Author Topic: Australian Investing Thread  (Read 760634 times)

FFA

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Re: Australian Investing Thread
« Reply #1350 on: September 04, 2015, 01:31:28 AM »
Personally I am currently reducing margin LVR from low 40s to low 30s. I am staying fully invested and will keep buying as cash inflows are received. But, I will be holding LVRs to low 30s with LOC/Credit on hand to quickly take LVR to low 20s if need be.
this might be a dumb question from someone who hasn't used margin loans, but wouldn't it be better to maintain or even increase LVR as market level falls ? obviously this is provided you have a solid back-up plan to fund any margin calls if they occur. I think if this proviso is not valid, then one shouldn't really be investing on margin in the first place.

the more the market falls, the investments are increasingly cash flow positive (dividends plus franking >> loan interest less tax deduction), and the potential for long-term capital gain is much greater too. as per my earlier comment, if the market falls to 4,200 even I might seriously look at a margin loan! (not something I thought I'd be doing post FIRE....)

marty998

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Re: Australian Investing Thread
« Reply #1351 on: September 04, 2015, 01:44:58 AM »
FY15 (year ended 30 Sep) reporting for ANZ, WBC and NAB in early November will be an exceptionally enlightening insight into the state of the economy.

We already know that GDP growth has collapsed to just 0.2% and real GDP growth per person is negative. Should show up as as a pick-up in bad debts in the bank results.

But unemployment is still at an OK level yeah? And interest rates remain low. I can't see bad debts hurting bank results yet. I think the beat up on the banks is a bit overdone as they continue to pay good dividends.

Either way I am OK with the banks getting hammered as I am dollar value averaging in during the slump. Looks like a buying opportunity for those accumulating.

Bad debts show up materially in commercial/business loans first. And when they go bad the banks lose hundreds of millions, not hundred of thousands when the average home loan goes bad (which may have LMI or equity can still be recovered on mortgagee sale)

Any views on WOW pls...

- New management can turn it around, deal with Masters fiasco, recover gap with Coles and fend off Aldi/Costco ?
- Or all the above is too much to deal with and it's a Sell ???

People will always have to eat. And when a recession hits people tend to drink more. So therefore their supermarket and liquor/hotel businesses are likely to keep doing ok, even when the economy goes to shit.

Logic101 (I may or may not be sober right now).

The Falcon

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Re: Australian Investing Thread
« Reply #1352 on: September 04, 2015, 04:00:32 AM »
Personally I am currently reducing margin LVR from low 40s to low 30s. I am staying fully invested and will keep buying as cash inflows are received. But, I will be holding LVRs to low 30s with LOC/Credit on hand to quickly take LVR to low 20s if need be.
this might be a dumb question from someone who hasn't used margin loans, but wouldn't it be better to maintain or even increase LVR as market level falls ? obviously this is provided you have a solid back-up plan to fund any margin calls if they occur. I think if this proviso is not valid, then one shouldn't really be investing on margin in the first place.

the more the market falls, the investments are increasingly cash flow positive (dividends plus franking >> loan interest less tax deduction), and the potential for long-term capital gain is much greater too. as per my earlier comment, if the market falls to 4,200 even I might seriously look at a margin loan! (not something I thought I'd be doing post FIRE....)

So what I am doing is injecting cash, so not selling down. I had let LVR creep up in the last year so I'm really just resetting to the portfolio target LVR (33%). This is a multi currency account, so you need to manage currency and collateral value. So, for SANF you are far better managing the margin then it managing you :)  I can tell you when playing with large sums that a rising LVR , through collateral devaluation - not through purchasing focuses the mind in a way that can't adequately be explained to virgins. It's easy to think about going hard say from 40% to 75% in a falling market, but geez you would want to be extremely confident that you pick the bottom, or you will blow up your portfolio. So, I'll be holding static LVR (roughly) and dashing in from the sidelines where I see opportunity. Rule 1 ; don't blow yourself up :)


dungoofed

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Re: Australian Investing Thread
« Reply #1353 on: September 05, 2015, 07:27:38 AM »
Any views on WOW pls...

- New management can turn it around, deal with Masters fiasco, recover gap with Coles and fend off Aldi/Costco ?
- Or all the above is too much to deal with and it's a Sell ???

