galumay
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Perhaps there would be less confusion if your type of investment is decribed as technical versus those that follow a fundamental approach?
Robusta fundamental, leveraged investments
- Thread starter robusta
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Perhaps there would be less confusion if your type of investment is decribed as technical versus those that follow a fundamental approach?
tech/a
No Ordinary Duck
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What the?
Who's getting under who's skin?
Is Robusta and Fundamental trading/investing above critique?
Is the whole idea not to offer food for thought?
After watching 30% slip buy most would be at least questioning?
A simple stop could have seen at least 20-30% gleaned even if he decided to buy back at these levels
with an extra 20-30% in his pocket.
This technical V Fundamental argument touted by the Fundamentalists is just plain rubbish.
Im speaking of Portfolio and Stock Management something I see needing some attention.
Im suggesting robusta's ideas could be improved.
If putting up food for thought or suggestion for improvements from me are an issue use IGNORE
prawn_86
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This is a good idea that can be applied across a lot of portfolios. I would be interested in seeing the reasoning as to why it is not used in this situation, especially as this is a leveraged portfolio.
CanOz
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You do have to wonder a little that in a raging bull market if the capital could have been better deployed elsewhere....
Robusta put this thread up knowing that he would receive criticism. I don't think anything anyone has said is offensive and i think many are wondering why you would add to a losing position when so many opportunities for equities showing strength on momentum were available. At least i am...
CanOz
Robusta put this thread up knowing that he would receive criticism. I don't think anything anyone has said is offensive and i think many are wondering why you would add to a losing position when so many opportunities for equities showing strength on momentum were available. At least i am...
CanOz
tech/a, its not what you say its how you go about saying it which people have highlighted before, anyway back on topic.
McLovin: With the administration burden thats expected by the new FOFA legislation its expected that dealer groups will be going through quite a lot of mergers etc (my dealer group already has). This in turn means that approved product lists (APL) originally are quite large as the two companies joining have different lists, however management also wish to reduce their research and administration burden and so therefore reduce the approved product list down to a small amount of products.
This has the effect of fund managers being listed on lower and lower amount of dealer groups APL's unless a dealer group is happy with them and want to retain them. The whole industry is going through quite a bit of change, I do think HHL will come out the otherside fine but a lot of boutique's might find it tough moving forward.
It's just the way that HHL say they expect the outflows to continue for a little longer that makes me think, just maybe, they are aware that a dealer group is selling out of them as they are no longer on an APL, beacuse after a 5 month appreciating straight line market I don't think you'd be expecting further outflows to continue in the coming months.
As tech/a is I think elluding to, is that when you see the net outflows trend reverse and become net inflows that may be the opportune time to buy in to HHL. Also agree with tech/a that HHL's share price dropping while the market is going up would've had some little alarm bells ringing for me that it may have been a good idea to take profit and come back another day but each to their own. Your strategy is to buy and hold long term and the purpose of this thread is to see how that goes so maybe it will work out this time around or maybe robusta will look back and see this as a learning experience, time will tell.
McLovin: With the administration burden thats expected by the new FOFA legislation its expected that dealer groups will be going through quite a lot of mergers etc (my dealer group already has). This in turn means that approved product lists (APL) originally are quite large as the two companies joining have different lists, however management also wish to reduce their research and administration burden and so therefore reduce the approved product list down to a small amount of products.
This has the effect of fund managers being listed on lower and lower amount of dealer groups APL's unless a dealer group is happy with them and want to retain them. The whole industry is going through quite a bit of change, I do think HHL will come out the otherside fine but a lot of boutique's might find it tough moving forward.
It's just the way that HHL say they expect the outflows to continue for a little longer that makes me think, just maybe, they are aware that a dealer group is selling out of them as they are no longer on an APL, beacuse after a 5 month appreciating straight line market I don't think you'd be expecting further outflows to continue in the coming months.
As tech/a is I think elluding to, is that when you see the net outflows trend reverse and become net inflows that may be the opportune time to buy in to HHL. Also agree with tech/a that HHL's share price dropping while the market is going up would've had some little alarm bells ringing for me that it may have been a good idea to take profit and come back another day but each to their own. Your strategy is to buy and hold long term and the purpose of this thread is to see how that goes so maybe it will work out this time around or maybe robusta will look back and see this as a learning experience, time will tell.
