Robusta fundamental, leveraged investments

Skc,

As time goes by and he/she becomes more competent, then we can start

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The original timeframe presented was 5 years. 5 years is a long time to waste if that is what happens. My opinion is that it is far better to constantly compare "what ifs", including doing some paper trading on slightly different methods at the same time.

Hoping to become more competent by doing more of the same, will only work if there is a rational reason to continue what you are doing. The only way to find out if there is a rational basis is to compare with alternatives. I do not consider 'doing nothing' as a reasonable alternative.

I just had a quick look at the original portfolio (August 2011) and it's value as of December 2012 was some $800 higher (no allowance for divs), so changing the portfolio appears to be positive to that point.

Sorry I have not been active on this forum for a while life has been busy...

PORTFOLIO UPDATE

Since the last update on January the first I have closed the position in OKN, opened and closed a position in VOC and increased the HHL investment.

The capital loss from these two closed positions of $338.79 means the capital gain this financial year falls to $495.27 subtracting this from the previous years loss $3095.16 gives a grand negative total of $2599.89

So far paid the bank $1371.51 in interest and charges when this is added to last years total of $2303.28 this brings the total I have paid to $3674.79

Probably about half way through the dividends for this interim period with DTL, HHL, SWL and MTU still to come so, $1161.75 in dividends plus $451.42 franking credits when we add to last years dividends $960.33 and franking credits $383.34

The total is $2122.08 in dividends plus $834.76 franking credits.

So that is loss of $4152.60

Better have a look at where the open positions are (including brokerage)

Open Positions
Bought:
1115 x MTU @ $2.62 = $2941.25 08/08/11
65 x COH @ $45.85 = $3000.20 30/09/11
1023 x NVT @ $2.93 = $3017.34 02/02/12
972 x TGA @ $1.505 =$1482.81 05/04/12
1074 x TGA @$1.395 =$1518.18 26/04/12
1912 x DTL @1.045 =$2017.99 18/05/12
278 x MTU @$2.66 =$739.48 21/05/12 (rights issue)
2089 x DTL @$0.92 =$1941.83 18/06/12
1685 x SWL @$1.18 =$2008.25 19/06/12
1412x EZL @ $1.055 = $1509.61 17/07/12
843 x SWL @ $0.895 = $774.44 26/07/12
1660 xIPP @ $0.915 = $1538.85 14/11/12
867 x TGA @ $1.745 = $1532.87 20/11/12
1182 xHHL @ $2.85 = $3388.65 23/11/12
717 xHHL @ $2.83 = $2049.06 11/03/13
Subtotal $ 29,460.81

Current Portfolio Market Value

65 x COH @$67.87 =$4411.55 +47.04%
4001 x DTL @$1.22 =$4881.22 +23.27%
1412 x EZL @ $1.25 = $1779.12 +17.85%
1899 x HHL @ $2.80 =$5317.2 -2.22%
1660 x IPP @ $0.94 = $1560.40 +1.4%
1393 x MTU @ $5.00 = $6965.00 +89.23%
1023 x NVT @ $5.20 = $5319.60 +76.3%
2528 x SWL @$1.25 =$3185.28 +14.47%
2913 x TGA @ $2.08 =$6059.04 +33.64%

Subtotal = $39,478.41


This brings paper profit considering the open positions to $5865.00

Portfolio market value $39,478.41 minus line of credit drawn of $29,663.76 equals $9814.65 equity.

The $50/week I am throwing at the line of credit now totals $4000.00

So the return on my contributions is around +145%.

Credit available $336.24

brty said:

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.

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This level of trading is a bit of a embarrassment to me, in a ideal world with a better me in it I would be patient and make better decisions without second guessing myself.

brty said:

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.

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Interesting comparison with AFI brty they certainly have been a good performer. The bottom line with my portfolio is the losses are all realised but the profits are all open. This makes a comparison with other portfolios difficult in my opinion at this early stage. The trouble with a lot of the open positions is the price to an extent is irrelevant to me. This makes short term fluctuations in price meaningless. The dividends exceeding the interest paid next year is something I am looking forward however.
Sooner or later maybe some capital gains will also come.

brty said:

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.

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Not at all brty I appreciate your input.

skc said:

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.

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Robusta can I suggest treating yourself as if you were a fund manager and calculating time weighted internal rate of return (TWIRR) - a mouthful but is relatively simple to set up and very simple to keep up to date. That way you can immediately compare your return vs the index or cash or do nothing or whatever.

"If you don't measure yourself you are kidding yourself."

There is a very good (old) Motley Fool article here http://www.fool.co.uk/stockideas/2005/si050720.htm.

