Vishy's Trading Blog

[vishalt]

I'd say this is a pretty good price, its almost $8 or around 20% from all-time highs, I wouldn't be surprised if it goes down to $38 and I'd also be ready to have enough capital to buy more down $32, really doubtful but you always have to be ready!

(Hence me shorting the UK BHP)

The brokers still have good targets, rumours of a Rio counter-bid, extremely strong fundamentals, and some of the signals my Dad uses encouraged him to buy today, so we're going on a joint venture of massing BHP ;D.

 

[vishalt]

I've bought more, its hit $40, pretty nice discount.

I've added more shorts to the British "BHP Billiton plc" to hedge and make money during the down fall.

I'm hoping this is the bottom but obviously a good trader thinks ahead and I'm ready to tackle it if it comes down to $38 or even $36.

 

[vishalt]

I've been through a phase once where I almost got wiped out by over gearing and received a margin call, but this time I'm ready. This time I'm going short on things that are getting killed to hedge against falling markets. (God bless CFD's)

US Mortgage Stocks: There is no such thing as support and resistance for US Mortgage shares, as long as the bad news keeps piling on, the further the stock will plunge. I've shorted 100 shares of Fannie Mae (Federal Mortgage Association).

I followed legend Jim Rogers recommendation that FNM still has a lot of problems to sort, it may cut its dividend and its not fully revealed its mal-practices in accounting.

You may think "oh but that price is so low its a great buy" - its not! These things don't have money to go up, and take a look at Countrywide Financial.

BHP Billiton: I have a feeling the market will take BHP with it, unfortunately, however I do believe the fundamentals are very strong. I suggest if you don't have enough capital that you just hold on, on the other hand keep buying at critical support points.

If you can short the British/US ADR's of the stock so you can profit on the downside (which is what I've done).

Dow Jones: Many traders say the critical point is 12,800, I agree. However what does a critical point mean? Will it mean the Dow plunges to 12,800? It could suddenly stop at 12,400, consolidate for months and then charge to 15,000. So I think you have to use strict stop-losses.

 

[vishalt]

woohoo! A 4.5% surge in BHP as far as I can see on my screens. Of course Rio (my earlier call) is doing fabulously, up almost $10.

I think today's big moves bring a lot of confidence in the market, hopefully enough to close this correction but can never be too sure.

Anyway BHP is still trading very cheaply, 14-15 multiple compared to Rio's 22, I'm strongly biased towards accumulating BHP and getting ready for a big run.

As the newspapers have reported, Rio's prospects are amazing, its African iron ore mine and Noyju (forgot the spelling, the one in Nepal) and Alcan etc etc - if Rio's prospects are THAT good, what do you think BHP's prospects are like?

Considering BHP stole the Olympic Dam, and has nickel and petrol divisions, and a whole pipeline that it hasn't even told investors about yet.

At prices this low I don't know what to say if you're not buying BHP.

 

[vishalt]

US stocks have wiped off over 10% of their all-time highs and the Dow has broken primary support at 12,800.

It's only 10% but I would be keeping an eye on this, I think if the Dow cracks below 12,000 that would start to be a worry and I would look at going market neutral or shorting.

I'm still firm on accumulating BHP.

 

[vishalt]

It's fair to say a lot of people who were exposed to Allco, MFS, Centro, ABS - and god knows how many others in the same - had their blood shed.

So my question (I'm not trying to be insulting, but critical) is was it worth it?

Was it really worth investing in a not-yet mature business that has such a complex structure of making money? With layers of complex debt and a spider's web of cross funding and god knows what in the closet?

As opposed to BHP which is simply "we dig earth, we get copper, we send to China".

Or Woolworths - "We sell food because everybody needs it.

Or Woodside who has gargantuan amount of petrol to come for the billion drivers on the road?

Or even a bank - "Need a loan?"

Even Telstra's yield would have sufficed. Everybody needs phone and the internet, the company makes a lot of money but is out of favor because analysts are just a bunch of toolheads.

