Funds & shares - Anyone heading for the exits yet

[Intrinsic_Value]

The market hasn't done anything since Sept last year. Suppose it depends on your time frame and reliance on dividends and use of margin loan.

But then again is it a stock market or a market of stocks.
Same argument that can apply to the property market, just because the whole market achieves x % return doesnt mean each individual property will replacate that exact same return.

My yoy return (ie Aug 09-aug10) on the stock market is 16.3% after all transaction costs (but not including tax yet, havent done the tax return yet).

My calender year(ie from 1st jan 2010) return on the stock market is 8.7% after all transaction costs.

 

[Intrinsic_Value]

Do you have a rational reason NOT to have been invested in gold, the best performing asset of the last decade?

Yea! I know. It's risky. LOL

the main reason not to be invested in gold is it doesnt produce an income stream.

I can see logic in speculating in gold at this point in time, but not investing.

 

[Intrinsic_Value]

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As long as the business is doing well and their isn't a sign things are going to drastically change don't get to caught up in the share price, that will always be changing.


RH

Riding High you have just hit on the most important factor in my opinion when it comes to investing in a share.

For anyone serious about investing in shares (not speculating, there are different rules for speculators), they should frame this comment by Ridin High on their wall.


Well done again for highlighting this point.

The only caverate i would add is the movement in the share price relative to the company. Even if a company is 'great' if its share price moves too far above its intrinsic value it will gravitate back towards the intrinsic value.

But this is for significant price movements, not the 10 or 20% movement.

 

[Intrinsic_Value]

Overly simplistic statements about the stock market get to me. It isn't simple and it isn't rational but gold is the simplest, most rational investment so I thought it should appeal to you.

GOLD IS NOT AN INVESTMENT.
Its a very long term store of wealth, and it can at times be a useful mechanism for speculation, but it is not an investment.

Unless i am missing something on this forum, the majority of members on this forum are not in the top 100 families in australia. Therefore the underlying purpose for most us us is to learn how to grow ones wealth through investing, not to find some form of store of wealth so we can pass our relatively meagre wealth onto future generations (ie we are not soooo wealthly that we have reached the stage where return on investment is no longer important, only the long term retention of that wealth)

 

[Intrinsic_Value]

, but the well is running dry after recent runs.

Yes this is a problem for me as well.
Especially with all the capital raising done post GFC.
Capital raisings were a great opportunity to make short term profits, but the trouble now is the share dilution which has lowered the return on equity.

 

[Intrinsic_Value]

Is anyone worried about the sharemarket atm?
I am and I think after the recent share market appreciation perhaps we should start taking out some of our gains.

For the umpteenth time i would ask the question: are you a speculator or an investor.

I am sure some of the more cynical people are mentally saying, here we go again, i have heard this so many times.

But i cant emphasise this enough.
There are completely different 'rules' that dictate 'wise' decision making for the speculator and the investor. And they are NOT the same rules.

 

[hobo-jo]

To give me abit of an idea Sunfish if you was to use points to sell gold to me now. what would they be?

- It's priced around 50% of it's 1980 inflation adjusted high (using conservative government stats)
- Central banks have turned from net sellers into net buyers
- World's greatest hedge fund managers & richest people are buying it (Paulson, Tudor Jones, Soros, Kaplan & more)
- China, Russia, India & more countries are buying it
- The public is not yet buying
- What intrinsic value do the plastic notes in your wallet have?
- It has been the investment of the decade and shows no signs of slowing

 

[Intrinsic_Value]

their is always opportunity.

In the 2 months since i purchased wesfarmers (they own coles, bunnings) they are up 19.1% for me and have a high 7% yield on purchase price.

The PE ratio for the big 4 is still abit below their long term averages, a week ago was really good buying.

But yeah I'm sure their will be more great buying opportunitys ahead

Regards,

RH

This is a speculators mindframe. Yes the share price has gone up 19.1%, but what has the 'business value' gone up by. This is what investors should be focussing on, not the share price.

On the other hand speculators should be focussing very much on the movement in the share price.

In other words, if the share price had gone down by 19.1% was your orginial decision to buy wrong from an investors point of view?
From a speculators point of view yes definately and its time to take evasive action, but for an investor its not so clear cut. If the share price has gone down by 19.1%, you then need to research if the 'business value' has gone down by 19.1%.

