Managed Accounts Purchasde of BHP and WPL
Wednesday, June 15th, 2011
Good afternoon,
Last Friday a purchase was made in BHP shares and yesterday a purchase in Woodside Petroleum for 15% of the portfolio each. Both stocks were re-buys of previously held investments, each 10% or more below our last sale prices.
The shares themselves need no updating – there have been no changes in the underlying prices or the outlooks for the commodities which are the drivers for the long term revenue forecasts.
Market Update:
The broader economy has shown a continued softness in economic data which is a genuine concern in some areas however is simply a reflection of a patchy recovery in others. Our main area of genuine concern remains the additional debt being used to prop up developed economies in the pursuit of continued economic growth.
Any developed economy will have slower economic growth than their developing counterparts, and this now includes Australia. Europe, the USA and Japan are all in a similar boat in many respects – all facing lower or stagnant economic growth than in the past and Governments and private citizens have taken out cheap debt with the expectation of ever-higher incomes and GDP to make the repayments. People will have to come to terms with the fact that this cannot continue indefinitely.
However the issue we face is not a new one, and neither are we completely unequipped to deal with paying back debt. In fact in the 1940’s after the Second World War the US the debt to GDP ratio was higher than it is now, and the interest rate paid on that debt was also higher.
While Greeks are in the streets protesting against much needed spending cuts, American culture is far more can-do and with the right kind of tweaks the economy may very well get moving quickly. American perseverance should not be underestimated and the way in which news is reported these days it is easy to become too bearish.
Let’s say that what is clear is that news reflects markets and as the last two months have been bearish the news being reported is also bearish while the story remains the same. We certainly don’t want to be ignorant of the facts – Greece’s debt was finally downgraded to the lowest possible rating last week (reflecting what markets have already priced in). Greece will face defaults of some kind and at some point this year, or next. We wouldn’t be surprised to see Greece ejected from the Euro and witness the New Drachma fall off into oblivion where it belongs. If this were to happen we don’t necessarily believe it would spell the end for world markets either.
Inflation is probably the next-biggest hurdle we face when the developed economies growth picks up, because of the large amount of free cash sloshing around the system. While inflation can be difficult to contain, right now it is nowhere to be seen and interest rates for the time being remain very low.
While we don’t want to be blindsided by something unexpected, the facts behind the current move down in our market are not negative enough to cause a sustained move lower; they are simply causing the market to remain range-bound. The stocks we have been buying are cheap on current and expected earnings and earnings are transparent enough due to the fairly ‘simple’ nature of their businesses.
For the time being, we expect the market to stay trading between 4,500 and 5,000 points. The two purchases bring our portfolios to between 75% and 80% invested and we can make one additional purchase for our managed discretionary accounts if there’s an opportunity to do so.
Tags: BHP, Buy Shares, Buying Shares, Managed Accounts, Managed Discretionary Accounts, Managed Funds, managed investments, Share Trading Recommendations, Stock Brokers
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations, Trading Updates
Managed Discretionary Accounts – Purchase of AMP
Wednesday, June 8th, 2011
Good afternoon,
Yesterday afternoon we purchased AMP shares to the value of 15% of the portfolio at $4.97 per share. The purchase brings the portfolio to around 50% invested, and provides us with ample buying power should the market continue to be weak.
The investment in AMP is on similar terms to previous recent investments in the company albeit at a lower entry price than we have managed to get before. AMP has recently completed a merger with the Australian and New Zealand assets of AXA Asia Pacific, making it one of the largest wealth management, Superannuation and financial planning, and life insurance companies in the region.
We are particularly fond of Superannuation and wealth management at this size level because economies of scale really start to kick in. Super in Australia is one of the only truly legislated-for-growth industries that we have. 9% of everything the average working Australian earns ends up in Super – and we can’t spend any of it before we turn 65 or retire. What’s more, the balance in a Super fund grows under its own steam most years due to investment returns, further increasing the funds under management for the manager. And life insurance is very very similar.
AMP is now a really good, stable company with a tight business focus, and as with many of our investments during this ‘range-bound’ market we are happy to purchase these shares at the low end of their range for the managed discretionary accounts because it represents both relative and absolute value for our portfolios. The time frame for this is between 10 and 16 weeks, and we expect to be able to sell AMP shares at or above $5.50 over that time.
