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

[freddy2]

With competition coming to the pokies and racing TAH are finished. All they will have with-in 10 years is crappy casinos on the Gold Coast and in Sydney. They got cosy with their monopoly ripping off customers (approximately 20% takeout vs 5% for Betfair) instead of innovating and becoming a leader in the field. Good article about this situation: http://www.news.com.au/perthnow/story/0,21598,23516989-5005406,00.html .

As for a good reliable stock I would suggest WOW

 

[Julia]

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?

Whiskers, I had BBI for a while. Sold it when the SP wasn't going up.
If you have a look at this and ENV over two years (including of course the rampant bull market) the SP has gone sideways or down. I guess you'd have to do the calculations to decide whether the dividends outweigh the loss of capital. Couldn't your mother access a greater income by (when stability and growth return to the market) buying good growth companies, and simply selling a few shares when she needs some injection of funds? If she has no other income she's unlikely to be worried by the tax factor unless she has very large holdings.

 

[vishalt]

Would you rather buy CBA at $62 or $40?

Would you rather buy Westpac/ANZ at $31 or around $22?

I know what I would choose!

These things are hotcakes for a long-term buy, I think we still got further in the turmoil to go though but I would like to see the banks forming a base around these SP's which would give confidence about stepping in the water so to speak!

 

[Bill M]

It is very hard to be positive about the banks when many factors are against you. The charts, sub prime, bad loans, investor sentiment etc isn't good. I tend to think long term and never short term and as such make my investments accordingly. I agree with vishalt why would anyone buy CBA at $62 but not at $42? I don't know but to me there is great value in them for the long term and during this crash you just baton down the hatches and collect the dividends until the good times come along again.

Some facts, this is the second worst banking/financial crash since the 1950's. Only the 1974 era was worse. Things were really much worse then, the banking sector dived buy -67%. Following on from there the period from 1974 to 1987 the banking sector increased by a massive +1,068%. Then came the 1987 crash and the banking sector dived again -39%. From 1987 to 1990 it went up +86%. There have been several ups and downs since then but the ups are many many times better than the downs.

To me this is the golden opportunity to buy the banks and I have been doing so. I would never have bought CBA at $62 and didn't but at $41 it's a steal.

I bought CBA for $10.30 in 1996. Today it is $41 even with all the Doom and Gloom around, that's a 400% increase in 12 years. They always paid good dividends in the mean time (tax free too), you need to be doing something a lot better to beat this. You can go on Commsec or any other broker site and just check back to the dividends paid to any year you like and you will see that almost every year they keep going up. Sure the share price capitulates from time to time but they always pull out their slump and surpass their previous highs. Think not next week or next Month just ask yourself where do you think the share price will be in 5 years or 10 years time, good luck with your investments.

 

[Sean K]

News coverage on this topic here:

Safe as a bank, but give it time

WEEKEND FORUM: Tim Blue | April 12, 2008

WITH bears roaring on equity markets, share brokers failing and banks' bad debt mounting, Weekend Forum thought it timely to take a critical look at the banking sector.

Banks have been an investor's favourite, but no longer, with valuations savagely marked down as credit concerns rise and funding costs tick up. Yet the low share prices look tempting.

We sought the views of four experts on the banking sector, posing the question: is it time for a personal investor to start buying the banks again?

Our respondents are Mark Topy, a banking analyst in Melbourne with share brokers Patersons Securities; Angus Geddes, managing director of Fat Prophets Funds Management; Roger Montgomery, a director of Clime Asset Management; and Brett Le Mesurier, banking analyst at stock broker Wilson HTM.

.........................

 

[Nicks]

In response to the original question posed, here are my thoughts:

TOL - excellent stock (I own) but the dividends are crappy. Buy for growth especially at current prices.

TCL - this will give you great and safe returns. Dividends are high yielding and the investment is safe (people need to drive on roads). The have growth potential too as they make inroads (pun) into toll roads overseas.

AFI - Great diversified stock. Gives good reliable dividends and is relatively safe as it is diversified. Expert investors and Management fees are low.

APA - Another high yielding dividend stock that is safe and I think will have excellent share price growth from current levels. Dividend yield is something around 9% at the moment and it is a fairly safe growth bet at current prices (people need Gas and Gas usuage is growing).


My picks for your requirements TCL and APA. High dividend yields with growth potential. Good for retirees and non retirees!


Cheers and hope this helps
Nicks

 

[Bill M]

News coverage on this topic here:

Kennas, that is probably the best article yet on the banks. Thanks for posting it, a very informative and well balanced view from several experts, cheers.

 

[vishalt]

Nice post Bill M and thank you for sharing that article Kennas, good spotting .

Personally I believe there will be some more to come, the banks may halve in price (or a little bit worse) but they will have the strongest recovery when things stabilise.

Personally I am going to pump in the cash into Westpac & BoQ slowly and steadily so I don't hog it all at one price incase Westpac goes down to $17 and BoQ to $11.

What I am amazed at though is how most US banks have not been as heavily hammered as the Aussie banks.. except for Citigroup, check out JPMorgan, Bank of America, Royal Bank of Canada and such and they have been nowhere as scathed as us even though they have performed nearly as good.

But the British banks like HBOS are under media speculation, Barclays is down 50%, Deutsche Bank is down from 110E to 75E.

 

[Muschu]

Thanks Nicks, kennas and Bill. Good to read a variety of views. Informative article link kennas -- there seems to be some consistency of view there, in amongst the differences.
I haven't had shares for as long as Bill and some major holds, such as CBA, were bought only last year. I've had WBC and ANZ for longer.
I've also been looking at some of the shares you mentioned Nicks. I've been watching TOL in particular.
My original thinking was [a] whether to take some, not all, funds out of banks and move them to shares such as TOL, LEI .. etc.
And another corner of my mind was thinking of switching - specifically - selling ANZ and moving to WBC.
I could do [a] and/or or [c] -- nothing.
Interesting days aren't they?