People will always have to eat. And when a recession hits people tend to drink more. So therefore their supermarket and liquor/hotel businesses are likely to keep doing ok, even when the economy goes to shit.

Logic101 (I may or may not be sober right now).

There was a decent writeup in the AFR recently:

http://www.afr.com/business/retail/battered-and-bruised-too-soon-to-buy-woolworths-20150902-gjdm5t

"Analysts say while there is no quick fix, the nation's largest retailer's problems can be mended. But for investors wondering how to time buying Woolworths shares, the wait for a turnaround could be long. While buying in just when the business begins to recover would be any investor's dream, what are the signs to show it's started happening?

Woolworths' long road back will will start by the appointment a new chief executive. The first of many tasks awaiting the new boss will be whether to sell the loss-making Masters home improvement chain and the discount retailer Big W. The pricing of grocery items in the core supermarkets business will also have to be fixed. So will its focus on its customers, with the company admitting this needs attention."

Aldi may only have 10% market share but the bigger picture is that Australian supermarket chains are not immune to overseas competition. Expect more in this space.

I think the price gouging that the duopoly has got away with for the last several decades was still their best strategy, but instead of returning the profits to shareholders they should have been building moats with that money.

At the moment the biggest question marks are over the new CEO and what direction they will take the company. Having said that, even if things get worse I think it's at enough of a discount now to still be called cheap (doubly so if you have some foreign currency you can deploy), though it's definitely a long term play.

limeandpepper

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Re: Australian Investing Thread
« Reply #1354 on: September 06, 2015, 01:27:44 AM »
ANZ share purchase plan offer expiring soon, wondering if I should take it up. Anyone with it? Thoughts?

The Falcon

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Re: Australian Investing Thread
« Reply #1355 on: September 06, 2015, 02:57:00 AM »
Discount is super skinny, 2% off VWAP you'd only take it if you intended to buy at market anyway.

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Re: Australian Investing Thread
« Reply #1356 on: September 06, 2015, 03:51:50 AM »
Thanks The Falcon. Yeah I was thinking about buying only $1k worth, no brokerage is tempting if I'm buying such a small portion, but then the market could slide a whole lot more as well. Will mull over it further.

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Re: Australian Investing Thread
« Reply #1357 on: September 06, 2015, 05:26:27 PM »
I decided to skip the SPP when the ANZ share price was below the insto price.  I bought shares on market instead - one parcel in the low $30.x's and the other in the low 27.x's. 

I reckon ANZ is good value at the moment.  However, I'm not convinced that the SPP is a good value way to access it - the discount is going to be pretty skinny, if indeed it exists at all (ANZ had been falling over the 5 day pricing period).  If I really wanted ANZ, I'd just buy it on market.  (maybe I'm just post justifying what I have already done :)

dungoofed

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Re: Australian Investing Thread
« Reply #1358 on: September 07, 2015, 05:00:29 PM »
http://www.smh.com.au/money/investing/rebound-makes-time-for-a-new-game-20150902-gjdd8z.html

"Recent events mean smaller investors have the opportunity to rebalance their portfolios."

Sounds good so far.

"Helped by the continuing weakness in the Australian dollar, overseas share holdings, especially in the US market, have outperformed Australian shares and also increased in Australian dollar terms by US dollar currency appreciation."

Ok, so time to take some profits and rebalance into the Australian stock market, right?

"While predicting future currency movements is difficult,"

Yep. Which is why we don't. We leave it to the institutions, who pay for active management.

"the continuing strength of the blah blah blah etc. This is why during the past year, unlike many smaller investors, larger institutions have been reducing their Australian share weightings and increasing their overseas weightings."

So... the market has already moved, the ASX has been sold off by institutional investors in exchange for international stocks?

"smaller investors still have the opportunity to rebalance their portfolios if they wish to reduce their overall risk profile. For many, the changes to be considered include reducing their gearing levels and/or increasing their exposure to overseas assets not necessarily shares."

Hang on. You're suggesting that instead of taking some of the profits from our international holdings and rebalancing into the ASX, we instead rebalance by selling down our ASX holding (at the lowest price it has been in forever), and buy international (at the highest it has been since 2008)? Just like the institutional investors have already done?

