State of the ASX200

[Intrinsic_Value]

Don't know how often and successfully you can continuously be able to invest when intrinsic value is less than the share price.

.

Spot on.
But who says anything about continuously being able to invest.

I have my positions, bought at much lower prices (when share price was significantly less than IV).

Now if Mr Market keeps moving those share prices higher, what is IV to do?
Does he just sell because IV is lower than market price, or does he just watch what Mr Market is doing. If Mr Market keeps pushing up those prices, then IV just sits back. Takes a littlebit of the table here and there. Everytime its jumping, taking a littlebit more. But still leaving skin in the game.

Until the volatility goes. That's when IV quickly sells and moves to the sidelines, in the confidence that when Mr Market wakes up to the real IV of the underlying shares, Mr Market will push those prices lower.

 

[Intrinsic_Value]

Intrinsic Values return so far for 2013 is 91%.

Its been a whopper of a year so far (although shouldn't count the chickens until they hatch)

 

[Intrinsic_Value]

Thanks for your insights on intrinsic value, Intrinsic Value. How does one calculate such?

Very first step in the journey on investing in shares:

If you were rich enough would you buy the whole company at its current market capitalisation. If not, then why buy one share?

(This is comes from my mentor (internet, obviously not real) Buffett).

Now take it down to the next level.

There is a real life example for the Australian market: Islect
Took me 5minutes to pass on the IPO and subsequent aftermarket.

How much profit does this company make?
How much does it 'cost' to 'own' this company.

Nah thanks, will pass.

Watching the share price drop with interest, but not interested yet. When it starts to get to around 80c will start to watch more closely. Watching with amusement as institutional investor Fidelity (who is supposed to be a value investor, yet massively over paid for their initial stake) tries to exit their stake, putting a lot of downwards pressure on the current share price.

A couple of other examples, Collins Foods and Myer.
IPO: no thanks
Subsequent market: no thanks not until the share price massively falls.

What happens?
suddenly both companies fall really out of favour.

Eventually i picked up both, the price was really just too cheap relative to IV.
Both i have offloaded a good % in the subsequent share price run ups.

But IV is not just a cheap charley. Baidu had some good value earlier this year.
Fast growing company, expensive on historical measures, but relative to growth there was a window of opportunity. Started buying.
Not too much.
Its now up 50%.
Out and waiting for the next opportunity.

Whats IV doing next?
There is not much on the Australian stock market that IV likes.

Topping up on Cabcharge again, but its risky. Buying chinese banks. Tried to hop on the institutional band wagon for the British IPO Royal Mail (had to make a bid of 300% of what i want in shares) but don't know if i will get any. Find out next week.

 

[redwing]

Intrinsic Values return so far for 2013 is 91%.

Its been a whopper of a year so far (although shouldn't count the chickens until they hatch)

That's great IV

What were the bargains that were trading for less than their intrinsic value, and gave such great gains?

Has the margin of safety now eroded with the rise in market value?

 

[datto]

Has anyone checked VRT out? Since IPO its been steadily going up. Could be another COH?

 

[Intrinsic_Value]

That's great IV

What were the bargains that were trading for less than their intrinsic value, and gave such great gains?

Has the margin of safety now eroded with the rise in market value?

Largest returns %wise based on purchase price to market price
(some of these have been held for more than one year)

Also remember I use leverage: a margin loan at an interest rate of 4.45% borrowing in AUD$ for everything

Ardent Leisure 55%
Automotive Holdings 109%
Bank of Queensland: 73%
Colorpack 54%
Collins Foods 47%
Countplus 44%
Hills Industries 92%
JB Hifi 94%
Logicams 48%
Legend Corporation 30%
Mc Millan Shakespeare 40%
National Australia Bank 56%
Programmed Maintenance 36%
STW Communications 73%
Seven West Media 65%
Seymore Whyte 73%
Tassal Group 116%
Treasury Group 126%
Thinksmart 52%
Vocus Communications 91%


International Shares:


GREEK ORGANISATION OF FOOTBALL PROGNOSTICS 72%
Cisco Systems 44%
Bidu 76%
Bank of America 156%
Citigroup 64%
Staples 52%
Western Union 64%




Largest Losses:
Adcorp -53% used Evans strategy, portfolio position was only 0.01%
Allmine Group - 77% used Evans strategy so portfolio position at cost was only 0.01%


Like I said in a previous post having a lot of difficulty finding quality shares trading below intrinsic value at the moment.

So long each individual's share trend is upwards, I just slowly take money off the table. If trend changes I will exit quickly as share prices are trading above IV.

 

[redwing]

Thanks, IV, 4.45% is also a great rate

 

[D.T.]

Wow who are you getting 4.45 through IV? Must be a volume discount?
And what sorta LVR have you been using?

 

[TPI]

Wow who are you getting 4.45 through IV?

I'd be interested in this too if you're willing to disclose IV...

Lowest rate I can see for retail investors is 6.65% for re-financiing with NAB (for loans <$250k or 6.15% for loans >$1M).

 

[Intrinsic_Value]

approach the investment banks, especially the international ones.

I am not prepared to disclose which institution handles my affairs as I like my confidentiality.