I have seen Robusta describe HHL as a long term core holding.
To date I have seen two data points( the purchase and 1 dividend) of what will possibly be hundreds of data points in his eventual investment return calculation.
The concept of cash flow from a business justifying an investment seems to be incomprehensible to most – perhaps it’s a time thing.
The future cash flows and the reasonableness of the buy price in relation to those flows are debatable - but the long term winner of that debate will be in the minority short term – It’s the only way you get the right price.
I see SHV has been put forward as a more sensible business for a “fundamental leveraged” hold.
That’s not what I see when I look at the economics of the two businesses.
SHV over 18 years has distributed via dividends 116 Million to shareholders and required 84 Million back to fund the net increase in the capital account. So a net 32Million free distribution over 18 years on current capital contributed of 96 Million. Current debt stands at 66 Million plus whatever they have added for recent acquisitions. Operational and Financial leverage in spades in this company to juice the short term result when things line up but little in the way of attractive long term business economics.
HHL over 12 years has distributed via dividends 105 Million to shareholders and required 12 Million back to fund the net increase in the capital account. So a net 93 Million free distribution over 12 years on current capital contributed of 17 Million. Current debt stands at ZERO. Yes HHL has operation leverage that will cause volatility but there is no financial leverage to kill them in a down cycle such as they are experiencing now and a lot to like from a business economics perspective.
By its very definition the “road less travelled” will never be crowded – It also seems destined to be endlessly mocked by those who don’t choose/understand it.
To date I have seen two data points( the purchase and 1 dividend) of what will possibly be hundreds of data points in his eventual investment return calculation.
The concept of cash flow from a business justifying an investment seems to be incomprehensible to most – perhaps it’s a time thing.
The future cash flows and the reasonableness of the buy price in relation to those flows are debatable - but the long term winner of that debate will be in the minority short term – It’s the only way you get the right price.
I see SHV has been put forward as a more sensible business for a “fundamental leveraged” hold.
That’s not what I see when I look at the economics of the two businesses.
SHV over 18 years has distributed via dividends 116 Million to shareholders and required 84 Million back to fund the net increase in the capital account. So a net 32Million free distribution over 18 years on current capital contributed of 96 Million. Current debt stands at 66 Million plus whatever they have added for recent acquisitions. Operational and Financial leverage in spades in this company to juice the short term result when things line up but little in the way of attractive long term business economics.
HHL over 12 years has distributed via dividends 105 Million to shareholders and required 12 Million back to fund the net increase in the capital account. So a net 93 Million free distribution over 12 years on current capital contributed of 17 Million. Current debt stands at ZERO. Yes HHL has operation leverage that will cause volatility but there is no financial leverage to kill them in a down cycle such as they are experiencing now and a lot to like from a business economics perspective.
By its very definition the “road less travelled” will never be crowded – It also seems destined to be endlessly mocked by those who don’t choose/understand it.
Thanks craft - possibly saved me a post in more ways than one.
FMs are notoriously hard to value as they rely on a lot of different factors (both client inflow / outflow, investment strategy and portfolio management expertise, and general macroencomic tailwinds and headwinds).
You need to understand how the business model works, where the cash flows in and out, how much they need to maintain or expand their business and how the ups and downs of the cycle will affect your investment, before you can be confident in a perspective purchase - just like any other business.
The safest place to buy them (in the absence of any erosion in the quality of their business) is at the bottom of the investment cycle. Others need to decide whether they think this is now, much later or if the market will never rise again like it once did (eternal purgatory) and act accordingly on this decision.
Short-term market movements and investment thesis are often at odds - hence why using a stop-loss won't help, mostly it will just expose you to the inherent whipsaw nature of the market.
FMs are notoriously hard to value as they rely on a lot of different factors (both client inflow / outflow, investment strategy and portfolio management expertise, and general macroencomic tailwinds and headwinds).
You need to understand how the business model works, where the cash flows in and out, how much they need to maintain or expand their business and how the ups and downs of the cycle will affect your investment, before you can be confident in a perspective purchase - just like any other business.
