Australian (ASX) Stock Market Forum

Medium/Longer Term Stock Portfolio

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Since the last post, I have had a lot of guidance from fellow ASF members in terms of going about longer-term investing. Few of the highly regarded members: @tech/a , @peter2 and @Skate have been generous to share some of their knowledge and experience with me over the last few days.

Basic conclusion at this stage is to stick to top quality blue chips like the latest buy in BHP and similar. Everything else (for example AIZ and FLN in this portfolio) should be considered as stocks for trading, something that I do in my other portfolio Speculative Stock Portfolio here at ASF.

But what do I do with AIZ and FLN ? I will continue to hold in this portfolio, even though they are down heavily. They may recover slowly over time if my original thoughts on buying them were good enough.

I haven't mastered the illusive art (or the science) of finding those smaller companies with sufficient consistency to make it worthwhile investing in. Yes, I have had the odd luck with a multi-bagger on an undervalued stock, but that's the problem, it was based mostly on luck than the time spent looking at the company fundamentals. There are a few ASF members that I know of who has some success in this area such as @galumay and @Value Collector but it's a tough gig.

I will continue to privately learn at my own pace and if I build up sufficient consistency, I may bring little gems into this portfolio again one day...

So, for the time being it will be just blue chips and dividend paying big caps that will be bought in this portfolio going forward.
 

Value Collector

Have courage, and be kind.
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Since the last post, I have had a lot of guidance from fellow ASF members in terms of going about longer-term investing. Few of the highly regarded members: @tech/a , @peter2 and @Skate have been generous to share some of their knowledge and experience with me over the last few days.

Basic conclusion at this stage is to stick to top quality blue chips like the latest buy in BHP and similar. Everything else (for example AIZ and FLN in this portfolio) should be considered as stocks for trading, something that I do in my other portfolio Speculative Stock Portfolio here at ASF.

But what do I do with AIZ and FLN ? I will continue to hold in this portfolio, even though they are down heavily. They may recover slowly over time if my original thoughts on buying them were good enough.

I haven't mastered the illusive art (or the science) of finding those smaller companies with sufficient consistency to make it worthwhile investing in. Yes, I have had the odd luck with a multi-bagger on an undervalued stock, but that's the problem, it was based mostly on luck than the time spent looking at the company fundamentals. There are a few ASF members that I know of who has some success in this area such as @galumay and @Value Collector but it's a tough gig.

I will continue to privately learn at my own pace and if I build up sufficient consistency, I may bring little gems into this portfolio again one day...

So, for the time being it will be just blue chips and dividend paying big caps that will be bought in this portfolio going forward.
One way to think of it, is that rather than being a punter that is making the bets on outcomes of individual races, you are a horse owner trying to put together a stable of horses that will perform well on average over time.

When it comes to both horses and companies, you want to be able to identify the good quality ones, and then work out a sensible price to pay for them based on how you expect them to perform.

You can lose money buying good horses (and companies) if you over pay for them, and you can make windfall profits if you get good ones and bargain prices.

The advantage that companies have over horses if their useful life, it’s possible for companies to continue performing for decades, where as horses have a shorter life.

————————
In my opinion there are two valid strategies when it comes to buying companies to populate your stable/portfolio.

1, You just buy into an index of companies with a set amount of money, each month or quarter. This will produce a credible average result.

2, or you can try and pick the best horses/companies, and purchase them at times when their prices look cheap compared to your estimates of their future performance.

Option 1 is very easy, and for most people is going to be the best option, and guarantees the person a decent average return over time.

Option 2 is much harder, though it can produce extraordinary returns, if selections or timing is off, it can pressure returns and losses that are far worse than average too.

I personally use both strategies, my main investment portfolio is using option 2, but I also use option 1 to dollar cost avergae into my super.
 

So_Cynical

The Contrarian Averager
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But what do I do with AIZ and FLN ? I will continue to hold in this portfolio, even though they are down heavily. They may recover slowly over time if my original thoughts on buying them were good enough.

In my long term experience, if you dont need the tax benefits of selling these losers then dont, i have had quiet a few stocks come back from the dead or near death, im genuinely surprised at how often it has happened, CHN Chalice i sold out in like 2014 or so for the tax loss at 20c or so, was 9 bucks something just last year, just recently (2years ago) i sold NHC New hope for the tax loss at about 1.20 now its 5.50.

Quite often the best thing to do is nothing.
 
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Since the last post, I have had a lot of guidance from fellow ASF members in terms of going about longer-term investing. Few of the highly regarded members: @tech/a , @peter2 and @Skate have been generous to share some of their knowledge and experience with me over the last few days.

Basic conclusion at this stage is to stick to top quality blue chips like the latest buy in BHP and similar. Everything else (for example AIZ and FLN in this portfolio) should be considered as stocks for trading, something that I do in my other portfolio Speculative Stock Portfolio here at ASF.