In short, all you need to know is how much money has gone into the account, how much has gone out and the value of the account on a given day (end of day, end of week, month, or whatever).

Then just begin at the beginning (as the King of Hearts says) with the allocation of $ at risk to a certain number of units. For example $10k and 10,000 units. Your base net asset value is $1.

Then whenever you put in or take out money of the account you purchase/sell the equivalent number of units at yesterday's closing NAV.

Your NAV is the fluctuating value of shares/cash/investment products.

Regarding your interest payments, you might treat that as a drawing or perhaps just forgettaboutit and it will be reflected in the decrease in NAV.

Happy days

ps Gav might have already done the work and a spreadsheet for you here https://www.aussiestockforums.com/forums/showthread.php?t=14478&page=4&p=672914#post672914

Post #144.

Huskar said:

Robusta can I suggest treating yourself as if you were a fund manager and calculating time weighted internal rate of return (TWIRR) - a mouthful but is relatively simple to set up and very simple to keep up to date. That way you can immediately compare your return vs the index or cash or do nothing or whatever.

"If you don't measure yourself you are kidding yourself."

There is a very good (old) Motley Fool article here http://www.fool.co.uk/stockideas/2005/si050720.htm.

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That was a interesting read Huskar. In a roundabout way I think the results I am getting are close to this. The cash contributed is probably a little skewed however. For about the first six months $40.00 per week, then after that $50.00 per week has been deposited without fail. The return has been calculated as a percentage of this cash. There has been no cash withdrawn.

Huskar said:

In short, all you need to know is how much money has gone into the account, how much has gone out and the value of the account on a given day (end of day, end of week, month, or whatever).

Then just begin at the beginning (as the King of Hearts says) with the allocation of $ at risk to a certain number of units. For example $10k and 10,000 units. Your base net asset value is $1.

Then whenever you put in or take out money of the account you purchase/sell the equivalent number of units at yesterday's closing NAV.

Your NAV is the fluctuating value of shares/cash/investment products.

Regarding your interest payments, you might treat that as a drawing or perhaps just forgettaboutit and it will be reflected in the decrease in NAV.

Happy days

ps Gav might have already done the work and a spreadsheet for you here https://www.aussiestockforums.com/forums/showthread.php?t=14478&page=4&p=672914#post672914

Post #144.

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The interest payments are treated as a reduction of the NAV at the moment this shows up on both sides of the equation;

Market value of portfolio - portfolio cost + capital gains - capital losses - interest paid + dividends received. The figure derived from this gives the gain or loss on the capital contributed.

This number should equal this.

robusta said:

Portfolio market value $39,478.41 minus line of credit drawn of $29,663.76 equals $9814.65 equity.

The $50/week I am throwing at the line of credit now totals $4000.00

So the return on my contributions is around +145%.

Credit available $336.24

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brty said:

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..

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The reason I shy away from comparisons like this is there are a couple of ways of looking at my portfolio.
Looking at the results from the closed positions I have thrown in $4000.00 and have this result so far to declare to the taxman.

robusta said:

So that is loss of $4152.60

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This by any measure is a diabolical result.

Looking at the NAV from the open positions things look a little brighter at the moment.

robusta said:

This brings paper profit considering the open positions to $5865.00

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At the end of the day the number I tell the tax man will be the only one that will count.

Robusta thanks for a great, honest read!
Hesking thanks for the tip...just spent afew hours figuring it out and although it is quite non intuitive at first, it is a great pointer for me.

Twelve months ago today I picked up my first parcel of Thorn Group

robusta said:

972 x TGA @ $1.505 =$1482.81 05/04/12

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A few weeks later the price kept on falling so I averaged down.

robusta said:

1074 x TGA @$1.395 =$1518.18 26/04/12

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In a first for me as a investor I averaged up on a dip in the share price about seven months later.

robusta said:

867 x TGA @ $1.745 = $1532.87 20/11/12

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So that ends up being a holding of 2913 shares at a cost of $4530.86 or a average price of around $1.556/share.

The most recent parcel has only received the interim dividend but but for the purposes of this post I will look at the yield on the total investment, $243.62 dividends received gives a yield of 5.38% plus $104.41 in franking credits. This should cover the interest I have to pay on the line of credit.

If you take today's closing price of $2.04 the market is valuing my $4530.86 investment at $5942.52 or a gain of about 31%. This business I consider a core holding and would have to be offered a very high price by the market to induce me to sell. Long may they grow profits and increase the dividend.

