Robusta fundamental, leveraged investments

[Vesupria]

Just looking at my return for the last 12 months. I'm 11.79% positive apparently. That surprises me considering I've never done this other than on stock market games (ie. not real money). The first stock I bought, although my smallest position is down 35%, but in all honestly it's not a "value investing stock" and it had no plan. Quick lesson learnt! My best performer, surprisingly is CBA at 35% return. All figures including dividends, but not imputation credits. Thinking of taking profits on WBC and ANZ, don't feel like I need to hold 3 banks at this point, especially with this sector holding considerable risk. Sorry if this isn't relevant to your thread!

[burglar]

Sorry if this isn't relevant to your thread!

Prey tell ... What could be more relevant to this thread?

[robusta]

Just looking at my return for the last 12 months. I'm 11.79% positive apparently. That surprises me considering I've never done this other than on stock market games (ie. not real money). The first stock I bought, although my smallest position is down 35%, but in all honestly it's not a "value investing stock" and it had no plan. Quick lesson learnt! My best performer, surprisingly is CBA at 35% return. All figures including dividends, but not imputation credits. Thinking of taking profits on WBC and ANZ, don't feel like I need to hold 3 banks at this point, especially with this sector holding considerable risk. Sorry if this isn't relevant to your thread!

Just goes to show there are plenty of opportunities in the market for those prepared to take on risk. I'm sure I read a few pundits about a year ago predicting the banks would supply a decent yield but forget about any capital growth in this environment.

[tinhat]

Just goes to show there are plenty of opportunities in the market for those prepared to take on risk. I'm sure I read a few pundits about a year ago predicting the banks would supply a decent yield but forget about any capital growth in this environment.

From a value perspective, CBA hasn't had any *real* growth in revenue or profit in the last financial year, and earnings forecasts for the next couple of year's don't predict any real growth either - so for me the recent rally in share prices of the big banks seems to be more about chasing yield in defensive stocks. There might come a time this year when I also consider selling some of my bank stocks if the price premium relative to yield gets too high. It depends if this rally continues as there seems to me to be quite a divergence at the moment between over-valued defensive income stocks and some of the "higher risk" stocks that are still languishing at very low valuations to earnings.

[herzy]

I decided not to use franking credits in the returns as these leave the portfolio and are offset against my income at the marginal tax rate. They are valuable to me but I am happy to take a larger tax return in these early years and hopefully reach into my pocket and pay some extra tax in the future.

Sorry if this takes away from your thread, but could you explain this a little more? The extent of my understanding of franking credits is that you get 30% extra to compensate for tax already paid by the company...

[robusta]

Sorry if this takes away from your thread, but could you explain this a little more? The extent of my understanding of franking credits is that you get 30% extra to compensate for tax already paid by the company...

Sure do and as a bonus with my leveraged posititions I am getting more benefit from franked dividends than I would otherwise. Say for example the portfolio earns $1000 in dividends in the same year $1000 is paid in interest the franking credits basically come straight off my tax bill.

However I view this as a bonus and do not make investment decisions based on tax considerations, the investment has to make sense first.

For the purpose of recording the returns of this portfolio I do not include the credits as they get mixed up in my personal tax return and basically leave the portfolio to be included in the consolidated payments I exchange with the tax man.

[robusta]

NEW INVESTMENT

COH - Cochlear Limited

Bought 65 shares @ $45.85

Have had my eye on COH since the recall and it finally reached a price I am willing to pay. There may be more short term pain to come but the growth and stability of this company is exceptional.

This is a few weeks old but formed a beginning to my research.

http://www.youtube.com/watch?v=TJmoU_dIkqg


INVESTMENT SOLD

MIN - Mineral Resources

It is with great regret that I sold MIN today but as stated earlier I am not comfortable being fully invested with such volatility around. The bottom line is COH was too good a opportunity to pass on an MIN was the closest to my calculation of IV in my porfolio.

Another nice anniversary today a year ago I bought into Cochlear, with hindsight it was also nice to get out of MIN with a small profit.

Anyway if you include brokerage I have invested $3000.20 and received $159.25 in dividends for a yield of a touch over 5.3% plus $32.32 in franking credits.

This is another fail as far as dividends covering the interest cost of my line of credit but considering COH have increased the dividend every year since listing I have high hopes for the future.

Not many companies can have a recall on their flagship product and still perform as strongly as COH this year.

For what it is worth the most recent closing price of $67.15 gives my holding a market value of $4364.75, I think it is worth more and will continue to hold.

[robusta]

Just remembered the tax position for the past financial year has not been posted here yet.

