Robusta fundamental, leveraged investments

robusta · 13 March 2012

Looking at the short history of this portfolio it seems I am having trouble curbing the desire to "do something". The strategy as outlined earlier was to have a low turnover portfolio of high quality growing companies bought at bought at reasonable prices. I see no reason to change this strategy but given my impatience I propose a additional strategy to be employed as a core and satellite approach.

Satellite Portfolio.

I propose to use available funds to take advantage of "special situations" like ; takeovers, workouts, arbitrage, trading at discount to NTA, SPP at attractive prices...

Sounds a bit vague I know but I will flesh in more details as opportunities arise. (this allows me to make it up - and learn as I go along)

I will not set a specific % or dollar amount to this strategy as my first preference will be to build the core portfolio holdings.

Opportunity

QBE has a SPP @ $10.70 with investors on the register allowed to apply for $1000, $2000, $5000, $10000 or $15000 worth of shares. The offer closes 26/3. QBE shares closed today at $12.46

I understand the offer will be oversubscribed and scaled back and given I only have a bit over $3000 of available capital I am in a position of looking to sell something to apply for $5000 worth of shares in the SPP.

INVESTMENT SOLD

MCE - Matrix Composites 837 @ $3.66 = $3063.42

Looking at the numbers of MCE it seems I have been guilty of speculation of a bright future, with little evidence that this will occur. I would consider buying again if the price is attractive enough but taking a little back of the previous losses now seems prudent to me.

RandR · 13 March 2012

robusta said:
Looking at the short history of this portfolio it seems I am having trouble curbing the desire to "do something". The strategy as outlined earlier was to have a low turnover portfolio of high quality growing companies bought at bought at reasonable prices. I see no reason to change this strategy but given my impatience I propose a additional strategy to be employed as a core and satellite approach.

Do you think your being more proactive then you need to be Robusta ? I understand the trouble your having, I was in a similar rush to make decisions quickly and allocated capital alot faster then I probably should have.

robusta · 13 March 2012

RandR said:
Do you think your being more proactive then you need to be Robusta ? I understand the trouble your having, I was in a similar rush to make decisions quickly and allocated capital alot faster then I probably should have.

You are probably right but it would be nice to take advantage of opportunity as it arises and make a decent return in the process

Ves · 13 March 2012

I have started a monthly capital averaging system. I worked out what money I wish to invest from my monthly income and deploy it into the market in the week that my salary is paid. This stops me from "grabbing at bargains" (you know, when a price suddenly starts to decrease and it looks "cheap") and making emotional decisions on the run (in the process buying more than planned). The rest of the month is used to decide what looks like an attractive purchase (and if nothing, the capital can be carried forward to the next month and so on). My goal is to focus on great companies (it always has been, but if you become emotional about prices the lines can blur).

Of course I still can't stop myself from looking at the market at least once a day. I would probably need a job that doesn't require me to sit at a computer all day to break that habit.

suhm · 14 March 2012

qbe turned out well thus far. Kudos I got that one wrong. Wouldn't you just apply for the full 15k, this is a leveraged account as you say and the LVR for qbe is quite generous for most providers or was the leverage just the LOC and having a fixed amount.

McLovin · 14 March 2012

robusta said:
Opportunity

QBE has a SPP @ $10.70 with investors on the register allowed to apply for $1000, $2000, $5000, $10000 or $15000 worth of shares. The offer closes 26/3. QBE shares closed today at $12.46

I understand the offer will be oversubscribed and scaled back and given I only have a bit over $3000 of available capital I am in a position of looking to sell something to apply for $5000 worth of shares in the SPP.

What chance do you think you have of getting your full $5k? I get the feeling this is going to get massively scaled back, especially given the recent SP movement. I'm applying for the full $15k but I doubt I'll get it.

YELNATS · 14 March 2012

McLovin said:
What chance do you think you have of getting your full $5k? I get the feeling this is going to get massively scaled back, especially given the recent SP movement. I'm applying for the full $15k but I doubt I'll get it.