For those with a technical bent here is a chart of the recent year and the year preceding it.

robusta said:

Twelve months ago today I picked up my first parcel of Thorn Group



A few weeks later the price kept on falling so I averaged down.



In a first for me as a investor I averaged up on a dip in the share price about seven months later.



So that ends up being a holding of 2913 shares at a cost of $4530.86 or a average price of around $1.556/share.

The most recent parcel has only received the interim dividend but but for the purposes of this post I will look at the yield on the total investment, $243.62 dividends received gives a yield of 5.38% plus $104.41 in franking credits. This should cover the interest I have to pay on the line of credit.

If you take today's closing price of $2.04 the market is valuing my $4530.86 investment at $5942.52 or a gain of about 31%. This business I consider a core holding and would have to be offered a very high price by the market to induce me to sell. Long may they grow profits and increase the dividend.

For those with a technical bent here is a chart of the recent year and the year preceding it.

View attachment 51650View attachment 51651

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My TGA story is similar to yours robusta.

I also averaged down when they went sub $1.40, and also bought some more at a higher price recently as I saw the trend of investors flocking to stocks with a good yield....which paid off as the stock is now $2+. I feel as though it is very conservatively priced and it will take a bad report to drop from here..

You say you would need a high price to sell. What do you have in mind? Without seeing the upcoming results I would be starting selling at $2.50+...

VSntchr said:

My TGA story is similar to yours robusta.

I also averaged down when they went sub $1.40, and also bought some more at a higher price recently as I saw the trend of investors flocking to stocks with a good yield....which paid off as the stock is now $2+. I feel as though it is very conservatively priced and it will take a bad report to drop from here..

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Interesting to look back at the debate on the TGA thread that was raging about a year ago. The views put forward by yourself, Craft, Ves, Pioupiou and others looks like a no brainer with 20/20 vision from hindsight. Well done on your investment and thank you for your posts over a year ago.

VSntchr said:

You say you would need a high price to sell. What do you have in mind? Without seeing the upcoming results I would be starting selling at $2.50+...

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Starting to find myself more and more obsessed with compounding, TGA probably has the ability to return a decent rate on money retained within the business over the next few years on top of the nice dividend yield. The price would have to jump to closer to $3.00 to get me to start to consider taking profits.

Investment Sold

SWL - Seymour Whyte

Sold 2528 @ $1.195 = $3001.01 on Friday.

Have probably done most things wrong with this business, bought too early and have now sold too early. I think this business may be a takeover target in the future. They would make a nice target for some cashed up mining services company looking to diversify their earnings. The problem is I can see some other opportunities in the market and needed to free up some capital so SWL had to go.

Bought this holding in two parcels, the first when the sp was dropping like a stone.

robusta said:

1685 x SWL @$1.18 =$2008.25 19/06/12

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The second a bit over a month later as the price continued to fall.

robusta said:

843 x SWL @ $0.895 = $774.44 26/07/12

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So that is a total thrown into this business of $2782.69 for a capital gain of $218.32.
In that time SWL has paid me dividends of $94.83 plus $40.63 in franking credits.

Probably should not complain by a return of a bit over 11% in ten months plus franking credits but it could have been better...

Here is the twelve month chart for SWL, the first parcel was bought in the middle of that falling knife, the second in the dip not long after.

Investment Increased

IPP- Iproperty Group

1910 shares @ $0.785 = $1519.30

Bought my first parcel of this business for $0.915 / share back in November, this is the only business I hold that is not making a profit but they are busy building their network and growing profits. Many of the metrics are similar to REA, if they can be half as successful in the next ten years things should work out OK.

Almost missed this little milestone for this portfolio, the business that I have held the longest is valued by the market at a bit over double the price I paid. The first parcel was purchased in August 2011, the second through the rights issue in May 2012 when they bought Iprimus.

robusta said:

1115 x MTU @ $2.62 = $2941.25 08/08/11

278 x MTU @$2.66 =$739.48 21/05/12 (rights issue)

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So that is 1393 shares bought for $3680.73. At today's closing price of $5.46 those shares are priced at $7605.78, the dividend is rather nice as well by the way.

New Investment

SRX - Sirtex Medical Limited

150 x shares @ $9.74 = $1480.95

This does not look like a value investment with the p/e around 20 and high book value multiple. The reason I have bought SRX is because I think they can grow profits well into the future.

All the dividends are tucked away for the financial year so probably a time to look at how things are going...

PORTFOLIO UPDATE

Since the last update in March I have closed the position in SWL, increased the IPP investment and taken a new position in SRX

The capital gain from SWL of $218.32 means the capital gain this financial year rises to $713.59 subtracting this from the previous years loss $3095.16 gives a grand negative total of $2381.57.