But what do I do with AIZ and FLN ? I will continue to hold in this portfolio, even though they are down heavily. They may recover slowly over time if my original thoughts on buying them were good enough.

I haven't mastered the illusive art (or the science) of finding those smaller companies with sufficient consistency to make it worthwhile investing in. Yes, I have had the odd luck with a multi-bagger on an undervalued stock, but that's the problem, it was based mostly on luck than the time spent looking at the company fundamentals. There are a few ASF members that I know of who has some success in this area such as @galumay and @Value Collector but it's a tough gig.

I will continue to privately learn at my own pace and if I build up sufficient consistency, I may bring little gems into this portfolio again one day...

So, for the time being it will be just blue chips and dividend paying big caps that will be bought in this portfolio going forward.
I don’t generally look to invest in blue-chip shares as there are a lot of very smart very well-resourced people out there analysing these companies and I’m not about to outsmart, outthink, or outwork these people on a day-to-day basis. My blue-chip investments tend to be made only every few years and held for 7-15 years. I spend much more time on small caps which I roughly buy on a monthly basis and hold for 2-4 years. I don't really care about diversity. If I have strong feelings about a share - then I'll put a high % into that share.

I’m not a trader, I will play in and out of small caps which I think have big price fluctuations and are undervalued – they have to be companies where I’m also happy to hold long-term in case I get stuck with shares if the price drops due to what I think is an irrational market. I've stopped doing this in the last two years because I can't be f-ed to spend days on the taxes for all my trades and I'm too stuck-up to pay a professional.

I don't think there are "sufficient consistency" small guys out there - which makes it prime for good investments. Sticking with the Buffet theme, I have a pseudo cigar butt investment philosophy. I tend to keep it textbook and analyse the cashflow statements and balance sheets of small caps looking for what I think is a financially healthy company trading at a low multiple relative to peers and relative to historical trends which has run into difficulties lately (lawsuits, dropping out of an index, missing/withdrawing guidance, cancelling dividends, write-downs, big capex program) or just a small cap with good growth that has not been picked up by others. More specifically I look for operating cashflows which are high enough to cover investments and debt servicing and leave enough in the kitty to fund current or future dividends. If it’s not – then I look at the tangible assets on the books and see if I think the assets can be sold off for more $$$ then they are generating in cashflow, or in extreme examples for more $$$ than the company is worth. I then work out what I think the value/share price of the company should be. These don't come across my eye very often, 1-5 a year at best.

I give some consideration to macro trends but again, I don’t try to outsmart a billion others. Have we had a few bad years of crops? If yes, I’m more likely to buy those wheat agricultural shares as there should be a good year around the corner. Given current inflation levels I am less likely to buy those premium European washing machine shares as no one has the money to go buy fancy appliances right now. A railway company has had low capital investments the past few years, I might stay away from those shares as I know railways have the potential for heavy capital investments every so often.

My side investments are junior miners/explorers... But that’s Ouija board stuff.

As far are your Freelancer… Looked at them maybe 5 years ago. Just looked again. I can’t really see since 2017 what they’ve managed to achieve. Revenue increases look on par with inflation and operational cashflows which have really just been enough to tread water, cash has gone down and I can’t see any dividends paid. Certainly not interesting me – but never know – facebook might knock on their door and buy the domain for a billion dollars.
In my long term experience, if you dont need the tax benefits of selling these losers then dont, i have had quiet a few stocks come back from the dead or near death, im genuinely surprised at how often it has happened, CHN Chalice i sold out in like 2014 or so for the tax loss at 20c or so, was 9 bucks something just last year, just recently (2years ago) i sold NHC New hope for the tax loss at about 1.20 now its 5.50.

Quite often the best thing to do is nothing.
Thinking the same thing I rode VEC and DML all the way to death in the past few years... :roflmao:....:cry:

I try not to get sentimental about what I paid for a share. Much easier now than 20 years ago. If a month or year or 10 years down the road I believe the investment is overvalued, I'll still sell even at a loss and move on.
 

Knobby22

Mmmmmm 2nd breakfast
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In my long term experience, if you dont need the tax benefits of selling these losers then dont, i have had quiet a few stocks come back from the dead or near death, im genuinely surprised at how often it has happened, CHN Chalice i sold out in like 2014 or so for the tax loss at 20c or so, was 9 bucks something just last year, just recently (2years ago) i sold NHC New hope for the tax loss at about 1.20 now its 5.50.

Quite often the best thing to do is nothing.
I knew a guy who specialised in buying companies near death. He would probably lose his dough about 1/3 of the time but his wins were massive.
 
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Great discussion guys, I think the markets are going to present us with opportunities with buying quality companies at lower prices for the long term. I will be looking for opportunities as well as to add to BHP if it drops quite a bit.

I value all the input from fellow ASF members, but I will keep small caps in the other portfolio for now. As I said, if I can improve my process of finding small caps that I am happy to hold long term, I will post in the future. All are welcome to discuss their favourite small cap growth stocks and value stocks on this thread, that's how we can all learn.
 
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