Capital loss $3095.16 (this will be set aside to be offset against any future capital gains)

Income $960.32, Dividends minus bank interest/charges of $2303.28 equals a loss of $1342.96 against my normal income plus $383.32 in franking credits received means the tax man will give back a little extra this year.

I would much prefer to pay him extra on some nice profits but that day will come.

[wilto]

Good thread, about to read it all from the start.

[robusta]

PORTFOLIO UPDATE

Have not updated this portfolio since the EOFY, now all the dividends are tucked away I guess now would be a good time.

The only position I have closed so far this year is PRV, for a small capital loss, would have been a gain if I held on a little longer. This incurred a loss of $53.64 that adds to the previous fy loss of $3095.16 to make a grand negative total of $3148.80

Paid the bank $773.77 in interest and charges when this is added to last years gouging of $2303.28 this brings the total I have paid the bastards to $3077.05

Received $833.09 in dividends plus $331.46 franking credits when we add to last years dividends $960.33 and franking credits $383.34

The total is $1793.42 in dividends plus $714.18 franking credits.

So that is a loss of $4432.43

Better have a look at where the open positions are (include brokerage)

Open Positions
Bought:
1115 x MTU @ $2.62 = $2941.25 08/08/11
65 x COH @ $45.85 = $3000.20 30/09/11
1373 xOKN @ $1.455 = $2017.67 23/11/11
1023 x NVT @ $2.93 = $3017.34 02/02/12
972 x TGA @ $1.505 =$1482.81 05/04/12
4000 x PET @ $0.78 =$3139.95 20/04/12
1074 x TGA @$1.395 =$1518.18 26/04/12
1912 x DTL @1.045 =$2017.99 18/05/12
278 x MTU @$2.66 =$739.48 21/05/12 (rights issue)
2089 x DTL @$0.92 =$1941.83 18/06/12
1685 x SWL @$1.18 =$2008.25 19/06/12
6250x KAM @$0.24 =$1519.95 27/06/12
1412x EZL @ $1.055 = $1509.61 17/07/12
843 x SWL @ $0.895 = $774.44 26/07/12

Subtotal $ 27,628.95

Current Portfolio Position

65 x COH @$71.71 =$4661.15
4001 x DTL @$1.15 =$4601.15
1412 x EZL @ $1.025 = $1447.30
6250 x KAM @$0.365 = $2281.25
1393 x MTU @ $3.68 = $5126.24
1023 x NVT @ $3.99 = $4081.77
1373 x OKN @$1.255 = $1723.12
4000 x PET @$0.86 =$3440.00
2528 x SWL @$0.80 =$2022.40
2046 x TGA @ $1.92 =$3928.32

Subtotal = $33,312.70

Cash contributed $3000.00

This brings paper profit considering the open positions to $1251.32

So the return on my contributions is ~41.71%.

Please understand this is a leveraged strategy and these returns can be very lumpy as you can see about 9 months ago the returns were minus a few thousand percent on my contributed capital.

[burglar]

... Paid the bank $773.77 in interest and charges when this is added to last years gouging of $2303.28 this brings the total I have paid the bastards to $3077.05
...

Hi robusta,

Bit harsh!

[robusta]

Hi robusta,

Bit harsh!

Yeah you are probably right but somehow I find it strangely therapeutic to bash the banks.I would like to own shares in them one day however, at the right price.

[burglar]

Yeah you are probably right ...

If it were just money I would agree.
But it's more than money.
It is opportunity!

[robusta]

Investment Sold

KAM - K2 Asset Management

Bought this small holding 27/06/12 my original plan was to collect nice dividend yield and consider selling somewhere north of $0.40 but with storm clouds again/still on the horizon in the financial world I decided to take my profits and hopefully redeploy this capital for a better future return.

Here is my original post, the market was pretty negative at the time as you can see if you look at the KAM thread.

New Investment

KAM - K2 Asset Management

Bought 6250 @ $0.24 = $1500.00 + $19.95 brokerage = $1519.95

Happy to discuss on the KAM thread.

Sold 6250 shares today @$0.35 for total proceeds (including payment to the broker) of $2167.55 this gives me a capital gain of $647.60 that will be offset against previous losses for tax purposes.

In addition they have paid me a dividend of $62.50 + $26.79 franking credits.

This gives me a return on this small piece of capital of $710.10 or ~46.72% minus my cost of capital.

