Retirees - model share portfolios

[brianwh]

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."

 

[Julia]

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.

 

[ROE]

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

 

[Muschu]

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

Sent you a PM Brian

 

[brianwh]

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]

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

 

[Muschu]

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

 

[sails]

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

 

[brianwh]

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

 

[Julia]

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?

 

[brianwh]

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.

 

[Julia]

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]

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]

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.

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

 

[Muschu]

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

 

[BuffettFan]

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?

 

[Pivotonian]

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

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]

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.

 

[BuffettFan]

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.

 

[Muschu]

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.