The safest place to buy them (in the absence of any erosion in the quality of their business) is at the bottom of the investment cycle. Others need to decide whether they think this is now, much later or if the market will never rise again like it once did (eternal purgatory) and act accordingly on this decision.
Short-term market movements and investment thesis are often at odds - hence why using a stop-loss won't help, mostly it will just expose you to the inherent whipsaw nature of the market.
Recently a friend and myself were playing around with plotting operations in R.
I was having a great time plotting the monthly return histogram for various stocks, funds, ETFs, etc.
We decided to plot the monthly return profile for Berkshire Hathaway back to 1990.
I was very very surprised to see the distribution of returns, because to me it looked exactly like a traders histogram, that is "cut your losers and let your winners run" skew.
Except, obviously Buffett isn't running stoploss. I am not saying it's easy to replicate this return profile, but at the same time it goes to show you don't necessarily need to hold "winners" (in the momentum sense of the word) to end up with a return profile like this. The proof is that there is 0 explanatory power of momentum in Buffetts portfolio going over many years. It seems that buying quality, low beta assets will (over the long term) provide a natural cut your losers hold your winners type strategy.
I was having a great time plotting the monthly return histogram for various stocks, funds, ETFs, etc.
We decided to plot the monthly return profile for Berkshire Hathaway back to 1990.
I was very very surprised to see the distribution of returns, because to me it looked exactly like a traders histogram, that is "cut your losers and let your winners run" skew.
Except, obviously Buffett isn't running stoploss. I am not saying it's easy to replicate this return profile, but at the same time it goes to show you don't necessarily need to hold "winners" (in the momentum sense of the word) to end up with a return profile like this. The proof is that there is 0 explanatory power of momentum in Buffetts portfolio going over many years. It seems that buying quality, low beta assets will (over the long term) provide a natural cut your losers hold your winners type strategy.
I also note that with an avg portfolio turnover of 4 years for value style portfolios, it's possible that majority of returns come from dividends, assuming you buy low beta stocks there is a high probability that "capital gains" will be low in terms of %, so a trend is not necessarily required as the main factor in return generation.
CanOz
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That's great Sinner, if you can stomach the draw-downs...
I posted this before but was diverted to another site...weird...
CanOz
I posted this before but was diverted to another site...weird...
CanOz
I f'n give up.:frown:
CanOz
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Yeah you a probably right I should have had more capital available in the first place so as to take a largeer position in the first place. As for a 30% fluctuation in the price? That should be a minor blip on the ten year chart.
Rate of outflow slowed from September,and they are likely to continue, is totally inconsistent with "we have been able to maintain our funds for 6 months. Which is it??
If you derive your income from a percentage of FUM, then fund outflows are clearly a leading indicator, not a lagging indicator.
Then the proverbial "we hope", added to "will continue our run of good performance". A 35% decline in ongoing cash profit from the prior corresponding period and a 22% decline in revenue from investment management is regarded as a good performance by the chair.
This from the CEO at the AGM in November
"3. Investor behaviour is strongly influenced by recent (ie. five year)
investment performance. Investors are bullish after markets have risen
and are bearish after markets have fallen
I would like to expand on this third point to demonstrate the strong relationship
between recent investment performance and investor behaviour. [Flows and
Performance]The chart on the screen shows the strong correlation between
the five year investment performance of the Value Growth Trust and net flows
into it. This data has been sourced from the 15+ year history of the VGT through
all sorts of market conditions. As shown on the chart, if the five year investment
performance of the VGT exceeds the cash rate (ie. about 5%) there are positive
net flows into the fund. If five year returns fall below the cash rate, net fund
flows turn negative. The current five year performance numbers are the worst
on record for the VGT and, not surprisingly, the net outflows are at their highest
levels. The good news is that our five year performance has bottomed and will
continue to improve throughout the remainder of the 2013 financial year.
This brings me to summarise the current state of the equities funds management
industry. The bottom line is that our industry is in recession. Why? [Industry
Segment]:1. The five year returns of cash far exceed the five year returns of equities.
For example, the MSCI has delivered returns of (5.0)% per annum and the
All Ordinaries has delivered returns of (3.6)% per annum for the five
years to 31 October 2012.
