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Robusta fundamental, leveraged investments

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Hmmmm this humble pie does not taste too good. I may be wrong but I could have made a mistake in not recalculating IV in relation to the soft half. Having said that I think the sell off was overdone and I still got ZGL at a discount - just not as large a discount as I thought.





This could turn into rather a long winded discussion and if it is ok with you I would rather have it at another time.


skc said:
Anyway.... all my opinion of course and my portfolio is also being torn to pieces like everything else. I hope I don't sound too critical in my post and good luck with the investments
Click to expand...

I love criticism it is a big reason I started this thread. To have to justify my investments it makes me think about them all the harder and maybe sometimes someone will pick up something I miss like for example ZGL
 
NEW INVESTMENT

MTU - M2 Telecommunications

A month ago I was looking at MTU and thinking if only in fell below $3.00 I would buy some, well at $2.62 today I could no longer resist.
A nice history of growth, good ROE and bright prospects. Once again this is a business that can increase revenue and NPAT with very little capital expenditure required.

Here is the latest investor presentation
http://www.asx.com.au/asxpdf/20110519/pdf/41yr8z22h5d2d9.pdf

INVESTMENT SOLD

ZGL - Zicom Group

See above comments for reasons, got out of this one with a small lost. Feels more like a bad trade than a investment.

INVESTMENT INCREASED

CCP - Credit Corp

I liked CCP @ $4.48, I like it even more @ $3.83

INVESTMENT INCREASED

MCE - Matrix Composites

I liked MCE @ $6.95, I like it even more @ $5.17

Starting line of credit $30,000.00

Portfolio Cost
Lenders Mortgage insurance $667.81 paid
Bought:
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524 x SOO @ $0.105 = $3100.02 (01/08/11)
7407 x ZGL @ $0.43 = $3185.01 (05/08/11)
1115 x MTU @ $2.62 = $2921.30 (08/08/11)
386 x MCE @ $5.15 = $1995.62 (08/08/11)
520 x CCP @ $3.83 = $1991.60 (08/08/11)

Sold:
7407 x ZGL @$0.40 = 2962.80

Brokerage Paid = $179.20

Total Portfolio Cost:
$27,032.01
Tax Position, Capital Gains (Losses)
($1069.22) loss

Current Portfolio Position

1373 x CCP @ $3.90 = $5354.70
676 x FGE @ $4.47 = $3021.72
932 x MCE @ $5.16 = $4809.12
1115 x MTU @ $2.55 = $2843.25
29524 x SOO @ $0.086 = $2539.06
7142 x TSM @ $.545 = 3892.39

Current Market Value:
$22,460.74

Total realised and unrealised loss -20.352% or - $4,571.27

Cash contributed $40.00
Credit available $3007.99

All ords @ 25/07/11 4603.80 @ 8/8 4056.7 = -13.48%

Well that was a tough start to this portfolio and a bit of patience would have improved the result but I am happy with the companies I have picked and have a very positive view over the medium to long term. Eventually all that red ink will start to turn green.
 
Hi Robusta, I also hold MTU and think it's a fantastic business, only problem is that I bought it just before this crash, a little above the 3$ mark. I'm now facing a dilemma of whether to sell into the next rally (if there is one) and try and get cheaper if the market falls (dramatically) even further...

At least as young 20 year old, time is on my side.
 

Hard to know what to do as we don't know what the market will do next, I however I think MTU will be worth a fair bit more than $3.00 in the coming years.

I have the same drama with MCE I bought a $6.95, then the price tanked the question I ask myself is if I sold it what would I buy? And the answer is MCE. I am not prepared to be out of it for 45 days to make the tax man happy about a capital loss and so I will hold (or buy more if I can)
 
NEW INVESTMENT

MIN - Mineral Resources Limited

Great management, good ROE and low debt/equity makes MIN to difficult for me to pass at these prices.
MIN is mainly a mining contractor prividing mineral processing, crushing services and pipeline services, they make a nice margin on these services.

Add to this MIN own:
50% of manganese Mesa joint venture ASX: MAS
100% of iron ore producer Polaris Metals
30% of lithium producer Reed Industrial Minerals a subsidiary of ASX: RDR

Starting line of credit $30,000.00

Portfolio Cost
Lenders Mortgage insurance $667.81 paid
Bought:
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524 x SOO @ $0.105 = $3100.02 (01/08/11)
7407 x ZGL @ $0.43 = $3185.01 (05/08/11)
1115 x MTU @ $2.62 = $2921.30 (08/08/11)
386 x MCE @ $5.15 = $1995.62 (08/08/11)
520 x CCP @ $3.83 = $1991.60 (08/08/11)
288 x MIN @ $9.96 = $2686.48 (08/08/11)


Sold:
7407 x ZGL @$0.40 = 2962.80

Brokerage Paid = $199.15

Total Portfolio Cost:
$29,920.44
Tax Position, Capital Gains (Losses)
($1069.22) loss

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. Nothing to do now except collect dividends, pay interest and read a couple of annual reports.
 