 

[rhen]

Personally I am going to pump in the cash into Westpac & BoQ slowly and steadily so I don't hog it all at one price incase Westpac goes down to $17 and BoQ to $11.

Any reason why BOQ over, say, SGB which has better value (according to some experts), and better dividends, to mention a couple of criteria retirees would be, perchance, interested in?

 

[Knobby22]

The time for selling banks has past. If you still own them you might just as well keep them. Bank of Queensland and Commonwealth are the best and safest. I sold mine a yeat ago and bought back Commonwealth recently when the got to $28.

I would also hold stocks that can handle the A$ dropping long term.
e.g. CSL and Woodside.

 

[overule]

Bank of Queensland and Commonwealth are the best and safest. I sold mine a yeat ago and bought back Commonwealth recently when the got to $28.

CBA didn't dropped to $28 this year and last year. Probably, you mean $38 ?

 

[vishalt]

Any reason why BOQ over, say, SGB which has better value (according to some experts), and better dividends, to mention a couple of criteria retirees would be, perchance, interested in?

Firstly I don't listen to "experts", I listen to amateurs (mainly elderly columnists) who have been investing like me but for a long time and ol - have they had better recommendation than analysts ever have.

I like BoQ simply because the company has good liquidity and a lot of retail deposits from Queensland and logically - Queensland is a booming state full of mines and rich people happy to splurge on McMansions to bask in the year-round sunshine (not to mention the coast). It is also a takeover target.

I like Westpac because the bank is a very liquid major, I'm happy with their business units. Also with Gail Kelly onboard the bank is bound to get good publicity! Also because my dad has Commonwealth Bank and we don't like NAB or ANZ.

St George is a good bank with a solid mortgage unit and wealth management but it was either this or BoQ and I like BoQ more.

 

[davo8]

Hi
I've been retired for a few years and we have about 25% of our portfolio with the banks.

Then you're hurting, and there's more pain to come. The credit crunch and deleveraging of the US economy are generating astronomical losses that will hurt banks worldwide, and ours are not immune.

The financials sector is toxic and we definitely haven't seen the bottom yet. Check the XXJ if you don't believe me.

 

[Muschu]

Then you're hurting, and there's more pain to come. The credit crunch and deleveraging of the US economy are generating astronomical losses that will hurt banks worldwide, and ours are not immune.

The financials sector is toxic and we definitely haven't seen the bottom yet. Check the XXJ if you don't believe me.

Thank you Prophet Davo8. I have no reason to disbelieve you although others disagree with your general advice.

I admit to having some difficulty with the way in which you express your opinion. The banks have recovered before and I posted this thread in the context of long-term, perhaps retired, investors.

It is very clear [obvious, apparent etc], and none of us need to be told, that the financials sector is suffering.

Perhaps you have a more definitive answer as to the context in which to the question was posed? Or to where the bottom is?

With 25% of our portfolio, over several years, in finance stocks -- with some ins and outs - yep, that sector has suffered. The other 75% has, in the main, over several years, held its own.

R

 

[dalek]

Rick62
The obvious truth is that no-one knows what the bottom could be for Aust. banks, but if you are a long term investor / retiree with an income stream from investments and a cash stash to tide you over for the next couple of years, it is purely an academic exercise. Even if banks go another 15-20% next week / month which some of the prophets so gleefully suggest, they will be back, which is more than can be said for a great many other ASX romances encouraged by "experts"

 

[Muschu]

Rick62
The obvious truth is that no-one knows what the bottom could be for Aust. banks, but if you are a long term investor / retiree with an income stream from investments and a cash stash to tide you over for the next couple of years, it is purely an academic exercise. Even if banks go another 15-20% next week / month which some of the prophets so gleefully suggest, they will be back, which is more than can be said for a great many other ASX romances encouraged by "experts"

I'm inclined to agree completely dalek. I found the previous post pretty useless and one which was not making an attempt to address the question asked.
Thanks
Rick

 

[davo8]

Thank you Prophet Davo8. I have no reason to disbelieve you although others disagree with your general advice.R

Nobody currently investing has any experience of a situation like the current one. We and the world have had 20+ years of credit-fuelled growth, which has produced spectacular returns in businesses whose assets are money rather than goods, and few people here have been investing longer than that.
The credit crunch is changing that model, probably permanently.

I sold all my banks, property trusts, insurance and similar, at prices higher than they are now. I may buy back in, but the bottom is months away.
I expect the sector in future to deliver boring dividends and low growth, on P/E's of around 10-12. Since we don't know what earnings will be, we don't know the price yet. There may even be a disaster lurking.

>>>With 25% of our portfolio,

Many investors (including myself) had far more. Right now, bank interest of 8% looks quite good. There is a tsunami of losses circulating around the world, and I don't want any more than I've had!

The same goes for traders. I venture to suggest that there is not a single trend-follower making money on financial stocks. All they're doing is feeding money into the market so the big players can sell the peaks.

If you want some dismal reading, here is as good a place as any to start.
link

 

[vishalt]

when you hear people like dave08 mention all the gloom, its time to buy imo, slowly and steadily

 

[Julia]

when you hear people like dave08 mention all the gloom, its time to buy imo, slowly and steadily

Vishalt, could you explain why Dave08's remarks prompt you to feel it's time to buy?

Do you think we've reached the bottom?

Where has all that debt gone?