Personal Investment Strategy

[KnowThePast]

Re: Personal Investment Strategy Help

I have picked up a couple of new positions,

SIP - I was happy to pick these up for $0.57, i think the market over reacted a bit to their latest results and otherwise they meet my criteria for a buy, happy to pick up the yield and wait for the growth I see coming here.

ITD - a little known micro cap that have a great little business, perhaps the lack of liquidity would scare some off, but with a long term view I am less concerned about liquidity than the strength of the business. Picked up a parcel at $0.30.

I also made my first serious mistake, it was of course one created out of emotion and human psychology rather than an error in my actual analysis. I had been discussing a new strategy to apply to a small amount of my capital, it was a potential alternative way to have some more involvement in the market aside from my long term investment portfolio.

I got to excited by the potential, my desire to apply the new strategy combined with my impatience meant I ended up applying it to entirely the incorrect type of share. Classic case of FOMO! Anyway, almost straight after purchasing the parcel I started to feel uncomfortable with the decision, (something i have not felt with any of my other buys), I went to sleep realising I needed to understand what caused me to make the poor choice and document it to avoid repeating it.

This morning I woke up and on the document i record my trades, with reasons for purchase, exit strategies and notes, I documented where and how I had gone wrong. Then I placed a sell order for the shares and managed to get out with a small profit and a big lesson!

I guess if I can learn hard lessons along the way without losing capital, then thats a bonus. I will certainly be applying the learnings of this mistake in future.

Hi galumay,

Our timing seems to still go in sync. Both bought CAB as first investment on the forum, both made a mistake in September that we sold out of, and, now, both looked at ITD.

I have to say I spent quite a bit of time looking at ITD and the more I looked at it, the more I liked it. What is stopping me so far is that BOTH founding directors are selling large chunks of their shareholding. Normally, the liquidity of the stock would not allow them to do so, but the buyback conveniently does.

This is not to talk you out of it, I am still undecided on whether to buy or not. Directors selling is generally not as strong of indicator as directors buying. But it is a red flag, especially if it's in large quantities, and both of them. Would love to hear your opinion on it!

If you don't mind me asking, what was your stock that you sold as a mistake? Mine was PMP.

 

[galumay]

Re: Personal Investment Strategy Help

KNP, thanks for the feedback. I did study the movement of director's interests. In the end I was comfortable because the sales actually represented such a small proportion of the shares they hold - Hobbs sold about 2m of his 34m shares. The other director sold about 1.2m out of 10m.

As far as I could tell they actually weren't picked up as part of the buy back but sold on market.

Generally i like share buybacks as a way to increase shareholder value and ITD have done well for shareholders with this one.

The share I made the mistake with is one I still hold, it was just that the strategy I applied was totally inappropriate for that share. As I said, I was lucky enough to be make a small profit and taught a lesson!

BTW, really enjoy reading your updates on your thread and following your journey.

 

[galumay]

Re: Personal Investment Strategy Help

One of the other things about the directors selling shares I forgot to mention in the post above, is that it also helps maintain liquidity as the share buy back scheme reduces liquidity.

 

[galumay]

Re: Personal Investment Strategy Help

I felt my portfolio was a little unbalanced with a bias towards smaller caps, so I have been waiting for an opportunity to enter some bigger caps like WOW, TLS and QBE etc.

Last week I felt ANZ were good value for an entry and picked up a position of my standard size of $10k, up nicely this week and I am comfortable with the buy within my overall strategy.

To summarise my portfolio is currently,

ANZ
CAB
CDA
ITD
MMS
MOC
NWH
SIP
SND
TGA

Speculative portfolio is,

AHZ
CEL

 

[jjtrader]

Re: Personal Investment Strategy Help

I focus on:

* Consistency of the dividend payments - much prefer a company that is increasing the dividend each year

* Blend of past and future earnings / dividend yield

* Payout ratio - the lower the better as it makes the dividend much more stable


Hi sydboy.
I am just starting to build a long term dividend based portfolio, I will be reinvesting all dividends to compound and making regular contributions to dollar-cost average. it sounds like you know a bit about what to look for in a stock to increase the likelihood of future dividend payouts. After much research, I will tell you what I am looking for.
1.) Has to have paid dividends consistently for 10 years
2.) has to have increased dividends by more than 4% consistently for 10 years
3.) i want to put some value on the p/fcf ratio. but I dont know what to look for with this. ie whats too high/too low
4.) div yield above 3%

Is there anything else that is crucial to this type of analysis that I need to include ie payout ratios/debt/equity etc.
I started this analysis with about 20 different fundamentals and it was a lot of work so I decided that I needed to simplify it a bit. I am interested in what you look for. What would you call a low payout ratio?

 

[galumay]

Re: Personal Investment Strategy Help

I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.

The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.

I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.

What are others doing with their dividend streams?