 

[Amadio]

GOLD IS NOT AN INVESTMENT.

Of course it is.

We've owned gold (physical gold) for so long I can't remember when we got it. Probably before most of you were born. It went nowhere for about 20 years. Then it went somewhere - up. When we go to sell it we make money. It will have been a pretty good investment.

When you pay for something and expect to make a profit later, that's an investment. It can be art, property, persian rugs (my other investment which has tanked in the last 20 years) shares, anything.

 

[profit]

lol, how did I know gold would be mentioned and spill out into an argument by page 2.

The same **** gets mentioned every stock market/GFC/doom and gloom/dishwasher thread. It'd be good to keep it to one consolidated Gold Thread no?

BTW, I say all this as a big fan of gold!

 

[Sunfish]

lol, how did I know gold would be mentioned and spill out into an argument by page 2.

The same **** gets mentioned every stock market/GFC/doom and gloom/dishwasher thread. It'd be good to keep it to one consolidated Gold Thread no?

BTW, I say all this as a big fan of gold!

Fair enough. What say we also use some constant logic?

If only dividend paying investments can be considered "investment grade" how is it we have a whole website devoted to negative geared property with the phissing competition being who can borrow most and "lose" most?

I think it is reasonable that all investment classes be measured against the same criteria.

 

[Ridin-High]

This is a speculators mindframe. Yes the share price has gone up 19.1%, but what has the 'business value' gone up by. This is what investors should be focussing on, not the share price.

On the other hand speculators should be focussing very much on the movement in the share price.

In other words, if the share price had gone down by 19.1% was your orginial decision to buy wrong from an investors point of view?
From a speculators point of view yes definately and its time to take evasive action, but for an investor its not so clear cut. If the share price has gone down by 19.1%, you then need to research if the 'business value' has gone down by 19.1%.

Yes i think its abit hot at the moment that stock, PE of 22 compared to the sector average of around 16.

I would sell abit if i had a bigger holding, but after costs/tax etc not worth it.
But say if i had a 100k holding i'd probably sell 20%

But i only have 15k (dollars) of Wes Farmer shares.

But yeah im down like 4% on my QBE shares but i think their IV is higher then what the market is pricing it. I was to late to jump in on their BSP i would have liked to participate this time because of only 15% franking credit and to defer tax obligations

Regards,

RH

 

[Intrinsic_Value]

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But yeah im down like 4% on my QBE shares but i think their IV is higher then what the market is pricing it. I was to late to jump in on their BSP i would have liked to participate this time because of only 15% franking credit and to defer tax obligations
Regards,

RH

Hey i never thought of this angle, thanks for highlighting it,
one learns something every day

 

[Bill.L]

Hi Sunfish,

If only dividend paying investments can be considered "investment grade" how is it we have a whole website devoted to negative geared property with the phissing competition being who can borrow most and "lose" most?

I think it is reasonable that all investment classes be measured against the same criteria.

I think this is where you are crossing 2 concepts over each other. First concept is to buy an asset for investment. The asset purchased can either be a dividend paying one, property with rent return or a non dividend paying one gold or property without any rent (vacant block of land).

The second concept is how you purchase, ie you have to borrow money or pay cash. Obviously you can scale the purchase of gold up and down according to how much money you have as you can buy little chunks of it. Property has to be bought in large chunks therefore most have to borrow to purchase.

The argument that some of us use against gold, that it is non income producing, is the same argument for vacant land that is non producing. However if there is the ability to rent out the vacant block via chucking a building on it, then its nature as an investment changes. I don't think there is much mechanism to create an income out of gold.

bye

 

[steveadl]

I'm not.

I think the Oz banks and other blue chip stocks had their run so there is no point buying them now.
I figured I'll now wait till the next storm comes out of the US or the EU and will buy CBA and the others at a discount...

I think looking at the US government's erratic behaviour and their continuing appetite for spending its just a matter of time

Wholeheartedly agree. I wouldn't be buying the banks at this point either (actually that's not right - NAB is still around my buy in level), I'm still waiting for ANZ to dip again so I can complete my parcel there - have less than 50% of what I want. Most of blue chips are too low yielding for me now as well. But I'm still finding a few smaller one's here and there that I like the look of and paying a healthy dividend for my requirements. But as I mentioned earlier, they are getting harder to find.