Cheers
Shawn and Hayden
Tags: Buy Shares, Buying Shares, Managed Accounts, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Stock Broking, stockbrokers, Stockbroking
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Discretionary Accounts – Purchase of WBC and Market Update
Saturday, May 7th, 2011
Good afternoon,
On Friday we made a purchase in Westpac Bank, which is paying a fully franked dividend in three weeks’ time. WBC reported a solid cash profit increase of 7% on the 4th of May, backed up by a dividend increase of 17% to 74c per share. This leaves WBC trading on a PE of 11.5 times. From our previous sell level, we have purchased WBC 50c cheaper and we expect to be holding the stock through the dividend period.
The market generally has been tricky, with large movements in specific areas of currency and commodities in both directions. As we flagged a month ago, the AUD much above $1.02 creates major problems for parts of the Australian economy and a number of listed companies, the flow-on effects in particular are difficult to forecast. As the currency has gone higher, we have become more cautious in areas such as materials and anything involved in exports or US Dollar denominated earnings.
The banking sector is one area which should not be impacted and the recent profit announcements and trading outlooks from the banks support this.
Our other main holdings, accounting for approximately 30% of the portfolio, are currently soft in an otherwise soft market and we want to update you on the progress below.
COY
In the absence of any news, Coppermoly has drifted lower on low volume however we expect the announcement of drilling results later this month will buoy the share price. The expectation for this investment is longer term and we are very confident of seeing a share price north of 20c soon
PDN
Paladin Energy has traded a wide range and has been testing the lower end of this range over the past week or so. We re-iterate our position on this stock; there is a lot of interest in Uranium assets from China who still have plans to build another 50 reactors after a safety audit is completed in the wake of the Fukushima disaster. The past week has seen undue speculation that Namibia (where PDN operates its largest mine) would look to some form of ‘Nationalisation’ of Uranium assets however the Government was quick to hose this down saying that they would simply insist on being a stakeholder in new projects only, similar to how Papua New Guinea operates. As Warren Buffett says, “be greedy when others are fearful”, this remains a classic example of just such an opportunity. Patience remains key with this investment and time will reward us if we are patient.
QHL
Quickstep Holdings is conducting a capital-raising which we see as being very positive. Most of its revenue going forward will be priced in US Dollars, QHL has managed to price $US15M in convertible notes at a 2% yield, with the notes converting based on its share price up to 90c per share. Existing investors will have the opportunity to participate through a Share Purchase Plan (SPP), documentation on which will come to you next week in the mail. While we cannot take up this opportunity on your behalf, we encourage you to take up $2500 worth of the QHL SPP for every $100,000 (approx.) of your portfolio value, or 2.5% up to the maximum $15,000. We remain committed to support QHL in the long term, and we expect that once this capital raising has been completed we will see the share price strengthen to above 50c in the medium term.
Looking forward, we anticipate there being the possibility of some further weakness in many sectors and put simply we want to have the available cash to invest on those days when the best opportunities present, thus we anticipate maintaining relatively high cash levels for the time being. Many of our previous holdings including BHP and WPL, have seen good falls in their share prices because of the currency. We don’t think we have yet seen genuine ‘wash-out’ days where the best buying presents but we certainly stand ready to pick these stocks up when that happens.
If you would like to discuss the portfolio for the managed discretionary accounts or the market in general please call the desk.
Tags: Buy Shares, Buying Shares, Managed Accounts, Managed Discretionary Accounts, Managed Funds, managed investments, Managed Share Investments, Share Trading Recommendations, Stock Brokers, Stock Broking, Stockbroking
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations, Trading Updates
Managed Discretionary Accounts – Sale of ANZ
Thursday, April 14th, 2011
Good morning,
Yesterday we sold our position in ANZ bank at $24.30, a 7.67% gross gain on the position for the managed discretionary accounts in 6 weeks, which has added 1.1% to the value of the portfolio overall.
The market has seen a very quick recovery from the Japanese Tsunami crisis, and we always viewed the market reaction to that event as being temporary. However while we view the market as being strong into June 30, we think the current strength may have come too early and in our view is likely to have a retracement before a move above 5000 points.