What I learned from watching this bloodbath is that you really don't need to invest in complexity for simple returns. No aircraft leasing , or debt fueled property expansion that can have seasonal and cyclical factors, no ultra wind farm out there in the Netherlands.

Not invest with debt atleast anyway.

If everyone was in the top 20 stocks today - other than News Corp (which shouldn't even be there) everyone would have been pretty happy.

So as is the way I am only going to put my money into liquid, big and secure companies rather than try out the dodgy scum of the market despite FMG tripling 500% in one year.

I can atleast sleep at night and not worry about Twiggy running away.

 

[Aviator33]

Too true! Even though I'm only day trading, rarely will I wander outside the top 20 except for a VERY quick stab at something. The top 50 used to be pretty safe.......

Cheers
AV

 

[vishalt]

As you know for the past few months I have been rabbiting on about how BHP was undervalued and people need to hold out and be firm in their convictions.

Well I couldn't:

Maintain conviction - Because as lovely as the fundamentals sound, who knows how much the price will be punished. After all like one other ASF reader said price is a "human idea".

And also, what if BHP acquires Rio, has too much trouble integrating the business and gets raped on its debt?

Hold on - The higher funding costs have gotten to me and I was sick of seeing cash seeping out of my account everyday to maintain it.

Wasn't ready myself - I was saying in my blogs earlier that traders should be ready for a 30% correction. Well that happened, and even I wasn't ready. I had to top up my account with plenty of my reserve savings to avoid a margin call.

And then I made a stupid move of shorting the British BHP at the bottom and then the criss-crossing between Aus/British BHP got too complicated.

Anyway, I'm still very happy . I had a 400% profit increase last year, I'm still up YTD and I've got my cash napping in the savings.

And most importantly - I actually had a good night's sleep last week because I didn't hold any CFDs and worried about metals/Dow each morning.

I bow out of CFDs and margin lending humbly. A margin call is something I do not want to worry about when I go to bed, I've had enough!

After this, and hopefully this is something I stick to: I want a diversified portfolio of mainly blue-chips and I don't want to use margin lending to buy them (so I can sleep at night!).

 

[prawn_86]

Good to see someone who can admit their mistakes and see the upside from bad situations.

You may bet a chance to get some bluechips at low prices the way the market is shaping up...

Good luck with it all

 

[Garpal Gumnut]

I agree with prawn's comment. good on you vishalt.

gg

 

[vishalt]

Hi everybody, I'm back to blogging again!

I'm now looking to build a long-term portfolio with sustainable investments that will have capital appreciation and pay yields nicely over a 10+ year period.

Previously, I was a short-term CFD trading mulling around trading BHP, Rio Tinto, Exxon Mobil and other shares that proved pretty successful till January where I vaporized a fair chunk of my gains.

I've been buying up good companies without using gearing for months now and so far I've been emotionally happy, not worried and parts of my portfolio are flat or have made gains.

So here goes my portfolio, I would most appreciate ideas from other members of ASF to fill in the gaps!

Here is my portfolio, I have descriptions and price targets and often track financial statements/management on them.

Bought in Beach Petroleum (BPT) at $1.44 (now $1.50+) - South Australian petrol company which has been turned around from a two-decade dud to Australia's fourth-biggest energy company.

BPT is a proven producer extracting oil from the Cooper/Eromanga and Gippsland Basin with nearly a decade of oil reserves.

I expect this company to be $6+ within two/three years if it keeps production up and a long-life of reserves and by luck, finds more oil.

Bought in SP AusNet, utility, @ 1.26 (now $1.20) - This is an energy and gas distribution company with a monopoly in Victoria which is reaping benefits off high electricity prices.

It has a good plan to expand but its gearing level is around 58%, sustainable at the moment but under close watch.

Would prefer it if management paid more debt down before expanding furthermore.

I think this company will grow to $3 within two/three years, perhaps faster depending how quickly the credit-crunch becomes `so yesterday'.