 

[coolcup]

Re: Personal Investment Strategy Help

I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.

The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.

I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.

What are others doing with their dividend streams?

Hi galumay

You probably already know this but a lot of companies have dividend reinvestment plans through which you can automatically reinvest your dividend into their shares sometimes at a small discount to the prevailing market price. The upside is that you can increase exposure without brokerage and perhaps with a discount. The downside is you are not timing your investment decisions as freely as you otherwise might.

Cheers

 

[galumay]

Re: Personal Investment Strategy Help

Hi galumay

You probably already know this but a lot of companies have dividend reinvestment plans through which you can automatically reinvest your dividend into their shares sometimes at a small discount to the prevailing market price. The upside is that you can increase exposure without brokerage and perhaps with a discount. The downside is you are not timing your investment decisions as freely as you otherwise might.

Cheers

Thanks mate, none of the companies I am currently invested in offer that option.

 

[coolcup]

Re: Personal Investment Strategy Help

Thanks mate, none of the companies I am currently invested in offer that option.

ANZ offers a DRP from recollection.

 

[DrapSnagon]

Re: Personal Investment Strategy Help

Hello galumay

Can I chip in here?

I felt my portfolio was a little unbalanced with a bias towards smaller caps, so I have been waiting for an opportunity to enter some bigger caps like WOW, TLS and QBE etc.

Last week I felt ANZ were good value for an entry and picked up a position of my standard size of $10k, up nicely this week and I am comfortable with the buy within my overall strategy.

To summarise my portfolio is currently,

ANZ
CAB
CDA
ITD
MMS
MOC
NWH
SIP
SND
TGA

Speculative portfolio is,

AHZ
CEL

I have an opinion on several of these, FWIW ....

• ANZ: The best of the banks, subject to what they say tomorrow
• CAB: Hate it with a passion. Their business model is broken imho and it's been in a downtrend since 2007. The technicians might like to think there's support at 360c or so, but I reckon that's just a pause on the road to oblivion.
• MMS: Far too risky imho. A competitor (Fleet-something) is about to float with a similar business model, which ought to take capital for MMS off the table. Regardless, there's also the possibility that the Abbot government will wake up one morning and decide that the previous Labor idea of trashing novated leases wasn't such a bad idea after all.
• SIP: Fabulous headline yield, but I worry about the prospects for generic drug manufacture in the current PBS climate. Seems like they have little upside from innovation and instead are planning on weathering the storm. I've had it on watch for six months but can't see any catalyst for it to move out of the 60c - 80c range. Certainly no indication of getting back to anywhere near the $3 level.
• TGA: Terrific pick. I see no probem with this, which puts me at odds with most of the analysts covering it. Their problem seems to be with the ticket price of things that Radio Rentals sells:- as popular electronic goods fall in price, so should revenue. I don't buy it:- this company has a long history of adapting to changing consumer patterns (browngoods -> whitegoods -> tech) and there's no reason to think they'll suddenly get worse at it. Add the recent initiatives in credit and I feel TGA is in good shape.

No opinion on the rest, but I hope this might help your thinking.

Snap

 

[KnowThePast]

Re: Personal Investment Strategy Help

I am wondering what the best way to reinvest my dividends is, I considered adding to one of my existing holdings and opening a new position in something on my watch list.

The issue with buying more shares is the brokerage costs as even if I only reinvest every 6 months its only a few grand - which is also way below my position size, but enough to change the position size of an existing parcel significantly.

I wondered whether maybe buying into something like Vanguard Index International Shares Fund would be a better strategy, it would also be somewhere i could easily and cheaply add other surplus funds to.

What are others doing with their dividend streams?

Hi galumay,

I don't treat dividends any different from any other cash.

Psychologically, I agree that it sometimes feels like dividens are income that you've earned and need to protect.

But, if you have $10k spare from your salary and $10k built up from dividends, why is investing in ANZ a good decision with the first, but not the second...

This is all assuming that you want to keep that money in shares.

 

[galumay]

Re: Personal Investment Strategy Help

Hi galumay,

I don't treat dividends any different from any other cash.

Psychologically, I agree that it sometimes feels like dividens are income that you've earned and need to protect.

But, if you have $10k spare from your salary and $10k built up from dividends, why is investing in ANZ a good decision with the first, but not the second...

This is all assuming that you want to keep that money in shares.

Hey KTP, I think you have misunderstood me, I dont feel any different about the dividends, its just that its a fairly small amount of money, even if I invest it every 6 months - my normal parcel size is $10K, and 6 months of dividends is usually around $2.5K.

I am not keen on having an ever increasing number of different shares in the portfolio, but also aware of brokerage costs with smaller parcels hence the question about maybe using a fund.