2. Therefore, most of the money at the moment is going into assets with
lower perceived risk such as cash.
3. There are net outflows from assets with higher perceived risk such as
Australian and international equities. In recent years, hundreds of
billions of dollars globally have poured out of growth assets into cash and
other defensive assets
4. Net inflows will not return to equities until the five year performance
numbers of that asset class exceeds the cash rate
To compound these problems, most equities fund managers are also under
pressure from their clients for having fees that are too high.
In other words, right now is possibly the worst time to be running an equitiesbased funds management company. Hunter Hall is no exception to this: FUM has
declined with negative investment performance, fund outflows have accelerated
because our five year investment performance is poor relative to cash, and
profits are declining.
Despite this, I am looking forward to the opportunity to manage Hunter Hall in
the next phase of its history. I see it as a glass half full not a glass half empty.
My optimism for Hunter Hall is based on the following factors:
1. Stock markets will eventually start outperforming cash
2. Our five year investment performance numbers are highly likely to
improve from their current low ebb.
3. As a result, investor behaviour will shift back towards equities and
Hunter Hall: slowly at first but more quickly over time
4. Hunter Hall has an excellent track record at picking stocks"
Sorry I could not post the charts for this presentation plus I seem to have forgotten how to quote from a outside source on ASF.
No stop loss, I have only used one once in my life.
The fixed cost nature of this business gives me plenty of confidence in the event of a eventual lift in revenue. I just have no idea when that operating leverage will manifest itself.
Not so sure HHL have used any large dealer groups in the past however the new CEO seems to be trying to change this.
Sinner you posted a article and discussion of low beta stocks on this thread a while ago.
https://www.aussiestockforums.com/forums/showthread.php?t=26228&page=2
I find this subject interesting and I would like to investigate it further. With your permission I would like to post it on the long term investing thread to make it easier to find in the future. This thread tends to ramble a bit, not that I mind that.
So_Cynical
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Silly question really...im a long only punter so obviously i only want my stocks to go up....your point is?
Who said HHL wasn't trending lower?? 2 year chart shows a clear down trend, 6 month chart a clear sideways trend...again your point is?
In all honesty im not looking for a trend, sure i want my stocks to go up and for that to happen an up trend will be needed, but i could care less about an up trend....just a play on words i suppose, i look for potential and a low entry or at least a statistically reasonable entry point...i let time take care of the rest.
The rally has been great for me, i call it a rally because that's what markets do, of course they trend up and down too....you call it what ever you want.
-------------------------
After i took a profit from PTM recently i looked back and compared their FUM turn around to their SP rally, from memory FUM lead the SP rally by 6 weeks or so....as FUM continued up so did the SP... Its not a big stretch of the imagination to see HHL doing similar at some point.
-----------------------
Just noticed this...good idea.
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There are several reasons why I differ from some of the views given, re the fundamentals of HHL. Looking at some facts.
The chair noted the good performance of Sirtex to December in the half year report. HHL held over 13m shares valued at a total of ~$172m or ~15% of total FUM. The chair also noted that the various funds had increased in value from 2.1-9.4% from the end of December to the time of reporting (20th Feb). The all ords had risen 9.5% in that time.
The company appears to me to have its hopes based primarily on one stock and its performance, which was negative from December to Feb, during one of the largest bull runs in years for the general market. Hence the funds have underperformed in that time. It reminds me of other fund managers in the past that rely on one stock for their performance, it never seems to end well.
As an individual, I would not let one company become 15% of my total investment holdings, I cannot fathom how an investment management company doesn't have risk management procedures in place to prevent this from happening.
Making poor decisions like this, coupled with the loss of FUM, seems to be interpreted by the shareholders as negative, hence the ~17% fall from Feb 20 price of $3.53 to todays $2.93.
Craft,
A quick comparison between HHL and SHV on the 20 feb, with knowns and unknowns...
Market CAP HHL ~$93m SHV ~$101m
Cashflow from operating activities HHL $4.4m and SHV $11.6m
HHL hopes revenue will remain steady (despite acknowledged fund outflows; a market correction will decimate this number)
SHV, no forecast, yet a ~70% increase in crop yield and a ~25% increase in world almond price indicates a much higher cashflow. My guess, with inventories of $52m, is cashflow in the $17-20m range for the second half.