There will be a huge scaleback.

They only want to raise $150 million under the retail offer having already raised $450 million from institutional investors.

Nonetheless I will be applying for the maximum $15,000 of shares given there's a near 20% profit to be made based on today's share price.

Klogg · 14 March 2012

Ves said:
I have started a monthly capital averaging system. I worked out what money I wish to invest from my monthly income and deploy it into the market in the week that my salary is paid. This stops me from "grabbing at bargains" (you know, when a price suddenly starts to decrease and it looks "cheap") and making emotional decisions on the run (in the process buying more than planned). The rest of the month is used to decide what looks like an attractive purchase (and if nothing, the capital can be carried forward to the next month and so on). My goal is to focus on great companies (it always has been, but if you become emotional about prices the lines can blur).

Of course I still can't stop myself from looking at the market at least once a day. I would probably need a job that doesn't require me to sit at a computer all day to break that habit.

I just experienced the same habit and recently stopped it.

I found just because I had a good 40-50k to use, I wanted to use it. Now I find myself a LOT more cautious with it, buying only what I'm sure of.
Given you invest @ each payday (or nearby), do you find yourself always able to find something of value, or are you forced to wait it out sometimes?

robusta · 14 March 2012

suhm said:
qbe turned out well thus far. Kudos I got that one wrong. Wouldn't you just apply for the full 15k, this is a leveraged account as you say and the LVR for qbe is quite generous for most providers or was the leverage just the LOC and having a fixed amount.

No margin on this account - just a LOC, with not much more to spend.

McLovin said:
What chance do you think you have of getting your full $5k? I get the feeling this is going to get massively scaled back, especially given the recent SP movement. I'm applying for the full $15k but I doubt I'll get it.

Buckleys and none of getting the full entitlement IMO, will be lucky to get 25%

YELNATS said:
There will be a huge scaleback.

They only want to raise $150 million under the retail offer having already raised $450 million from institutional investors.

Nonetheless I will be applying for the maximum $15,000 of shares given there's a near 20% profit to be made based on today's share price.

Not sure what this line means in the offer document

"Please keep this potential scale back in mind when deciding how much to apply for as it will impact how many shares you receive. For example if you hold $1000 of shares, apply for $15000 and QBE scales back the offer, you may only receive $1000 of shares (or less)....."

So with $2380 of shares applying for $5000 and scaled back say 60-80% this means... - guess I will have to wait and see.

robusta · 14 March 2012

Ves said:
I have started a monthly capital averaging system. I worked out what money I wish to invest from my monthly income and deploy it into the market in the week that my salary is paid. This stops me from "grabbing at bargains" (you know, when a price suddenly starts to decrease and it looks "cheap") and making emotional decisions on the run (in the process buying more than planned). The rest of the month is used to decide what looks like an attractive purchase (and if nothing, the capital can be carried forward to the next month and so on). My goal is to focus on great companies (it always has been, but if you become emotional about prices the lines can blur).

I have been rereading The Intelligent Investor and this technique is listed as one of the most profitable if you have the discipline and funds to apply to it. I imagine by looking at the most attractive stocks and doubling up in subsequent periods will only add to the returns.

Ves said:
Of course I still can't stop myself from looking at the market at least once a day. I would probably need a job that doesn't require me to sit at a computer all day to break that habit.

Once a day!!! I may be borderline obsessive compulsive, looking around twenty times a day It is probably remarkable this portfolio has not had more turnover considering.

Ves · 14 March 2012

robusta said:
Once a day!!! I may be borderline obsessive compulsive, looking around twenty times a day It is probably remarkable this portfolio has not had more turnover considering.

Haha, I did use 'at least' in that sentence. If I have time at work, which I generally do, I usually check it once an hour. Which is silly, because it doesn't achieve anything (other than cause wonder in how the trading ranges of certain stocks bounce around). I guess you do get a rough feel for how they move after a while. Keep in mind that I process SMSF accounts and returns for a living, so I often need to confirm prices and such on share or finance related sites and can catch a sneaky look at the market in the process. Often clients will have a stock that I have never really heard of... so I might use that as an excuse to look it up.

