Robusta fundamental, leveraged investments

[robusta]

Thank you for posting consistently over the last several years here robusta. It's valuable to see things mapped out in real time. As someone who is just starting out - Dec 16 will be one year of investing direct in the ASX for me. Your thread is a useful place to learn and I haven't fully digested it either! We have come to some different conclusions on the value of a stop loss and averaging down however! Jessie Livermore's idea of not fighting the market holds a lot of weight for me, but perhaps it's that I'm not comfortable with short term volatility (or losing capital over the long term). I agree however picking the tops and bottoms is futile. I enjoyed Nick Radge's book Adaptive Analysis for Risk Management.
Consider a list of "A1" stocks from Montgomery in 2010 - if an investor followed the buy and hold approach they would have a 13.83% pa return vs a per holding stop loss set at 8% would lead to a return of 17.08% pa - excluding dividends along the way. I know there are a lot of assumptions here (was there a MOS at the time of purchase for all these stocks, that RM's 'picks' are worth buying, that prospects and therefore valuations didn't change) but it is food for thought. I use RM's stocks only because we both follow a similar valuation methodology based on his book and that several of yours and his investments are similar (not all!).

Thanks again, it's really an enlightening and refreshing read to see a journal from a value investor!

Thank you for your post Anglers Rest, there have been some fantastic posters on this thread that have taught me more than I thought possible.

Having no stop losses and averaging down are central to my investment criteria. To be honest I have discovered I'm not very good at trading shares and also valuing companies accurately. The only edge I think I have is to spot a better than average business that should grow profits in the longer term (have made some BIG mistakes however) and to buy them at a reasonable price.

The markets are volatile, I have no confidence in myself to re-enter after being stopped out.

I must also admit to being a massive RM fan early on but I haven't used his formula for at least a year and a half. I may have read some Jessie Livermore in the past but have not read any Nick Radge yet.

 

[Anglers Rest]

there have been some fantastic posters on this thread that have taught me more than I thought possible.

Totally agree. That people put in the effort for free is humbling. Still a lot to learn but I've subscribed to your thread.

Having no stop losses and averaging down are central to my investment criteria.

Hmm, yeah I'm still figuring out there place in my own approach. Time will tell.

Jessie Livermore

Parts are entertaining, parts a bit hard to get through. Radge actually I read after reading a post from someone on ASF. (whoever referred to the first few chapters as "the ducks guts" thank you!)

 

[robusta]

Thanks Anglers Rest I will have to have a look at those books.

New Investment

DNA- Donaco international

Bought 1986 @ $0.755 = $1519.38

I like the casino business, they seem to have a habit of making money. Not so long ago DNA raised capital at somewhere north of $1.35, they are in Vietnam close to the Chinese border and should be in for a nice period of growth over the next few years.

Interesting investment thesis here from PM Capital back in August

http://www.pmcapital.com.au/news/webinars_and_videos/donaco__dna_investment_thesis151.aspx

 

[robusta]

Investment Increased

DNA- Donaco

Bought 2726 @ $0.55 =$1519.36 22/01/15

So the share price has fallen over 20% from my initial purchase so I picked up some more.

Needless to say will be very interested in the reason for the trading halt called a couple of hours later.

 

[robusta]

Investment Increased

Just the DRP
CAM - Clime Capital

18 Shares @ $0.936242 = $16.85 23/01/15

 

[robusta]

Investment Reduced

Sold 1629 x TGA @ $2.88 = $4671.15

Below is my trading history with this business.

TGA - Thorn Group

Bought, 972 x TGA @ $1.505 =$1482.81 on 05/04/12, 1074 x TGA @$1.395 =$1518.18 on 26/04/12, 867 x TGA @ $1.745 = $1532.87 on 20/11/12 and Bought 762 @ $1.97 = $1521.09 on 07/02/14 for a grand total of 3675 shares for $6054.95

Back in December I sold a small parcel.