HHL no debt, net assets ~$18.9m mostly cash
SHL debt-cash ~$61m, net assets ~$139m mostly almond orchards.
Given the above, the price of the debt is about a $20m difference in cashflow. With the reduction of the dividend for SHV and even last years (full year) cashflow of $22m repeated, further asset sales already announced, then the $61m debt will be quickly diminished.
Having stated all that, I sold my position today errr yesterday, as the current upmove is probably overdone, 40% since 20 Feb. I intend to re-enter SHV on both value and potential grounds, given the correct technical signals, I will not be entering HHL for precisely the same reasons.
The chair noted the good performance of Sirtex to December in the half year report. HHL held over 13m shares valued at a total of ~$172m or ~15% of total FUM. The chair also noted that the various funds had increased in value from 2.1-9.4% from the end of December to the time of reporting (20th Feb). The all ords had risen 9.5% in that time.
The company appears to me to have its hopes based primarily on one stock and its performance, which was negative from December to Feb, during one of the largest bull runs in years for the general market. Hence the funds have underperformed in that time. It reminds me of other fund managers in the past that rely on one stock for their performance, it never seems to end well.
As an individual, I would not let one company become 15% of my total investment holdings, I cannot fathom how an investment management company doesn't have risk management procedures in place to prevent this from happening.
Making poor decisions like this, coupled with the loss of FUM, seems to be interpreted by the shareholders as negative, hence the ~17% fall from Feb 20 price of $3.53 to todays $2.93.
Craft,
A quick comparison between HHL and SHV on the 20 feb, with knowns and unknowns...
Market CAP HHL ~$93m SHV ~$101m
Cashflow from operating activities HHL $4.4m and SHV $11.6m
HHL hopes revenue will remain steady (despite acknowledged fund outflows; a market correction will decimate this number)
SHV, no forecast, yet a ~70% increase in crop yield and a ~25% increase in world almond price indicates a much higher cashflow. My guess, with inventories of $52m, is cashflow in the $17-20m range for the second half.
HHL no debt, net assets ~$18.9m mostly cash
SHL debt-cash ~$61m, net assets ~$139m mostly almond orchards.
Given the above, the price of the debt is about a $20m difference in cashflow. With the reduction of the dividend for SHV and even last years (full year) cashflow of $22m repeated, further asset sales already announced, then the $61m debt will be quickly diminished.
Having stated all that, I sold my position today errr yesterday, as the current upmove is probably overdone, 40% since 20 Feb. I intend to re-enter SHV on both value and potential grounds, given the correct technical signals, I will not be entering HHL for precisely the same reasons.
BRTY
I don’t disagree that SHV is/was a good short term proposition. A good season works wonder on the levers in the business.
Long Term leveraged fundamental – which is Robusta’s stated strategy, I would buy HHL during a tough time in a flash over SHV during a bumper year for such an approach. The business economics matter over the long term, not what forces may be at play in the short term.
Perhaps you are questioning whether his strategy is right – that’s another debate, but as far as I see his HHL selection fits his stated strategy.
Now to nuts – I like nuts (or am I nuts)
I differ with your analysis on SHV’s debt.
From the operating costs you need to subtract SIB capex and tree development to get free cash. Averaged over good and bad years SHV carries too much debt for my liking and they still need to buy more crop to get the fixed cost of installed processing down. All in the face of OLAM having a far better competitive position.
WBA are into Walnuts and have a much stronger competitive advantage and a far better balance sheet. – You may want to compare the two companies if you are after a longer term agriculture exposure. However SHV would be the better trading stock: volatility: liquidity.
I don’t disagree that SHV is/was a good short term proposition. A good season works wonder on the levers in the business.
Long Term leveraged fundamental – which is Robusta’s stated strategy, I would buy HHL during a tough time in a flash over SHV during a bumper year for such an approach. The business economics matter over the long term, not what forces may be at play in the short term.
Perhaps you are questioning whether his strategy is right – that’s another debate, but as far as I see his HHL selection fits his stated strategy.
Now to nuts – I like nuts (or am I nuts
)I differ with your analysis on SHV’s debt.