 

[robusta]

Re: Personal Investment Strategy Help

Hi Galumay just a couple of random thoughts. You could hold onto your dividends until you see a opportunity, this could be a in a existing holding or a new position. If you are anything like me you have a few in your portfolio you wish you had invested more in plus a watch list full of businesses you wish you had a piece of.

The other alternative is to look at the old core and satellite approach with a mix you are comfortable with. This could be with something like LIC's or ETF's. In my portfolio I have recently taken a small position in both IAA and WDIV these ETF's offer a DRP at the NTA of the fund. My current strategy is to not worry about the brokerage and buy/sell spread and just allow the returns to compound. Eventually they will reach a full position size.

Here is a good article by Marcus Padley in today's Age on international ETF's

http://www.theage.com.au/money/inve...posure-with-etf-investing-20140211-32dg9.html

 

[galumay]

Re: Personal Investment Strategy Help

Hi Galumay just a couple of random thoughts....

Thanks Robusta, this past year I did just add to an existing holding once they were all in for the 6 months, I am wary of having too many positions in my portfolio so i am reluctant to open too many new ones.

I am tending towards just using a fund like Vangaurd for the dividends, that way I can just add them as they come in over the year and it makes it very easy to track performance of re-investment.

 

[galumay]

Re: Personal Investment Strategy Help

I realised seeing KTP's update that it was a while since I had updated my portfolio progress, its been about 9 months since I started investing,

Performance is skewed by the inclusion of my speculative holding, AHZ, performance would be more like +15% if it were not included. Obviously CDA has had quite a negative impact on performance, but I have decided to continue to hold as I remain optimistic they can turn the business around in the next few years.

Dividends for the 9 months amounted to $2576 and there was a small capital gain from a transaction that I made in error, as described earlier in the thread, $181.

As a long term value investor this measure of paper 'performance' is largely irrelevant, I guess the takeaway is outperforming the acccumulation index, otherwise I may as well be invested in an index fund and save my time and energy!

 

[craft]

Re: Personal Investment Strategy Help

Performance is skewed by the inclusion of my speculative holding, AHZ, performance would be more like +15% if it were not included.

Hi galumay

Noticed there is no cost base entered for ANZ - suspect that omission is skewing your number even more then AHZ.

 

[galumay]

Re: Personal Investment Strategy Help

Hi galumay

Noticed there is no cost base entered for ANZ - suspect that omission is skewing your number even more then AHZ.

LOL!! The danger of doing stuff quickly, before going to bed!! Not sure why the cost base was missing, its auto filled from my trading account, anyway you are right, its basically doubling my return. I will fix it and repost the image.

 

[galumay]

Re: Personal Investment Strategy Help

I have been a little tardy with catching up on an end of financial year check of how my portfolio is tracking, I am busy setting up an SMSF as well as starting a new job after being made redundant from my last job so life has been busy!

Here is a snapshot,



I am not sure what if any conclusions to draw from such a short time span with a long term investment portfolio, first and obvious point is that if AHZ is removed (which is not an investment share, but a speccy), performance was flat. (approx 1.7% in unrealised capital growth excluding AHZ.)

This was because of the negative impact of 3 shares mainly, CDA which as we know fell well out of favour, I still like the long term prospects and continue to hold having averaged down with some of my dividends reinvested.

ITL has also been a very poor performer since purchase, but nothing I can find justifies such a fall based on fundamentals, so I continue to hold and expect it to do fine in the long run.

The last under performer was NWH, they went well earlier in the year but got dragged down with the other mining services companies, I also reinvested dividends from my portfolio into increasing my position in NWH, I continue to rate them one of the cheaper shares in my portfolio and expect time will be kind to this investment.

The standout performers have been MOC which surprised me with its strength, its been very solid and the nice divvy adds to the warm and fuzzy feeling with this one!

SIP has also done very well, again I wasnt expected such a quick turnaround, but its again nice to see another solid performer.

SND is one I have been very happy with, I got in at a really good price and news continues to be good and the business is just one of those small, tightly held businesses that are run really well and keep on keeping on.

Dividends for the year amounted to $4794 fully franked, which represents about 4.6% or 6% grossed up.

I havent bought or sold anything since the end of October other than adding to existing holdings as described above.

I cant see much activity this year as I will be focussing on the SMSF and looking for investment opportunities for those funds, also we are having a 'gap year' from the end of this year so I wont be adding to savings for a while!

 

[galumay]

Re: Personal Investment Strategy Help

The last week has not been kind to my portfolio! I am sure I am not alone in that outcome though.

Performance slipped behind my benchmark, the AXJO, this month, portfolio is down 4.25% for the FYTD and the AXJO is down 1.18% for the same period, so outperformance in the wrong direction this month!

The plunge in NWH's price is the biggest impact on my poor performance.

No shares were sold or bought since i last posted.

 

[Wysiwyg]

Re: Personal Investment Strategy Help

G'day. Got a portfolio snapshot for a then and now perspective?