Robusta fundamental, leveraged investments

[robusta]

May I ask why?

It would have been nice to get it closer to $1.00 like I did in my super but there was a mini bounce in the middle of the day....

As to why buy SWL at all, look on the SWL thread.

[robusta]

New Investment

KAM - K2 Asset Management

Bought 6250 @ $0.24 = $1500.00

Happy to discuss on the KAM thread.

[robusta]

PORTFOLIO UPDATE

Thought I had better update this portfolio for the EOFY.
There is a error somewhere of $93.96 in my favor that I will pick up when doing the tax return.

Capital losses for the year of $2504.50, considering I lost $3027.86 due to my fatal attraction to MCE and made other errors I will take that.

Paid the broker $863.00, that is 43 buy and sell events WAY TOO MUCH!!! Have set myself a target of five or less trades this year.

Bank interest and charges $2303.28

Dividends $960.33 Franking credits $383.34

So that is a loss of $4710.45

Better have a look at where the open positions are

Open Positions
Bought:
1115 x MTU @ $2.62 = $2921.30 08/08/11
65 x COH @ $45.85 = $2980.25 30/09/11
1373 xOKN @ $1.455 = $1997.72 23/11/11
916 x PRV @ $0.655 = $599.98 25/01/12
1023 x NVT @ $2.93 = $2997.39 02/02/12
972 x TGA @ $1.505 =$1462.86 05/04/12
4000 x PET @ $0.78 =$3120.00 20/04/12
1074 x TGA @$1.395 =$1498.23 26/04/12
1912 x DTL @1.045 =$1998.04 18/05/12
278 x MTU @$2.66 =$739.48 21/05/12 (rights issue)
2089 x DTL @$0.92 =$1921.88 18/06/12
1685 x SWL @$1.18 =$1988.30 19/06/12
6250x KAM @$0.24 =$1500.00 27/06/12
Subtotal $ 25,725.43

Current Portfolio Position

65 x COH @$65.84 =$4279.60
4001 x DTL @$1.11 =$4441.11
6250 x KAM @$0.28 = $1750.00
1393 x MTU @ $3.36 = $4680.48
1023 x NVT @ $4.34 = $4439.82
1373 x OKN @$1.05 = $1441.65
4000 x PET @$0.80 =$3200.00
916 x PRV @$0.64 = $586.24
1685 x SWL @$0.995=$1676.58
2046 x TGA @ $1.46=$2987.16

Subtotal = $29,482.64

Cash contributed $2100.00

This brings the total loss considering the open positions to $953.24


Credit still available of $1747.05 with dividend season on the way.

[ParleVouFrancois]

Nice to see you claw your way back , after a few blunders you seem to be travelling well, keep it up man!

[robusta]

Nice to see you claw your way back , after a few blunders you seem to be travelling well, keep it up man!

Thank you for that. There is still a long way to go before I am satisfied with the returns but at least it is headed in the right direction at the moment.

I think I will be well served by long periods of inactivity, there are some top quality companies in this portfolio I should sit back let them compound, collect dividends and wait for opportunity to come knocking.

[robusta]

NEW INVESTMENT

EZL - Euroz Limited

Bought 1412 @ $1.055 = $1489.66

Well I just like the way these guys allocate capital, the holdings in OZG & WIC are a bonus, also good leverage to any possible rebound in world growth.

Fully invested now, need some dividends if I am going to buy anymore - lucky for me tis the season.

[robusta]

Probably should start a thread for PET one day but until then I will update here.

Latest quarter results out now.

http://www.petersmacgregor.com/2012%...A%20Report.pdf

Very happy with the deal with ASTA, buying as low as $1.30 - $1.40 during the GFC and selling half the position at $9.40, also happy with the increased positions in Tesco and Johnson & Johnson.

The new JC Penny investment however I am not so sure about I like to listen to the American Motley Fool podcasts and those guys thought JC Penny had lost their way. I will just have to wait and see I guess.

All in all a credible result for the year in a difficult year for investing. The other thing I like about holding PET is the 30% cash, it will make me feel a little better if the market continues to be bearish knowing Wayne Peters will be buying as I am fully invested at the moment.

[robusta]

Robusta - rather than clog up the GNG thread with talk about BKL I'll post here.

Just remember that BKL has fairly high debt-to-equity. I had a quick look at the half-yearly report. They also have other fixed costs such as leases. Care should probably be taken to see how much of a cash flow buffer they have if the proverbial hits the fan due to the European crisis. I am not sure what preferences you have for debt ratios, but I usually try to compare this to operating cash flow and will not proceed unless there is a big margin for error. A general observation from the past decade seems to be that BKL matches their debt/equity ratios to their earnings cycle. Since the GFC they seem to be reducing this percentage. Happy researching!