Ves · 14 March 2012

Klogg said:
I just experienced the same habit and recently stopped it.

I found just because I had a good 40-50k to use, I wanted to use it. Now I find myself a LOT more cautious with it, buying only what I'm sure of.
Given you invest @ each payday (or nearby), do you find yourself always able to find something of value, or are you forced to wait it out sometimes?

Not as yet, there are still stocks that I follow that haven't moved a great deal either way (or they are range trading). I would suspect that if the market kept going up and earnings did not keep up for the next few years that it would be harder to narrow down stocks.

LifeChoices · 14 March 2012

I was just looking over this thread again from the start and couldn't help wondering where you'ld be today had you not done all this, dare I say "emotional", buying and selling.

I'm sure you would have been better off, had you just held on to your portfolio when you were fully loaded on 8/8/11. Sure there were some duds in there but the rest of them looked like fairly good investments: FGE, MTU, CCP & MIN for example

Obviously always easy in hindsight. But sometimes I look at my trading and think... maybe if I had just held my original parcel I could have saved myself all that stress and would have probably been better off.

robusta · 15 March 2012

LifeChoices said:
I was just looking over this thread again from the start and couldn't help wondering where you'ld be today had you not done all this, dare I say "emotional", buying and selling.

Emotional? I am not sure how to answer that one, impatient, impetuous, stupid maybe but I am not sure I feel emotional about my decisions.

LifeChoices said:
I'm sure you would have been better off, had you just held on to your portfolio when you were fully loaded on 8/8/11. Sure there were some duds in there but the rest of them looked like fairly good investments: FGE, MTU, CCP & MIN for example

You are probably right I think I may have to workout the difference, but would have to use 9/8 to include MIN.

I still hold MTU and CCP and do not regret selling MIN, FGE however is the business I made a mistake selling.

LifeChoices said:
Obviously always easy in hindsight. But sometimes I look at my trading and think... maybe if I had just held my original parcel I could have saved myself all that stress and would have probably been better off.

LifeChoices · 16 March 2012

robusta said:
Emotional? I am not sure how to answer that one, impatient, impetuous, stupid maybe but I am not sure I feel emotional about my decisions.

Emotion is the right word. You bang on about how great a company X is from a fundamental point of view, then a week or so later it's all changed and you sell it.

I think you can argue that being impatient and impetuous are strongly related to emotions. You can learn to recognize and control your emotions.

I can only gather from your reply that if the decisions you are making are not emotional - you must be......

Well - you said it.

robusta · 17 March 2012

Well I guess I should have a look at how that portfolio from the 9/8 would look like now.

robusta said:
Current Portfolio Position

1373 x CCP @ $3.83 = $5244.86
676 x FGE @ $4.44 = $3001.44
932 x MCE @ $5.30 = $4839.60
288 x MIN @ $11.04 = $3179.52
1115 x MTU @ $2.63 = $2932.45
29524 x SOO @ $0.086 = $2539.06
7142 x TSM @ $.55 = $3928.10

Current Market Value:
$25,765.03

Total realised and unrealised loss -13.89% or - $4,155.41

Cash contributed $40.00
Credit available $119.56

All ords @ 25/07/11 4603.80 @ 8/8 4096.7 = -11.01%

Well that is it, fully invested after two and a half weeks, I am surprised stocks fell to these prices so quickly.

1373 x CCP @ $5.90 = $8100.70
676 x FGE @ $6.52 = $4407.52
932 x MCE @ $3.57 = $3337.95
288 x MIN @ $12.83 = $3179.52
1115 x MTU @ $3.31 = $3695.04
29524 x SOO @ $0.05 = $1476.2
7142 x TSM @ $.36 = $2571.12

Total $26768.05

Interesting, if I could assume costs would be roughly equal between the portfolios (less brokerage cancelled out by higher interest charges) I am fairly happy with the relative performance of the actual portfolio, I have more capital available and am slightly better off albeit in open positions.