[robusta]

New Investment

IPP - IProperty Group Limited

Bought 1660 @ $0.915 = $1538.85

This business while not making any money at the moment is following in the footsteps of REA, with leading portals in Indonesia, Malaysia, Singapore and Hong Kong. They have recently had a breakthrough in the HK market and are a clear leader in Indonesia while Malaysia is actually making money. The are still trying to build a clear lead and network effect so there are risks but if successful the competitive advantage and pricing power in these markets should be satisfactory.

[robusta]

Investment Sold

Pet - Peters Macgregor Investments

Here is what I said back in April this year when I bought this one.

New Investment

PET - Peters Macgregor Investments

Bought 4000 @ $0.78 = $3120.00

The liquidity on this one is almost trade by appointment, I moved the sp 4% today all on my own. Have been looking to buy for 3 weeks now and actually picked some up for my super earlier this month at $0.725, at the time all my spare cash was with the QBE spp.
Anyway since then the latest monthly NTA announcement jumped from $1.0222 to $1.0931 after tax, my bid has constantly been outbid at higher volume and I missed 5000 shares @ $0.75 with my bid @ $0.745

But so much for the negatives I am very happy to finally have a piece of this one and I like the investment strategy and the holdings within this LIC - also still at a decent discount to NTA.

Wayne Peters is the chief investment officer, they also run a managed fund with as far as I can see parallel portfolios.

Anyway here is the investment philosophy.

http://www.petersmacgregor.com/about-philosophy.php

I like the way, the look at value, for example they bought BP in the middle of the oil spill disaster also Bank of America around $7.00.

Here is the most recent investment report

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

Top five holdings;

Michael Hill International - yes the jeweler!! Take a look at the cash flow, not much debt...

Berkshire Hathaway - have always wanted a piece of this one, just a cash generating machine.

Fairfax Financial - Another brilliant capital allocator at this insurance conglomerate a bit like BRK with more room to grow IMO.

Asta Funding - Americas version of Credit Corp

Bank of America - bought about a month before Buffet started buying.

I do not expect this one to shoot the lights out but a nice 10% CAGR of net tangible assets per share is more likely than not in my opinion, if that can be achieved I don't care what the share price does.

There is a bit of a discussion from page 22 of this thread if anyone is interested.


Still would have been happy to hold except I do not like the position they took in JC Penney (US retailer, same store sales falling off a cliff) and I am looking to free up some capital for other opportunities.

Sold 4000 shares @ $0.85 = $3380.05 after paying the broker.

That is a capital gain of $240.10 and in addition I received $80.00 in dividends plus $34.29 franking credits.

So that is a return of ~10.22% on my invested capital in about 7 months, not a world beater but I will take it.

[RottenValue]

Caught up with the thread after an absence of a few months and the PET sale reminded me of my MFF suggestion at the time. In hindsight, always a good thing, it seems MFF has continued to outperform, especially given they have commenced paying a dividend and provided a 1:3 bonus issue for no apparent reason.

However also brings back my latest big screw up - having owned considerable MFF I was interested in exploring parent in MFG, after much angst decide that they were too expensive at $1.70 back in Feb. With SP now at $4.50 I dont feel so clever with my 30% MFF gain

Anyway, imortant that you stick to your proven process and accept that cant win them all

[robusta]

Know what you mean, after you suggested MFF I set my price I would like to buy at and just watched the sp run away, I also looked at MFG, added it to my watch list but decided it was too expensive. That's life I guess.

[robusta]

Investment Increased

TGA - Thorn Group

Bought 867 shares @ $1.745 = $1532.87 inc brokerage

There have been plenty of times in my short investing career that I have averaged down, this is the first time I have averaged up!!!. That shows a little of how highly I rate this business.

I don't expect TGA to shoot the lights out but I do expect rising dividends over time and maybe some capital gains to follow.

[tinhat]

Investment Increased

TGA - Thorn Group

Bought 867 shares @ $1.745 = $1532.87 inc brokerage

There have been plenty of times in my short investing career that I have averaged down, this is the first time I have averaged up!!!. That shows a little of how highly I rate this business.

I don't expect TGA to shoot the lights out but I do expect rising dividends over time and maybe some capital gains to follow.

Really? I hold TGA in the SMSF and plan to do so. But alas, like many of the high dividend payers, earnings growth is looking a bit soft. When I look at the banks and other companies yielding over 5% I generally see soft earnings growth forecasts. When you look at defensives that have solid earnings outlooks you are looking at a dividend less that 5% at the moment. That is just my observation. I like that the payout ratio keeps enough cash retained to grow the business but is still giving a very attractive yield. The bottom line with TGA I think is faith in the management's ability to make the right investments and get the business strategy right to keep up with the changing economics of consumer durables markets.