So far paid the bank $1653.25 in interest and charges when this is added to last years total of $2303.28 this brings the total I have paid to $3956.53.

Received this financial year $1584.97 in dividends plus $615.07 franking credits when we add to last years dividends $960.33 and franking credits $383.34

The total is $2545.30 in dividends plus $998.41 franking credits.

So that is a loss of $3792.80

Better have a look at where the open positions are (including brokerage)

Open Positions
Bought:
1115 x MTU @ $2.62 = $2941.25 08/08/11
65 x COH @ $45.85 = $3000.20 30/09/11
1023 x NVT @ $2.93 = $3017.34 02/02/12
972 x TGA @ $1.505 =$1482.81 05/04/12
1074 x TGA @$1.395 =$1518.18 26/04/12
1912 x DTL @1.045 =$2017.99 18/05/12
278 x MTU @$2.66 =$739.48 21/05/12 (rights issue)
2089 x DTL @$0.92 =$1941.83 18/06/12
1412x EZL @ $1.055 = $1509.61 17/07/12
1660 xIPP @ $0.915 = $1538.85 14/11/12
867 x TGA @ $1.745 = $1532.87 20/11/12
1182 xHHL @ $2.85 = $3388.65 23/11/12
717 xHHL @ $2.83 = $2049.06 11/03/13
1910 x IPP @ $0.785 = $1519.30 22/04/13
150 x SRX @ $9.74 = $1480.95 24/04/13
Subtotal $ 29,678.37

Current Portfolio Market Value

65 x COH @$70.17 =$4561.05 +52.02%
4001 x DTL @$1.18 =$4721.18 +19.23%
1412 x EZL @ $1.1 = $1553.20 +2.89%
1899 x HHL @ $2.84 =$5393.16 -.82%
3570 x IPP @ $0.87 = $3105.90 +1.56%
1393 x MTU @ $5.91 = $8232.63 +123.67%
1023 x NVT @ $5.68 = $5810.64 +92.57%
150 x SRX @$10.75 =$1612.50 +8.88%
2913 x TGA @ $2.12 =$6175.56 +36.21%

Subtotal = $41,165.82


This brings paper profit considering the open positions to $7694.65

Portfolio market value $41,165.82 minus line of credit drawn of $29,129.48 equals $12036.34 equity.

The $50/week I am throwing at the line of credit now totals $4400.00.

Just had a seniors moment, should I work out the return percentage from my investment ($4400) on the total equity ($12036.34) or the gain on my investment ($7694.65)

Either way this makes a slightly ridiculous percentage return on my invested capital, but owning good businesses with leverage in a rising share market will give you that result. I guess that is the flip side of earlier on when my returns were minus a few thousand percent.

Credit available $878.52

robusta said:

Just had a seniors moment, should I work out the return percentage from my investment ($4400) on the total equity ($12036.34) or the gain on my investment ($7694.65)

Either way this makes a slightly ridiculous percentage return on my invested capital, but owning good businesses with leverage in a rising share market will give you that result. I guess that is the flip side of earlier on when my returns were minus a few thousand percent.

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I'd work out the return on total invested in the market (whether it is your money or the bank's money).

Ves said:

I'd work out the return on total invested in the market (whether it is your money or the bank's money).

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That may be the best way Ves but but I am mainly interested in the money I am contributing to the portfoilo and the return I earn on that. Having said that the return percentage considering the open positions is a fairly useless number until those positions are closed. The number I should be concentrating on is the $3792.80 loss and the percentage that is of my investments.

The portfolio update above shows the nuts and bolts of the investments so far but I thought I should pull out some important figures and have a bit of a look at some percentages...

The line of credit has $29,129.48 drawn from it and I have put $4400.00 of my own cash in, the realized loss from the closed positions is $3792.80, when looking at the open positions however I have made a paper gain of $7694.65 and have $12036.34 in equity in the portfolio. (as at before the market open 13/5)

If we look at the return on the total capital invested ( $29,129.48 + $4400.00) there is a realized loss of -11.31% but a paper profit of 22.77%.

If we look only on the capital I have contributed ($4400.00) then we have a realized loss of -86.2% and a paper profit of 173.55%

The portfolio has only been going for 22 months. This has been a very volatile period for the markets, considering this I think we need a longer period to get a more accurate picture of this investment strategy.

Why do you need more time.
The XAO has risen 30% in the last 12 mths.

What's your nett on $ invested?

By doing the same thing week after week what are you expecting to happen.
Are there aspects you think you should consider.
Are you happy just to leave it as it is?