Yes this is a problem for me as well.
Especially with all the capital raising done post GFC.
Capital raisings were a great opportunity to make short term profits, but the trouble now is the share dilution which has lowered the return on equity.

Yes have noticed that, but still finding stocks I like based on 2011 estimates. Which reminds me IV, at what point of the year do you generally switch to focusing more on the 2012 year instead of 2011?

 

[Ridin-High]

Wholeheartedly agree. I wouldn't be buying the banks at this point either (actually that's not right - NAB is still around my buy in level), I'm still waiting for ANZ to dip again so I can complete my parcel there - have less than 50% of what I want. Most of blue chips are too low yielding for me now as well. But I'm still finding a few smaller one's here and there that I like the look of and paying a healthy dividend for my requirements. But as I mentioned earlier, they are getting harder to find.



Yes have noticed that, but still finding stocks I like based on 2011 estimates. Which reminds me IV, at what point of the year do you generally switch to focusing more on the 2012 year instead of 2011?

Sounds like you got a good plan. I'm not a massive fan of NAB, over the last 10yrs other big 3 have had double the total return then them. So obviously they are doing something better.

ANZ looks pretty good with their expansion plans into asia, i think they was doing Due dilligence on a bank in Korea.

Them and CBA have opened first branches in India.

If i was to add to current positions, i'd be waiting for a price reduction on CBA, probably buy now for BHP and QBE (would put a buy order in on QBE @ around $16.50 - 16.70)

 

[steveadl]

Sounds like you got a good plan. I'm not a massive fan of NAB, over the last 10yrs other big 3 have had double the total return then them. So obviously they are doing something better.

ANZ looks pretty good with their expansion plans into asia, i think they was doing Due dilligence on a bank in Korea.

Them and CBA have opened first branches in India.

If i was to add to current positions, i'd be waiting for a price reduction on CBA, probably buy now for BHP and QBE (would put a buy order in on QBE @ around $16.50 - 16.70)

I agree with you, ANZ is my pick for the banks - like the Asia strategy. Yes they're looking at buying the 50% of Korea Exchange Bank that Lone Star are trying to sell. Seems to have been going on for a while though, so not sure if they'll pull it off.

NAB I just couldn't resist the yield, similar story with BEN, though being smaller they should be able to find growth easier. Conversely being smaller also comes with it's own problems ie. cost of funds etc. Rumours last week of merger talks with BOQ but apparently came to nothing.

CBA bit too pricey for me at this level. Wasn't aware they had started opening branches in India, that's good to know. BHP I would love to buy, but I can't justify it in my current portfolio due to focus on yield - I always keep an eye on it though as I like the co. and will jump back in one day. QBE I finally unloaded couple weeks back, as much as I like the co. - it seems their high growth days are behind them - not saying I wouldn't buy back in again, but would like to get a higher yield if possible, especially with the pathetic franking.

 

[BV]

i'd be waiting for a price reduction on CBA)

Me too, and I think its on the cards not because there is something wrong with CBA or with our other blue chip shares but because I see the move by Pellegrini to wind down his fund as significant.

It could be the start of other funds doing the same.
Lets face it, shares have now reached a level where future gains are questionable so fund managers have to find other ways to make money.

If several of them started to sell chunks of their portfolio as they did in 2008 and shares came down they could buy them back later for less.

Just a thought...

 

[willair]

Me too, and I think its on the cards not because there is something wrong with CBA or with our other blue chip shares but because I see the move by Pellegrini to wind down his fund as significant.

I just have to ask why are people worried about the Banks,either way they have their business covered,willair..

 

[Intrinsic_Value]

Yes have noticed that, but still finding stocks I like based on 2011 estimates. Which reminds me IV, at what point of the year do you generally switch to focusing more on the 2012 year instead of 2011?

The answer depends on the company, the greater the stability and consistency of the company the more i am prepared to go further out in time.

Generally at this point in time i am happy looking at Jun/Dec 2011 estimates.
2012 estimates are more a 'curiosity' factor when looking at future movements in IV.

I am less likely to sell a stock even if the current price is above current IV if i expect a significant increase in the future IV (ie future IV is increasing significantly over time).
An example of this type of stock would have been CSL/COH in their early days


Conversely if a stock has only a slow future appreciation in IV i will start to take money off the table at a much earlier stage (potentially even before the market price equals the current IV).

An example of this type of stock would be listed REITS.