 Billion in compensation. IMO I don't like their chances of legal success (which would murder the SP at that point in time if that were the case) and I don't think the SP will go anywhere *nice* in the meantime anyways with such a massively risky court case hanging over them ..

All in all, I would regard TAH currently as V. High risk until the court case scenario is resolved one way or the other - whenever that may be.

Chiz,

AJ

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