 
INVESTMENT SOLD

SOO - Solco
When I bought SOO I was aware that it was speculation investing in a industry exposed to government legislation to the extent the solar industry is, also I had no plans to be fully invested so soon but I could not resist the prices thrown up by the recent correction.
Sold SOO @ $0.10 today for a small capital loss.


Portfolio Cost
Lenders Mortgage insurance $667.81 paid
Bought:
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524 x SOO @ $0.105 = $3100.02 (01/08/11)
7407 x ZGL @ $0.43 = $3185.01 (05/08/11)
1115 x MTU @ $2.62 = $2921.30 (08/08/11)
386 x MCE @ $5.15 = $1995.62 (08/08/11)
520 x CCP @ $3.83 = $1991.60 (08/08/11)
288 x MIN @ $9.96 = $2686.48 (08/08/11)
809 x MCE @ $4.20 = $3397.80 (24/08/11)

Sold:
7407 x ZGL @$0.40 = $2962.80
7142 x TSM @$0.49 = $3499.58
29,524x SOO @ $0.10=$2952.40
Interest Paid = $143.18
Brokerage Paid = $259.00

Total Portfolio Cost:
$26,887.29
Tax Position, Capital Gains (Losses), Brokerage, Interest
($2,653.96) loss

Current Portfolio Position

1373 x CCP @ $4.25 = $5835.25
676 x FGE @ $5.35 = $3616.60
1741 x MCE @ $4.62 = $8043.42
288 x MIN @ $11.92 = $3432.96
1115 x MTU @ $2.78 = $3099.70

Current Market Value:
$24,027.93

Total realised and unrealised loss -10.63% or - $2,859.36

Cash contributed $160.00 ($40/week)

Return on contributed equity -1,887%

Credit available $3053.70

PORTFOLIO REVIEW

Well what a wild ride the last six weeks have given me. I have traded too much, been impatient and am sitting on both realised and unrealised losses but all in all I am happy with the portfolio - strange as that may seem to some.


CCP- Credit Corp +0.38%

What a result this reporting season, I think ROE put it best on the CCP thread

 
Have not posted my strategy for this portfolio so here goes...

The light bulb moment for me as a investor was reading The Intelligent Investor by Benjamin Graham. The idea that you can buy a part ownership in a company when out of favour and profit from the subsequent performance of the company seems like a good strategy to me.

From here reading Warren Buffet taught me you could pay more than book value for a share particularily if the company makes good incremental returns on retained equity.

Next Philip Fischer, Roger Montgomery et al have further confirmed and refined these basics and I hope to be able to profit from these lessons.

So the things I look for in a stock/business are:

Competitive advantage
Little or no debt
Competent and honest management
High ROE
Good prospects
A ability to retain profits and earn a high rate of return on those profits.

To date I may not have executed this strategy particularily well (-1887% on contributed equity) but I am confident that with time on my side the returns will come.
 

I'm not I'd be putting Montgomery in the same league as Graham, Buffet, Fisher.

What was the reason for selling the SOO? It bounces around a fair bit, but I still like it as a spec play even with the legislation risk. From what I have read the market is growing at over 100%pa even without Govt subsidies.
 
McLovin said:
I'm not I'd be putting Montgomery in the same league as Graham, Buffet, Fisher.
Click to expand...


I take your point, Montgomery will need 20 plus years of performance to be in the same league. I do however like his book and use the valuation method for a "guestimate" of IV.

McLovin said:
What was the reason for selling the SOO? It bounces around a fair bit, but I still like it as a spec play even with the legislation risk. From what I have read the market is growing at over 100%pa even without Govt subsidies.
Click to expand...

You said it yourself SOO is a bit of a spec play, while I will allow about 10% of the portfolio to be in spec companies I also did not intend to be fully invested so soon then the recent correction happened.....
It is good to have some capital in reserve for future opportunities.

Some would say 33.41% of the portfolio in MCE is speculation but time will tell.
 
robusta said:
Some would say 33.41% of the portfolio in MCE is speculation but time will tell.
Click to expand...

You only have a small portfolio, but 33.41% is probably a bit too heavy, whatever MCE is. Esp if you also hold it in your super.

If I have a portfolio this size and is managing it actively, I would allocate say $25k on longer term holds and trade $5k on short term basis. With the aim of that $5k being able to pay for the interest over the year.
 
skc said:
You only have a small portfolio, but 33.41% is probably a bit too heavy, whatever MCE is. Esp if you also hold it in your super.
Click to expand...

Yes I agree MCE is 25.3% of my super (FGE now 35.7%- a almost total reversal of % from a couple of months ago) and I have a lot more capital commited to MCE than FGE due to profit taking of FGE @$6.50). I think I may take some profits with MCE when times do not seem so dire.


skc said:
If I have a portfolio this size and is managing it actively, I would allocate say $25k on longer term holds
Click to expand...

I want to go long on every investment, when I sell after a short time it means I stuffed up.

skc said:
and trade $5k on short term basis. With the aim of that $5k being able to pay for the interest over the year.
Click to expand...

Many are quite succesful at short term trading but I do not see any edge I could deploy to ensure decent returns in this manner. Maybe just does not suit my personality but I respect anyone who can suceed at it.