There are a few potential catalysts for a move down which we are continuing to watch. As flagged previously, the currency at US105c or above has a damaging effect on many sectors of the economy, particularly exporters. Oil price at US$110 and above adds to the cost of all items that have high energy cost inputs. This isn’t to say that we should run for the hills, there are just certain areas we want to avoid for the time being; we are likely to continue to concentrate on resources, banking and media exposures.
As always we welcome your call should you want to discuss anything.
Tags: Managed Accounts, Managed Funds, managed investments, Managed Share Investments, sell shares, Share Trading Recommendations
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Discretionary Accounts – Sale of BHP
Tuesday, April 12th, 2011
Good afternoon,
Yesterday we sold our managed accounts holding in BHP after a Woodside announcement that effectively ended speculation that BHP was ‘eyeing’ it for a takeover. Once that announcement was made, BHP saw some very aggressive short covering, which sent the share price near all-time highs, and peaking at $49.81. Our sale price at $49.51 represents an 11.9% gross gain in just four weeks and added 1.9% to the value of the overall portfolio.
In other news, Coppermoly added 12% yesterday to close at 14c after Intersuisse released the attached research report. We will continue to hold the stock as our view on it is medium term and for a much higher exit price level.
Finally, quarterly reports are being mailed out in today’s post. If for any reason you haven’t received yours by Friday this week, please contact me by email for a replacement copy.
Tags: Managed Accounts, Managed Funds, managed investments, Managed Share Investments, sell shares, Share Trading Recommendations, Stock Broker, WPL
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Discretionary Accounts – Sale of Westpac (WBC)
Friday, April 1st, 2011
Good afternoon,
Yesterday we sold our position in WBC for the managed discretionary accounts to reduce our exposure to the market overall. We chose WBC for a sale because the share price is gathering near previous highs at $24.50 and is the most vulnerable to a pullback should the whole market experience some weakness after quarter’s end.
We also already have exposure to the banking sector at much better entry prices (in ANZ , at $22.57). As far as ANZ goes, we see no reason why our initial target price of $24.70 or above should not be reached within the next two weeks.
The gross profit on the WBC transaction was 4.2% which added .67% to the annual performance of the portfolio.
Paladin Energy (PDN) has stabilised around our initial ‘worst-case’ scenario around $3.60 per share, some 15% below purchase, however we now believe the stock could see a very good, and most probably very fast recovery in the current quarter. Analyst research we have been reading would suggest the near term outlook for Uranium will continue to be soft due to sentiment, but that the long term outlook is still very positive. This view is supported by the quick bounce in spot uranium prices to $62.50 per pound (down from $73.50 in Jan but still up from $40 a year ago).
We would suggest that PDN’s long term valuation has not changed and that prices of plus $5.00 per share could be seen on a strong day, but that prices again below $3.50 are becoming increasingly unlikely. For that reason we will continue to hold PDN with a view to sell in the high $4.00 range.
If you would like to talk to us about anything at all, please call the desk.
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Accounts update – Sale of WPL and purchase of COY
Monday, March 28th, 2011
Good afternoon,
Today we made the decision to sell our investment in Woodside Petroleum shares at $47.504. We entered the position on October 27 last year, purchased at $43.78. Including the dividend of 55c which has been received (to be paid 6 April), the investment returned a gross profit of 9.73% in five months.
The stellar run-up in the share price of WPL over the past two weeks has been influenced by two factors. First, the company announced a gas strike on March 17th in the offshore-WA “Pluto” project. This new discovery will assist in formally expanding the project, and importantly for our position this announcement came during the initial reaction to the damaged Japanese nuclear plant and whilst investors sold down exposure to Uranium they bought exposures to oil, coal and particularly gas.
Secondly, a rumour broke out that someone was in the market to launch a takeover bid for WPL, supported by some foreign currency buying amounting to around $6B of AUD, around the size of Shell’s remaining 24% stake. The rumour culminated in an article in the Australian Financial Review this morning which suggested that BHP was in talks with WPL to purchase Shell’s remaining 24% stake in the company and had the shares trading near their spike highs of last Thursday.