From the operating costs you need to subtract SIB capex and tree development to get free cash. Averaged over good and bad years SHV carries too much debt for my liking and they still need to buy more crop to get the fixed cost of installed processing down. All in the face of OLAM having a far better competitive position.
WBA are into Walnuts and have a much stronger competitive advantage and a far better balance sheet. – You may want to compare the two companies if you are after a longer term agriculture exposure. However SHV would be the better trading stock: volatility: liquidity.
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Craft,
We obviously have different opinions on this. I also prefer lower debt, which I believe the good season will help resolve. The tree development costs have mostly concluded according to the half year report, further property purchases have been for mature orchards which will add immediately to the bottom line.
If all of the problems were totally solved, then I would expect the stock price to reflect this, hence the early opportunity, IMNSHO value.
I think it appropriate for any further discussion on SHV to occur in that thread as Robusta has not entered it into his portfolio. My apologies for hijacking the thread.
On Robusta's premise of long term value, I note a level of trading in and out of different stocks so I decided to have a look at overall performance so far.
In the last full update to 17 December we get this....
compared to an earlier portfolio holding of this....
It begs the question of "Is this strategy working?" As a comparison I looked at dumping the entire $30k starting LOC into a LIC, say AFI..
AFI price 17 Dec $4.95, price on the 25th July 2011 $4.45.
Of the starting LOC $29,322 was available. Allowing for brokerage then 6575 shares could have been purchased with a few dollars of change left over.
Dec 17 value of AFI $32,456 plus dividends totalling 34c, 100% franked so $3,193. Total $35,649, a gain of $5,649. Take away the $3,300 payment for the LOC = $2,349
So, yes the portfolio has exceeded AFI returns by ~$500 to December. Currently AFI is $5.41 and has paid another 8c div ff, so currently an AFI portfolio value would be $35,570 plus $3,945 divs and franking credits, total $39,515, a 10.8% increase since December.
Up to the December 17 date, a strategy of just saving the $50pw, instead of having a LOC, and buying AFI upon each mutiple of $1000 would have been more profitable, but less educational.
A look at the current portfolio would be interesting.
Robusta, I do apologize if I come across as too harsh or ask too many hard questions. This thread is very educational and a good read of all the differing opinions.
We obviously have different opinions on this. I also prefer lower debt, which I believe the good season will help resolve. The tree development costs have mostly concluded according to the half year report, further property purchases have been for mature orchards which will add immediately to the bottom line.
If all of the problems were totally solved, then I would expect the stock price to reflect this, hence the early opportunity, IMNSHO value.
I think it appropriate for any further discussion on SHV to occur in that thread as Robusta has not entered it into his portfolio. My apologies for hijacking the thread.
On Robusta's premise of long term value, I note a level of trading in and out of different stocks so I decided to have a look at overall performance so far.
In the last full update to 17 December we get this....
compared to an earlier portfolio holding of this....
It begs the question of "Is this strategy working?" As a comparison I looked at dumping the entire $30k starting LOC into a LIC, say AFI..
AFI price 17 Dec $4.95, price on the 25th July 2011 $4.45.
Of the starting LOC $29,322 was available. Allowing for brokerage then 6575 shares could have been purchased with a few dollars of change left over.
Dec 17 value of AFI $32,456 plus dividends totalling 34c, 100% franked so $3,193. Total $35,649, a gain of $5,649. Take away the $3,300 payment for the LOC = $2,349
So, yes the portfolio has exceeded AFI returns by ~$500 to December. Currently AFI is $5.41 and has paid another 8c div ff, so currently an AFI portfolio value would be $35,570 plus $3,945 divs and franking credits, total $39,515, a 10.8% increase since December.
Up to the December 17 date, a strategy of just saving the $50pw, instead of having a LOC, and buying AFI upon each mutiple of $1000 would have been more profitable, but less educational.
A look at the current portfolio would be interesting.
Robusta, I do apologize if I come across as too harsh or ask too many hard questions. This thread is very educational and a good read of all the differing opinions.
skc
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IMO the benchmark to anyone starting to trade / invest should simply be against a do nothing scenario.
As time goes by and he/she becomes more competent, then we can start aiming to generate alpha and benchmark against a LIC or XJOAI.