------

I don't know about everyone else but if I were doing a periodic rebalance then all signs at the moment are pointing to lower international exposure, higher ASX exposure. Include gold and bonds into the mix and I should be selling off these too in order to buy more of the ASX.

potm

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Re: Australian Investing Thread
« Reply #1359 on: September 07, 2015, 05:13:36 PM »
ANZ share purchase plan offer expiring soon, wondering if I should take it up. Anyone with it? Thoughts?

You have until 5pm today to make a decision so wait to see what it closes at today and compare it to the vwap to see what kind of discount, if any, you are getting.

Now that the Aud has gone below 70c, I'm changing most of my future super contributions to go to the Aus index instead of 50/50.

TJEH

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Re: Australian Investing Thread
« Reply #1360 on: September 07, 2015, 07:18:34 PM »
Does anyone have thoughts re the approach for transferring a lump sum back to AUD? I've had some funds  sitting in a GBP denominated account for far too long, waiting for the fx rate to improve. In waiting (we're talking years rather than months) I've obviously been missing out on potential returns by not having the funds invested here. Emotions getting in the way I suppose, as the fx rate didn't seem "good enough".

I was thinking of transferring a set amount each month, much like a DCA approach with buying shares. There is a reasonable chance the AUD is not going to be particularly strong against the GBP for a while (predictions predictions.....)


dungoofed

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Re: Australian Investing Thread
« Reply #1361 on: September 07, 2015, 08:02:45 PM »
Does anyone have thoughts re the approach for transferring a lump sum back to AUD? I've had some funds  sitting in a GBP denominated account for far too long, waiting for the fx rate to improve. In waiting (we're talking years rather than months) I've obviously been missing out on potential returns by not having the funds invested here. Emotions getting in the way I suppose, as the fx rate didn't seem "good enough".

I was thinking of transferring a set amount each month, much like a DCA approach with buying shares. There is a reasonable chance the AUD is not going to be particularly strong against the GBP for a while (predictions predictions.....)

For anyone besides FX traders the rule of thumb is "have the money in the currency where it is needed." The need might be consumer spending, investments, etc. Please just repatriate, consult your Investment Policy Statement and invest accordingly. Ozforex have fair retail rates.

detrimental12

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Re: Australian Investing Thread
« Reply #1362 on: September 07, 2015, 09:03:49 PM »
Does anyone have thoughts re the approach for transferring a lump sum back to AUD? I've had some funds  sitting in a GBP denominated account for far too long, waiting for the fx rate to improve. In waiting (we're talking years rather than months) I've obviously been missing out on potential returns by not having the funds invested here. Emotions getting in the way I suppose, as the fx rate didn't seem "good enough".

I was thinking of transferring a set amount each month, much like a DCA approach with buying shares. There is a reasonable chance the AUD is not going to be particularly strong against the GBP for a while (predictions predictions.....)

Yes, I use Ozforex. If you are transferring a decent amount (around $15k or more at a time), CALL THEM and ask for a better rate. Usually you will pay a 1c difference when transferring, much better than the banks 4-5cents.
FI by 30 baby!

TJEH

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Re: Australian Investing Thread
« Reply #1363 on: September 07, 2015, 10:10:54 PM »
Some years ago I used xetrade, but more recently I've started using ozforex. Agree the rates are pretty good. Also, I can get money from a GBP denominated account into AUD via ozforex faster than I can get AUD to AUD doing a local bank transfer!

I notice on their website they say to call for better rates if moving 100k but do you think it's possible with ~15k at a time? Don't ask don't get I suppose.

Hmmm, "have the money in the currency where it is needed", now that is far too sensible! The "need" perhaps hasn't been strong enough, as I haven't had a burning requirement for it. Investing it indeed should be good enough, and now that I have a strategy I should pull the trigger. As for the IPS I did start on it, this is a good reminder to finish it :)




detrimental12

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Re: Australian Investing Thread
« Reply #1364 on: September 08, 2015, 02:04:06 AM »
I notice on their website they say to call for better rates if moving 100k but do you think it's possible with ~15k at a time? Don't ask don't get I suppose.

Speaking from experience, yes it is! Just asking nicely :)
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Re: Australian Investing Thread
« Reply #1365 on: September 08, 2015, 03:59:59 AM »
Thanks for the thoughts about the ANZ SPP, guys. I decided not to buy it in the end. But if the price continues on a downward trend I might buy it on the market.