We like to trade on what facts we have about a company, and on rumour alone the rule is that you sell into the euphoria. Even if BHP simply buys Shell’s remaining 24% stake there is no guarantee of a full takeover bid, and that alone would simply block the further possibility of a takeover. Should the rumour prove false and oil take a breather, WPL shares may very well settle back around $45 per share, or lower on a bad day. As it stands, Shell sold down their stake four months ago at just above $42/share.
If another opportunity to own this company cheaply is presented we would be very happy to look at it then, in the mean-time we are back to around 75% invested and awaiting further strength in the stocks we own.
By way of an update, you would have noticed that a small position of 8% of the managed discretionary accounts portfolio was purchased in a junior miner called Coppermoly (COY). We have not sent out a note because it took a few weeks to fill the entire holding we required.
The purchase was made after a presentation we requested with a geologist who has a shareholding in the company, and who also has over 50 years’ experience in the mining and metals industry. The company’s drilling in PNG is being funded by Barrick Gold Corporation, one of the largest Gold companies in the world and listed on the NYSE and the Toronto Stock Exchange. Barrick has recently confirmed that it will spend the whole of its pre-committed $20M to drill the prospects owned by COY to earn a 72% interest in an ‘earn-in’ arrangement. Of that, $9M has already been spent and the results have been nothing but excellent. Drilling and the corresponding results start up again in around four weeks, and we expect the quality of results will continue for the remainder of the year at least.
We believe COY to be undervalued by at least half, and should be trading 25c plus, although our vision for the investment will depend somewhat on the results we see in the coming months. Suffice it to say, the investment is a medium to long term, with a view to seeing an outcome in the fourth quarter of the year.
If you would like to speak with us about the above to find out some more information, please call the desk.
Talk soon,
Tags: Buy Shares, Managed Accounts, Managed Discretionary Accounts, Managed Funds, Managed Share Investments, Share Trading Recommendations, WPL
Posted in Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations, Trading Updates
Managed Accounts – Purchase of ANZ
Wednesday, March 16th, 2011
Good afternoon,
During such volatile times great opportunities present themselves to buy quality stock at prices not seen for months.
Wednesday’s purchase of ANZ came a few weeks after the quarterly report shed light on the quality of the underlying business. The company is seven weeks away from going ex-dividend, which if paid while we are holding will further reduce our effective entry into the stock to well under $22.00 per share.
As we forecasted, although ANZ’s result was largely ‘in-line’ with expectations, the market had priced in an upside surprise and the disappointment at not getting that led investors to sell ANZ stock.
The post-result selling was of course exacerbated by the situation in the Middle East and the selling accelerated during the Japanese-led panic selling. All in all, ANZ fell from $26 per share to just over $22 per share, and we were able to pick it up for $22.57. ANZ should very easily deliver us a 10% profit to $24.70 within just a few weeks, especially given that 70c of this may come in the form of a dividend in early May.
The wash up is that we are now fully invested for the managed discretionary accounts, and yesterday’s market action (down 80 points early and closing down just 2 points) suggests that we saw a technical bottom in the market.
If you would like to speak with us about anything at all, please call the desk.
Tags: Buy Shares, Buying Shares, Managed Accounts, Managed Discretionary Accounts, Managed Funds, managed investments, Managed Share Investments, Stock Brokers, Stock Broking, Stockbroking
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Discretionary Accounts Purchase of PDN (Paladin Energy)
Monday, March 14th, 2011
Good afternoon,
In times of extreme volatility, first and foremost we want to maintain a clear vision of what the volatility means for the underlying market. We also make judgements on whether the volatility is justified in either direction, or likely to be reactionary and short term. Today, we have made a judgement on the scale and cost to various sectors of our market regarding the earthquake and tsunami disaster in Northern Japan. We would like to elaborate on our analysis behind the purchase made in Paladin Energy (PDN) today.
We purchased PDN shares this morning at $4.24, an 11% discount to their last traded price on Friday afternoon. Because of the higher than usual volatility, we restricted the purchase to 11% of the portfolio despite PDN being an ASX top 100 stock and having an average analyst target price of around $7.00.
The Uranium energy sector of the market is by far the hardest hit against the overall market, (All-ords down just 0.5% on the close). Our largest Uranium producers are ERA Energy operating the Rangers mine, BHP Billiton with Olympic Dam and Paladin, which produces in Africa. ERA and PDN are down 12.2% and 16.5% respectively while BHP, which is far more diversified, is down only very marginally, 0.23%. Uranium juniors who are anywhere from 6 months to some years away from production are down 20% plus.