Investment Reduced

Thorn Group
Sold 867 shares @ $2.955 = $2542.04 1/12/14

I really like this company and hope to not regret this sale like when I took profits in MTU but the fact remains the share price has had a good run and probably gotten a bit ahead of the value of the business.
There seems to be some good prices being thrown up by the market at the moment in businesses that I want to have a piece of, VED for example is back in my buy zone and NVT is also looking enticing.

Out of sheer laziness I've sold the smallest entire parcel that will minimise CGT.

So all up a nice capital gain locked in along with a decent dividend yield along the way. I still hold 1179 shares with a market value at market close of $3407.31

The reasons that pushed this decision in no particular order are;

1) need to raise around $1000.00 by the end of the month to participate in the DNA rights offer.

2) the desire to at least double the position size of VED

3) the attractive price NVT is trading at at the moment and the desire to increase this holding.

 

[robusta]

Investment Increased

VED - Veda Group

bought 655 @ $2.33 = $1546.10

The more I've looked at this business the more I wanted to make it a decent position size.

20 years of consistent growth at a CAGR of 14.6%, could be a good chance of this continuing.

 

[skc]

New Investment

UOS - United Overseas Australia

Bought 2634 @ $0.535 = $1429.14 13/2/14

This is a REIT invested mainly in Malaysia, they have a good history of capital management, low debt and a nice little discount to NTA.

Just curious...
Do you know the correct number of shares outstanding for UOS?

 

[robusta]

Just curious...
Do you know the correct number of shares outstanding for UOS?

I will have to look that up, they just reported tonight.
Do you mean ASX listed or total shares outstanding. There is a dual listing and confusing company structure

 

[skc]

I will have to look that up, they just reported tonight.
Do you mean ASX listed or total shares outstanding. There is a dual listing and confusing company structure

Aha... got it. Thanks. I was reading the report and I couldn't get the correct EPS figures by dividing the nubmer of shares on issue.

Upon further investigation... The ASX quoted shares on issue is 496.767m, while total issued capital has 1172.377m shares. That's how a $87.1m profit gets translated into EPS of ~7.6c. At 50c, market cap is ~$560m and trading at PE ~6.6x. Plus it has very substantial assets on the balance sheet... certainly looks cheap on paper.

 

[Klogg]

Certainly looks cheap on paper.

If they could provide a look-through of the balance sheet, to determine which assets sit in each company, it'd be worth much more. There's about $400m AUD on the books, but if that all sits in the development company, then it's only really 68% owned by UOS.
Alternatively, if it all were within UOS, then you're getting a lot of the MC in cash, ignoring any UOAREIT holding and investment properties (UOADB).

However, they do provide an NTA/share of 81c, after accounting for Non-Controlling interests. Even if you discount this for a drop in KL property values, it's hard to see NTA/Share being lower than the SP.

As far as margin of safety goes, this has it in spades. Only problem is, I don't know how/when/if the market will recognise that (even if a look-through is provided)

 

[themeinvestor]

Great stuff guys, i can't see why an investor wouldn't look at a chart if they thought it might give them a better price at which to buy at...I reckon even Buffet would have guys on his staff that would tell him what good level would be to start accumulating stock based on more than just the fundamentals...Surely.

Even as Nomadic says, if its only just a change in trend, or a bottom in place...very handy...

I don't believe in Technical analysis per se, but the fact that some people in the market swear by it means you can't ignore it. I think technical analysis in some ways reflects behavioural economics.

The line on a chart is the sum of the markets fears and hopes.

 

[Klogg]

Investment Increased

DNA- Donaco

Bought 2726 @ $0.55 =$1519.36 22/01/15

So the share price has fallen over 20% from my initial purchase so I picked up some more.

Needless to say will be very interested in the reason for the trading halt called a couple of hours later.

Robusta - do you still own the shares from the iSentric (ICU) spin-off?
I just finished going through that maze of prospectuses and tax statuses, and found a favourable outcome, so I've recently purchased on market at 18cps. (If management outlined their 'one-off' spin-off costs, it'd be much easier)

Keen to know your thoughts.

EDIT: Sorry, ignore that - just realised you purchased after the spin-off.