It may take a couple of years to come to fruition but the dividend yield should eventually cover the interest and my $40/week contribution will allow for more investments to be purchased at reasonable prices.
 

Fair enough, FWIW I have far far less that 10% in SOO, while the actual dollar amount is probably large the nature of the stock (and business/industry) meant I put very little %wise of my capital in it.

I was the same with MCE, I put it at the speculative end and adjusted my weighting accordingly. I'm down a bit on where I bought MCE.
 
After reading the financial press, listening to the pundits and of course reading Aussie Stock Forums I have come to some conclusions regarding the short term direction of the market. Basically I can see three options:

1) The ASX200 will head back towards 5000

2) The market will "range trade" for a while

3) The market will crash

My strategy for options 1 & 2 are the same - Sit back, collect dividends and look for opportunities to take profits.

Strategy for option 3 is mostly the same as 1 & 2 except I would like to buy more stocks in this enviromemt. As I only have ~ 10% of my original capital left to invest I am considering getting a margin loan to take advantage of the possible crash.

The two main self imposed rules for this loan would be:
1) Only to be used when value is obvious ie a major crash or correction

2) Only use up to 50% of available margin
 
To be honest I would just spend some time observing your current positions and learning more about investing.

Their will always be opportunities with or without the market crashing.

You became fully investing within a relatively short period of time and I know it can feel frustrating because you see more opportunities present themselves, however I do believe a wait and see approach for the time being is warranted.

The above is not advice, just my general thoughts in regard to the information you have posted.
 
robusta said:
No worries there SKC it is a line of credit on my mortgage so no margin calls, only the chance of terrible losses or incredible profits or more likely something inbetween.
Click to expand...

robusta said:
Cheers skc, I would have a little trouble sleeping with a concentraded portfolio that was nearing a margin call
Click to expand...


It's good to have a plan, but a plan needs to be clearly defined so it can be followed. This will avoid the danger of making decisions on the run and in the heat of battle.

If you do want to use margin loan (even though you didn't plan that at the beginning), you need to really think hard about some clear rules and boundaries.

- How do you determine what the market has done in relation to the three possible outcome? A particular point level? Velocity of movement? If market falls to 4000 tomorrow, is it still ranging or is it crashing?

- When will you action? Will you start buying 1 day after the crash? 1 week?

- What does it mean for "obvious value"? Should you allow greater margin of safety before entry?

- What is your ability to pay interest? Has that got a bearing on how much margin you use?

- With margin you can no longer afford to be long term holder regardless of market price, as someone else will do the selling for you if you won't. Where is that line? Will you institute a price stop? Do you need to review your position size?

- And last but not least... should you really use margin? Should you wait a bit longer to see how your current positions pan out first? It's easy to buy but trade management is just as important.

- Bring out a chart of the great depression or the Japan's lost decade, and accept what is possible (and probable imo). Then check margin loan is still the right idea if that comes to pass.

To be honest I agree with InvestorPaul...Your signature says

If a bargain cannot be obtained today, the market will open again tomorrow offering you a fresh new opportunity and a new price.

You should observe that. And may be a slightly different version will also be helpful

If a bargain on XXX cannot be obtained, the market will offer other bargains like YYY and ZZZ.

There are always bargains on the market, and you should trust your own ability to make money in a steady market, and not needing to rely on big bets in volatile crashing markets to either win big or lose big.

Good luck.
 

Originally i intended to get a Margin loan with a nice safe 20 or 30% of room to move should the market head south...long story short that was back in 2007 and if i had taken that loan i would of been totally wiped out.

The margin calls would of forced me to sell and realise losses...losses since recovered because i wasn't a forced seller in the GFC and was subsequently able to trade my way out due mostly to a couple of good calls.

On the flip side of that...a margin loan in early 2009 would of made me a heap of money and would of perhaps doubled my net worth by now. (as in double what it currently is) because March 2009 to October 2011 net worth is like 350% up.

Timing...who knows these things :dunno: i certainly don't.
 
investorpaul said:
To be honest I would just spend some time observing your current positions and learning more about investing.

Their will always be opportunities with or without the market crashing..
Click to expand...

True - just a lot more opportunities to buy good companies on the cheap when the market crashes.


Thankyou for that opinion investorpaul but some opportunities are too good to pass up, like for example buying any of the big four banks in the middle of the GFC for example.
 

There is another way..
You could also let most of your cash sit around earning 5.5% and write some cheap
ass options and if **** fall down you end up owning the stock pretty cheap else collect nice premium

I be careful with margin with this market wild volatility, it only take one major panic briefly for you to face margin call and if you don't have the cash it could be costly
 

You must be hurt'n buddy. Are you sure about this margin loan thingo you are rabbiting on about? I know you also have MCE. It's like some stockbroker in China read this post and said to himself "I'm going to stick the boot into Robusta."

FGE today is selling for $4.780 I'm sure it's undervalued, but atm that's all anyone is willing to pay for it. What a difference a couple of months make?

Do you use stops at all Robusta?
 
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