Thank you Vesupria and sorry I tool so long to reply. I have not done any further research on BKL as by my estimation it is trading about or a bit above my estimate of IV, however they to have I nice history of growing earnings and high ROE over the last decade and should profit handsomely from a ageing population. Anyways I was reminded of this post when reading the CAM quarterly update today, starting from page 10 they have a interesting discussion on calculating intrinsic value and as a example they use BKL. Some may find the method used familiar.

Sorry I am having trouble downloading PDF at the moment, click on this link and type in CAM if interested.

http://www.asx.com.au/asx/statistics/announcements.do

Other items of interest is CAM has been buying or increasing positions in TGA, BKL, BKW, FGE, IRE and BHP.

They have also sold the position in MTU stating Iprimus cost to much and will result in lower ROE, EPS and higher debt. I will be reading the annual report with added interest.

[Vesupria]

Thank you Vesupria and sorry I tool so long to reply. I have not done any further research on BKL as by my estimation it is trading about or a bit above my estimate of IV, however they to have I nice history of growing earnings and high ROE over the last decade and should profit handsomely from a ageing population. Anyways I was reminded of this post when reading the CAM quarterly update today, starting from page 10 they have a interesting discussion on calculating intrinsic value and as a example they use BKL. Some may find the method used familiar.

Sorry I am having trouble downloading PDF at the moment, click on this link and type in CAM if interested.

http://www.asx.com.au/asx/statistics/announcements.do

Other items of interest is CAM has been buying or increasing positions in TGA, BKL, BKW, FGE, IRE and BHP.

They have also sold the position in MTU stating Iprimus cost to much and will result in lower ROE, EPS and higher debt. I will be reading the annual report with added interest.

Thanks for the post. I am working my way through the Clime investor report. However, I will comment that the more I think about it, the more trouble I find locked away in the intricacies of Return on Equity as a measurement of investment return (and perhaps capital intensity). I prefer ROIC, although it too can have its short comings.

I think the calculation, or reported value of equity itself, if you want to look at it in any depth, can pose questions to the validity of using this as the denominator. Past earnings and current earnings (accounting profits, not necessarily bearing any economic reality in some cases!) and even the contributed equity figure (how close to fair value is it and how much difference does this make?) cause problems. Of course this is also influenced by capital structure too. Not to mention the seasonal nature of earnings or other special situations (such as start-ups or businesses going through a growth spurt). Sometimes I can over-analyse things, especially when relying on single ratios, so I try to use a whole mixture. I guess what I am is saying is that I find it hard to rely on valuation calculations where ROE is the main input, especially if they involve a perpetuity calculation.

[robusta]

OK here is the link, may be easier to find in the future

http://www.climecapital.com.au/wp-co...terly_0612.pdf

Thanks for the post. I am working my way through the Clime investor report. However, I will comment that the more I think about it, the more trouble I find locked away in the intricacies of Return on Equity as a measurement of investment return (and perhaps capital intensity). I prefer ROIC, although it too can have its short comings.

I think the calculation, or reported value of equity itself, if you want to look at it in any depth, can pose questions to the validity of using this as the denominator. Past earnings and current earnings (accounting profits, not necessarily bearing any economic reality in some cases!) and even the contributed equity figure (how close to fair value is it and how much difference does this make?) cause problems. Of course this is also influenced by capital structure too. Not to mention the seasonal nature of earnings or other special situations (such as start-ups or businesses going through a growth spurt). Sometimes I can over-analyse things, especially when relying on single ratios, so I try to use a whole mixture. I guess what I am is saying is that I find it hard to rely on valuation calculations where ROE is the main input, especially if they involve a perpetuity calculation.

Cheers Vesupria I think I can see where you are coming from it is a imprecise measurement at the best of times looking at the past with the hope returns will follow into the future. The problem is I know of no better way to value a business. DCF can lead you astray as well.

Personally I am happy using ROE as the main input as this tells me how much money the business earns on the owners investment. A high ROE with low debt it is often a sign of a competitive advantage being present. I can think of no better metric to use. The trick is deciding how sustainable the returns are and how much you are prepared to pay.

With this in mind I think it is vital to look for high quality and a margin of safety in your calculations.

[robusta]

Investment Sold

PRV - Premier Investments

Sold 916 @ $0.64 = $586.24

This was by far the smallest position in the portfolio, I was intending to let it build via the DRP. Basically EZL and SWL have reached even more attractive prices since I bought and I am "searching the back of the couch" for more capital to increase one of these positions.

That's twice I have paid the broker this month I must slow down this frenzy of activity.

[sinner]

Basically EZL and SWL have reached even more attractive prices since I bought and I am "searching the back of the couch" for more capital to increase one of these positions.

That's twice I have paid the broker this month

Won't you be paying the broker a third time if you buy some EZL or SWL?