Here is a Buffett quote I am thinking of getting engraved on my forehead.

"An investor needs to do very few things right as long as he or she avoids big mistakes"

Here are my open positions and the % gain/loss if I could for a moment ignore brokerage and interest costs.

853 x CCP @ $5.90 = $5032.70 +31.7%
65 x COH @$57.25 =$3721.25 +24.86%
2976 x MEF @ $0.63 = $1874.88 0.0%
1115 x MTU @ $3.31 = $3690.65 +26.34%
1023 x NVT @ $3.38 = $3457.74 +15.36%
1373 x OKN @$1.19 = $1633.87 -18.21%
916 x PRV @$0.67 = $513.72 +2.29%
185 x QBE @$13.14 = $2430.90 +21.55%
Total $22455.71

For a total gain of $3262.91 or 17%

Looks OK until you look at the capital loss of a bit under $4000.00 plus brokerage and interest paid giving a total cost of a bit under $6000.00

Does anyone want to go over again where I think the errors were made with MCE, TSM... and position sizing?

Anyhow as Forrest said "stupid is as stupid does"

McLovin · 18 March 2012

robusta said:
Does anyone want to go over again where I think the errors were made with MCE, TSM... and position sizing?

TSM isn't that bad, IMO. Despite retail in Australia and the UK being extremely difficult and the high AUD impacting their UK business and the transition to the new lease model, the numbers are pretty good. It's one that needs time. They're also well positioned to take advantage of growth in the internet in Australia.

So_Cynical · 18 March 2012

robusta said:
((27th-July-2011)NEW INVESTMENT

FGE - Forge Group

385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)

-----------

robusta said:
(30th-November-2011) INVESTMENT SOLD

Sold 676 x FGE @ $4.53

robusta i hate to do this to you but its for your own good and the good of a great thread....4 and a half months later and its clear you sold at almost the wrong time.

Like all non trend following investors you were faced with a choice of sell (take the loss), hold (see what happens) or buy more (average down) and you decided to sell....The Green dot shows your buy, the red dot shows your sell decision and the rest of the chart indicates just what a poor decision that was....buy a few more and believe in your self and your a million miles in front.
~

robusta · 18 March 2012

McLovin said:
TSM isn't that bad, IMO. Despite retail in Australia and the UK being extremely difficult and the high AUD impacting their UK business and the transition to the new lease model, the numbers are pretty good. It's one that needs time. They're also well positioned to take advantage of growth in the internet in Australia.

Yep I agree they are back on my radar, I think the main drama for me before was to pay to much for expected growth that was never going to continue from the past in a straight line.

So_Cynical said:
-----------

robusta i hate to do this to you but its for your own good and the good of a great thread....4 months later and its clear you sold at almost the wrong time.

Like all non trend following investors you were faced with a choice of sell (take the loss), hold (see what happens) or buy more (average down) and you decided to sell....The Green dot shows your buy, the red dot shows your sell decision and the rest of the chart indicates just what a poor decision that was....buy a few more and believe in your self and your a million miles in front.
~

Oh I remember this ok and I think you pointed out at the time you thought I was selling a few positions too early. I have no excuse, at the time I was listening to the market and expecting to pick up FGE again in the future at a cheaper price. Definitely not part of the strategy and a expensive lesson.

So_Cynical · 18 March 2012

robusta said:
Yep I agree they are back on my radar, I think the main drama for me before was to pay to much for expected growth that was never going to continue from the past in a straight line.

Oh I remember this ok and I think you pointed out at the time you thought I was selling a few positions too early. I have no excuse, at the time I was listening to the market and expecting to pick up FGE again in the future at a cheaper price. Definitely not part of the strategy and a expensive lesson.

And the key point here is not don't listen to the market...the point is COMPLETELY IGNORE IT.

The market is a million Muppet's behaving like a million Muppet's....fact is there are no genuine believers selling FGE at under $5

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