 

[skc]

I don't believe in Technical analysis per se, but the fact that some people in the market swear by it means you can't ignore it. I think technical analysis in some ways reflects behavioural economics.

The line on a chart is the sum of the markets fears and hopes.

The line on a chart is the marginal impact of the market's fears and hopes. i.e. Those who are most fearful or greedy. Sometimes they are right, sometimes they are wrong.

 

[robusta]

Aha... got it. Thanks. I was reading the report and I couldn't get the correct EPS figures by dividing the nubmer of shares on issue.

Upon further investigation... The ASX quoted shares on issue is 496.767m, while total issued capital has 1172.377m shares. That's how a $87.1m profit gets translated into EPS of ~7.6c. At 50c, market cap is ~$560m and trading at PE ~6.6x. Plus it has very substantial assets on the balance sheet... certainly looks cheap on paper.

It sure does and they have a decent history of growing profits and NTA

If they could provide a look-through of the balance sheet, to determine which assets sit in each company, it'd be worth much more. There's about $400m AUD on the books, but if that all sits in the development company, then it's only really 68% owned by UOS.
Alternatively, if it all were within UOS, then you're getting a lot of the MC in cash, ignoring any UOAREIT holding and investment properties (UOADB).

However, they do provide an NTA/share of 81c, after accounting for Non-Controlling interests. Even if you discount this for a drop in KL property values, it's hard to see NTA/Share being lower than the SP.

As far as margin of safety goes, this has it in spades. Only problem is, I don't know how/when/if the market will recognise that (even if a look-through is provided)

I'm with you Klogg, not sure what catalyst will cause a rerating of the sp but i'm happy to hold and find out. From memory the founder is getting on a bit maybe in the future the next generation will try to put some of that mountain of cash to work a bit harder one way or another.

 

[robusta]

Robusta - do you still own the shares from the iSentric (ICU) spin-off?
I just finished going through that maze of prospectuses and tax statuses, and found a favourable outcome, so I've recently purchased on market at 18cps. (If management outlined their 'one-off' spin-off costs, it'd be much easier)

Keen to know your thoughts.

EDIT: Sorry, ignore that - just realised you purchased after the spin-off.

Have to admit to not looking at ICU at all, thank you. I will check them out.

 

[robusta]

The line on a chart is the marginal impact of the market's fears and hopes. i.e. Those who are most fearful or greedy. Sometimes they are right, sometimes they are wrong.

I could not agree more skc. I have the utmost respect for those that are successful using technical analysis. It's something I've never understood.

 

[robusta]

Investment Increased

DNA- Donaco International

2243 shares @ $0.60 = $1345.80 23/02/15

This latest purchase via the rights issue. They should be allocated Monday or Tuesday

Just reading the annual report and have to decide if I'm happy to have so much capital tied up in something this speculative. DNA looks cheap to me and should have decent growth prospects but there is a fair bit of risk...

 

[robusta]

After this post I will probably have to take the word leveraged out of this thread title. We have had a change in our family finances and are now down to one income as a result I have had to raise some quick cash.

So right now on the line of credit we owe $27,737.22

11/3/15

Sold
1412 x EZL @ $1.04 = $1448.53
1220 x ECQ @ $1.08 = $1297.65
1509 x CAM @ $0.93 = $1383.42
2537 x HHL @ $2.30 = $5815.15
627 x MTU @ $9.84 = $6149.73
1380 x VED @ $2.365 = $3243.75
1179 x TGA @ $2.65 =$3104.40
6955 x DNA @ $0.73 = $5057.20
1660 x IPP @ $2.75 = $4545.05
1606 x NVT @ $4.58 = $7335.53

So there goes $39,380.43 in todays fire sale.

So not happy to be selling but you sometimes difficult decisions have to be made.

The remaining holdings at todays closing prices have a market value of $20,618.84

I will probably have to sell around $10,000 of this tomorrow.

 

[tech/a]

Gee mate
That's bad news and sudden.
I hope its just the loss of a job and not something more sinister! (Health/Breakup)
Other Jobs are around.

Cant run it as an exercise as if nothing happened?