I only ask in relation to

I must slow down this frenzy of activity.

[robusta]

Yeah you are right but I will also have run out of money and there is nothing else I am looking to sell.

[robusta]

INVESTMENT INCREASED

SWL - Seymour Whyte

Bought 843 @ $0.895 = $754.49

That's it all in, bring on the dividends

[Noddy]

NEW INVESTMENT

CCP - Credit Corp Group
These guys specialise in debt collection, they buy overdue debts from banks, credit card companies etc at a discount and collect the payments. The minimum they budget to make on a 6 year period on purchased debts is 230%.

Once again a simple business model with the ability to increase revenue and profits with not much extra capital required. CCP also has the ability to retain a lot of equity (low payout ratio) and earn a high return on that equity.
ROE is a little low at the moment (otherwise my investment would be larger) but it should be rising in the future.

I will keep a eye on FSA because they seem to be gaining market share but probably at a lower margin to CCP.

Portfolio Position

Starting line of credit $30,000.00

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)


Brokerage Paid = $40.05
Lenders Mortgage insurance $667.81 paid

Available credit $16,959.28

All ords @ 25/07/11 4603.80

I do have one order in the market half filled but after that waiting on reporting season to find more value.

Hi Robusta.
Best of luck with your thread.
Is there any particular reason that you buy odd numbers of shares ?

[robusta]

Hi Robusta.
Best of luck with your thread.
Is there any particular reason that you buy odd numbers of shares ?

Cheers Noddy, when I started investing way back in 2010, all positions were nice even numbers, 2000 of xyz, 10000 of ABC.... Now I decide to allocate say $3000 to a company including brokerage and however many shares I get that is it. Must admit sometimes I will allocate a number like $2990 so in a few years when the position is hopefully priced at $6000 by the market I will look sooo much smarter.

[burglar]

Cheers Noddy, when I started investing way back in 2010, all positions were nice even numbers, 2000 of xyz, ...

With the advent of the spreadsheet, it is no longer necessary for mental arithmetic on nice even numbers.

[kermit345]

Hi robusta,

I'd taken a back seat from the market for a while but started looking through some stocks lately in search of some value using some basic screeners. One that caught my eye is Challenger (CGF) and I was wondering if you or any others here have had a look at it recently? The reason it caught my eye was as follows:

Current P/E of about 6.86 vs other diversified financials companies - (Platinum – 13.83, Macquarie – 10.35, IOOF – 14.90, Perpetual – 17.09)
Reasonably steady increase over the years in EPS and DPS with only hiccup coming in 08 - same as most financial companies experienced.
Consensus earnings are all pointing towards EPS growth this year, even at the lower end - which will marginally increase dividends as they maintain a payout ratio
Continue to implement buyback strategy which certainly seems a smart move while the shares trade at this PE level.

Interested in the views of others, just seems they are lurking in the shadows with consistent earnings growth while trading at a reasonable discount to peers. Note I also work in the financial services industry and Challenger are (as far as i know) the first company that springs to mind for most when doing annuities for people leading to or in retirement. As baby boomers continue to move into retirement it should help them continue their EPS growth as all their presentations show.

Anyhow just thought i'd generate some discussion

[So_Cynical]

(26th-July-2012)INVESTMENT INCREASED

SWL - Seymour Whyte

Bought 843 @ $0.895 = $754.49

That's it all in, bring on the dividends

Traded as low as 0.81 cents again today, 3 days this week...maybe that's a good sign.

One that caught my eye is Challenger (CGF) and I was wondering if you or any others here have had a look at it recently?

Anyhow just thought i'd generate some discussion

CGF is on one of my oldest watch lists, in fact one of my very first watch lists from 2007, CGF is one of the many stocks i just didn't have enough money for in GFC 1, and i was totally spewing i didn't get in on the last big dip ($3.50) a couple of years back.

I had taken my eye off the CGF ball, thanks for re focusing me. does look cheap...and my super fund desperately needs a big financial.

[oddson]

Interested in the views of others, just seems they are lurking in the shadows with consistent earnings growth while trading at a reasonable discount to peers.

Kermit,

I performed a short term trade when it was at $3.08.

IMO, CGF is tricky to value due to the business structure of a Fund Manager and Life Insurance. If the Life Insurance part of the business was listed seperately I would buy a lot as I am confident about the retirement megatrend over the next 20 years. Not sure I want to long term hold the Fund Manager side of the business.

I traded at the time due to the following.

-priced around book value
-the last company announcement was positive
-the company is performing share buybacks
-the medium analyst forecast for the next 12 months is around $4.5.

There is a lot to like about Challenger but I will never long term hold due to Fund Manager side of the business. If it drops to under book value I trade it again - it is on my watchlist.

Cheers

Oddson