Bought in Oxiana, miner, $3.465 (now $3.20) - I'm very confident Oxiana is going to be a winner.

The company's gearing level is only 10% and is making mountainloads of profit from record copper and gold prices and I think it will be a great fit with Zinifex and a great takeover target.

The proven production, Prominent Hill expansion and Martable Gold project in Oxiana's books plus cash reserves and Izok/Dugald river projects from Zinifex are making the combined company like a mini-Rio Tinto star.

I think Oxiana could blaze $10 or $15 within a year or two (BHP certainly did).

Bought in Neptune Marine Services, engineering, @ 65c - The way I understand this company's business makes it a simple investment.

It employs people and wields technology that allow divers and machines to fix oil rigs and oil pipes under water.

It's generating money and its order book is full at the moment.

It's a tad on the speculative side because of its short history but if it continues to generate revenue and increase in market size then this will be another winner hopefully.

I don't know where this will go, depends on how much of a market darling it becomes, but atleast back at the $1 within a year with dividends (assuming the company's financials are factually stable).

Bought into ASX @ $36.05 - Pretty straightforward, ASX is a monopoly with puny debt that generates money off market volume and pays it back to shareholders.

AXE and LiquidNet are planning to set up here but so what? BHP competes with Rio, CBA competes with Westpac, nothing new about competition!

ASX is well-placed to use its financial strength to keep a lot of the trading volumes and over the long-term I think this a no-brainer.

$80+ within five years, back to $50 within two.

---

 

[vishalt]

Here is a pie chart of my positions at the moment:

I'm looking to be overweight on financials in the short-term as the banking stocks are an absolute bargain.

As Buffet said - be fearful when others are greedy and be greedy when others are fearful.

People are pretty damn scared of the banks at the moment so I'm looking to pick up some Westpac if it goes below $21 and BoQ if it goes below $15.

Of course I need to keep diversifying the portfolio and need some health care, IT, telecom and property stocks in there.

I have learnt the importance of diversity, BPT is holding my portfolio up at the moment while the others are continuing to be bearish/flat.

 

[Sean K]

Other suggestions to round it out a bit may be:

WOW. Consumer staple.
AMP. Wealth management.

And maybe even CWN as a growth stock, if you're not put off by the ethics, or lack of them....

Not 'recommendations' of course. I just see them fitting your new philosophy of longer term solid return. These stocks are part of Lonsec's Model Portfolio, which has outperformed for years.

DYOR, blah, blah, blah...

(not holding any - still playing the spec game)

 

[Sean K]

Another sector to consider is insurance.

QBE, IAG, ??

 

[vishalt]

Oh yeah WoW and QBE for sure, thanks Kennas.

I'd like to see WoW go down to $24 before I buy it though, its P/E and price are too high in my opinion, but the sad thing is there's not really any choice - I don't understand Metcash and am not touching Wesfarmers due to its huge debt.

AMP and QBE are good ideas, I hope QBE softens a bit more, considering it use to be $35 its a good buy at the moment.

Today I bought Westpac @ $22.25 - Imo Westpac's current position is that of a fortress in terms of liquidity and a good reputation with Gail Kelly as leader.

They picked up St George at a cheap price and the bid makes sense to me.

Far too attractive to pass up @ $22.

 

[golfmos123]

All fairly solid sorts of companies - not allocating a small part of the portfolio to some speccies????

 

[Naked shorts]

The reason why you would go out of the top 20, is because thoese stocks are far far more likely to go up 1000% in a day then BHP.

It comes down to the age old rule, if you want a bigger return, you gota take more risk

 

[Sean K]

I'lll definately be looking at BHP soon, once the correction is over.

I think the supercycle is in tact, and this is a necessary correction after the free money dished out by the banks over the past few years. Well, many years.

BRIC, then the rest of Latin America (especially Mexico) will run, and then in 100-150 years Africa.

A very long term boom of resources, with the usual corrections on the way.

Keep the powder dry to make the most of the opportunities coming up.