The market is selling down Uranium companies in particular because the Japanese tsunami has badly damaged three nuclear reactors North of Tokyo and there is a continuing risk of a ‘nuclear meltdown’.
With that said, we feel it’s important to make the distinction between a disaster at a nuclear power plant that uses Uranium as fuel, and the demand for Uranium itself. Nuclear power is a very emotional issue because it is emotionally tied to the threat of Nuclear War. Also, previous nuclear-related disasters such as the meltdown at Chernobyl in the Soviet Ukraine in 1986 haven’t helped sentiment in any way.
However selling Uranium producers in Australia as proxy for selling the Japanese nuclear power disaster is simply wrong. Uranium producers are not in and of themselves economically linked to a disaster at a nuclear power plant. The issue is sentiment-driven and market sentiment has a way of being temporary.
The second point we feel strongly about: when you boil it down, this is not really a nuclear issue as it relates to supply and demand for Uranium or in fact for nuclear power. This is actually a planning and Government issue. It will almost certainly reignite debate over nuclear power however it won’t change the long term outcome on the fuel-mix for energy generation all that much.
The underlying problems are with 40-year-old reactors that were built too close to the Pacific Ocean, without taking onto consideration what damage a Tsunami might do. The reactors withstood the force of the quake as they were designed to do but the water knocked out the cooling fans and has caused the reactor cores to overheat. Of course, this will affect decisions in Japan regarding nuclear power plants, specifically their location, and possibly whether some should be replaced with something like a Liquefied Gas power plant.
What this is unlikely to do is affect the plans and current activities of countries such as China, India, Russia and South Korea on nuclear power and subsequent long term demand for Uranium.
To put this in perspective, in 2009 a total of 436 nuclear reactors were operating in 31 countries, which represents 15% of the world’s electricity needs and 6% of its energy needs overall. The chart below shows that, worldwide, circa 50 reactors are currently under construction whilst there are approved plans for a further 125, and proposals for 225 more above that, and mostly in China.
We’re not trying to downplay the extent of the disaster and human tragedy in Japan, far from it.
However the opportunity that this very separate issue has created in our domestic market is one we would otherwise have been unlikely to get. The US-Dollar spot price of Uranium has moved from $40 per pound in June 2010 to a high of $70 per pound more recently this year on increases in demand for the fuel.
To be able to buy a stock such as PDN post an event such as this doesn’t come often. If we had any concern that this could affect the long term spot price of Uranium or PDN’s business we wouldn’t consider making this investment however under the circumstances we felt compelled to take the opportunity. PDN stock was recently upgraded across the board to around $7.00 per share by most analysts and was trading well above $5.00 per share three days ago.
In terms of the investment, there is likely to be continued volatility and while there is an outside potential for the share price to reach lows around $3.50, our medium term outlook for PDN is $5.50 and we are looking for a minimum return of 15% with a target return of 20% for our managed discretionary accounts within 16 weeks.
If you would like to speak with us about anything at all, please call the desk.
Talk soon,
Shawn Uldridge and Hayden Kerr.
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
Managed Discretionary Accounts – Purchase of Westpac (WBC)
Monday, March 7th, 2011
Good afternoon,
Tuesday last week we purchased Westpac shares for the managed discreationary accounts after the stock fell sharply from our sale price of $24.29 to $23. We paid $23.27, around $1.00 lower than the sale two weeks ago.
ANZ’s result did precipitate a selloff among the big banks as predicted, exacerbated by further unrest and uncertainty surrounding the Middle East. WBC shares have settled at a ‘trend-line support level’ on the price chart and any move higher from here will probably take it to $25.50, or 10% higher than our purchase price.
Fundamentally nothing has changed since our last trade we were simply given the opportunity to re-purchase the stock due to the increased volatility in the share price.
If you would like to speak with us about anything at all, please call the desk.
Tags: Buy Shares, Managed Accounts, Managed Funds, Managed Share Investments, Share Trading Recommendations
Posted in Managed Account Investment Notifications, Managed Account Investment Notifications, Managed Discretionary Accounts, Managed Funds, Share Trading Recommendations, Share Trading Recommendations
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