But basically you will need:
(a) to place at least one million of investable assets with them
(b) be a 'sophisticated investor' (this removes retail level liability for the banks if you stuff up)

Ask what sought of 'margin' they charge above bank bill rates.

My rate is a margin premium on bank bill rates, it keeps fluctuating.

 

[keithj]

I'd be interested in this too if you're willing to disclose IV...

Lowest rate I can see for retail investors is 6.65% for re-financiing with NAB (for loans <$250k or 6.15% for loans >$1M).

I use Interactive Brokers. They have a tiered rate - the most you will pay is 1.5% above the RBA rate (ie RBA is currently 2.5% + 1.5%, so currently 4%), and the least is 0.5% above the RBA rate.

The fly in the ointment is that ASIC has recently stopped their margin lending for some types of account - long story. I understand the workaround is to use a trust with corporate trustee (it works for me anyway). The other major caveat with IB is that they don't do margin calls - they just liquidate your holdings without notice if you breach their limits .

And it is a complex platform to trade with - aimed at frequent traders.

 

[TPI]

approach the investment banks, especially the international ones.

I am not prepared to disclose which institution handles my affairs as I like my confidentiality.

But basically you will need:
(a) to place at least one million of investable assets with them
(b) be a 'sophisticated investor' (this removes retail level liability for the banks if you stuff up)

Ask what sought of 'margin' they charge above bank bill rates.

My rate is a margin premium on bank bill rates, it keeps fluctuating.

Great, thanks IV.

Will make a note of this for once I qualify for points (a) and (b) .

Looks like the better your financial position the better it gets.

 

[TPI]

I use Interactive Brokers. They have a tiered rate - the most you will pay is 1.5% above the RBA rate (ie RBA is currently 2.5% + 1.5%, so currently 4%), and the least is 0.5% above the RBA rate.

The fly in the ointment is that ASIC has recently stopped their margin lending for some types of account - long story. I understand the workaround is to use a trust with corporate trustee (it works for me anyway). The other major caveat with IB is that they don't do margin calls - they just liquidate your holdings without notice if you breach their limits .

And it is a complex platform to trade with - aimed at frequent traders.

Thanks keithj,

I read about Interactive Brokers recently.

The ASIC licensing issue sounded a bit concerning to me, but if they are still lending to trusts with corporate trustees that seems more reassuring.

Do you have any concerns re. their custodial arrangements?

I believe this is common in the US, but not as much here.

I understand there is some insurance cover they have to protect investors in case a brokerage firm goes bankrupt ("SIPC" scheme I think it was?).

These issues are what caused me to be a bit apprehensive about using them.

 

[Intrinsic_Value]

. I understand the workaround is to use a trust with corporate trustee (it works for me anyway). .

This is similar for myself. The reason for this is that lending is done against the entire 'book' of everyones asset holdings.

Similar structure to those companies that went belly up during the financial crisis.

To minimise risk:
individual shares are held in trust with a different institution (the beneficial custodian). For this service I have to pay 25 basis points.

The custodian in my situation acts as a pure custodian, they are not allowed to sell the shares short, lend them out or borrow against them.

 

[Intrinsic_Value]

Thanks keithj,

I read about Interactive Brokers recently.

The ASIC licensing issue sounded a bit concerning to me, but if they are still lending to trusts with corporate trustees that seems more reassuring.

Do you have any concerns re. their custodial arrangements?

I believe this is common in the US, but not as much here.

I understand there is some insurance cover they have to protect investors in case a brokerage firm goes bankrupt ("SIPC" scheme I think it was?).

These issues are what caused me to be a bit apprehensive about using them.

The risk is that that lending party gets into financial trouble.
I prefer to stick with a bank as they are better regulated.

I am not sure what the financial situation is with IB

 

[TPI]

I use Interactive Brokers. They have a tiered rate - the most you will pay is 1.5% above the RBA rate (ie RBA is currently 2.5% + 1.5%, so currently 4%), and the least is 0.5% above the RBA rate.

If you add the effect of cash/dividends sitting in or offsetting margin loan accounts to reduce the effective loan balance, then the effective interest rates paid would be even lower.

 

[TPI]

To minimise risk:
individual shares are held in trust with a different institution (the beneficial custodian). For this service I have to pay 25 basis points.

The custodian in my situation acts as a pure custodian, they are not allowed to sell the shares short, lend them out or borrow against them.

Do you have to pay CGT if you switch from a custodian to a regular CHESS-sponsored broker?

 

[Intrinsic_Value]

Do you have to pay CGT if you switch from a custodian to a regular CHESS-sponsored broker?

who knows, never thought of that angle

However having said this I have no plans to change at this point in time. Very happy with my circumstances, its not just about the interest costs, its about the platform (I can trade across the globe) and I can also participate in institutional capital raisings (although I am small small small fry in this pit, I managed to get my allocation in Bank of Queensland institutional capital raising a couple of years ago, but missed out on Royal Mail, even though I bid 5 times the amount of stock I wanted and at the maximum price).

The great thing with institutional bidding, you don't even need to own any of the stock to participate. On the downside you only have around 48hours max to make your bids, and if you think they flog crap when its not wanted to the retail side, you should see the institutional side.

 

[redwing]

On another note, did you see Google's recent share price spike

Now over $1,000.00

 

[TPI]

Bull-market phase two?