FFA

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Re: Australian Investing Thread
« Reply #1366 on: September 08, 2015, 10:33:35 AM »
Also an ozforex user for at least 8 yrs. I would repatriate it. I understood any fx gains or losses are taxable if youre oz tax resident (??) which was another reason i didnt leave funds abroad, in addition to better local yields....

FFA

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Re: Australian Investing Thread
« Reply #1367 on: September 09, 2015, 08:43:43 AM »
Quote
Now that the Aud has gone below 70c, I'm changing most of my future super contributions to go to the Aus index instead of 50/50.
Potm, just a thought, if its mainly fx driven why not switch to global (hedged) instead? Or are you also seeing better value in asx irrespective of fx

potm

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Re: Australian Investing Thread
« Reply #1368 on: September 09, 2015, 04:17:19 PM »
Quote
Now that the Aud has gone below 70c, I'm changing most of my future super contributions to go to the Aus index instead of 50/50.
Potm, just a thought, if its mainly fx driven why not switch to global (hedged) instead? Or are you also seeing better value in asx irrespective of fx

Hedging only protects you against a rising AUD, it doesn't help that you are getting less USD for your AUD right now.

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Re: Australian Investing Thread
« Reply #1369 on: September 10, 2015, 12:07:02 AM »
Can i just clarify something very basic - reinvested dividends are considered 'income' for taxation purposes right? I.e. taking the DRP doesn't allow your dividends to compound tax free does it?

I was talking to a friend recently who was insisting it does, and I was pretty sure that couldn't be right. (I have a family accountant who has been doing my tax since I started investing a year or so ago)

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Re: Australian Investing Thread
« Reply #1370 on: September 10, 2015, 12:55:10 AM »
This is my understanding, but please donít take it a gospel.

Dividends paid as cash or used for dividend reinvestment plans are treated the same way for tax purposes.

When it comes to CGT, the DRP shares are deemed to have been brought for the entry price that the company publishes at the time.

A small number of companies (QBE for example) offer what called bonus share plan (BSP). This is where you surrender your right to a dividend, and instead the company will give you free shares. So no dividends = no tax to pay. You also surrender your right to the franking credits.

The catch is, for CGT, you are deemed to have brought the shares for $0.00, and therefore the total sale price is a capital gain.

marty998

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Re: Australian Investing Thread
« Reply #1371 on: September 10, 2015, 01:49:15 AM »
Hi Banksie,

Yes your reasoning is correct on DRP and bonus share plans. Lots of LIC's offer that option.

DRP's can get a bit messy for trusts (like VAS) because of tax deferred components of distributions.

Holding VAS for 10 years with reinvested dividends can result in over 40 individual acquisition parcels. Every time you get paid a distributions you then have to do cost base adjustments to all of them to account for the tax deferred income.

Doing large DRP's on companies that pay unfranked dividends can be problematic because you have to pay the tax on them but you've got no cash because you've reinvested the dividend...


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Re: Australian Investing Thread
« Reply #1372 on: September 10, 2015, 03:22:19 AM »
Just wondering what is everyones opinion of timing in the market, after a day like today where you've got, as an example, VAS down 2.4% is this when it's best to strike?
Assuming crystal ball is correct and it won't go down any further :P

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Re: Australian Investing Thread
« Reply #1373 on: September 11, 2015, 07:54:38 PM »
http://www.smh.com.au/money/investing/rebound-makes-time-for-a-new-game-20150902-gjdd8z.html

"Recent events mean smaller investors have the opportunity to rebalance their portfolios."

Sounds good so far.

"Helped by the continuing weakness in the Australian dollar, overseas share holdings, especially in the US market, have outperformed Australian shares and also increased in Australian dollar terms by US dollar currency appreciation."

Ok, so time to take some profits and rebalance into the Australian stock market, right?

"While predicting future currency movements is difficult,"

Yep. Which is why we don't. We leave it to the institutions, who pay for active management.

"the continuing strength of the blah blah blah etc. This is why during the past year, unlike many smaller investors, larger institutions have been reducing their Australian share weightings and increasing their overseas weightings."

So... the market has already moved, the ASX has been sold off by institutional investors in exchange for international stocks?

"smaller investors still have the opportunity to rebalance their portfolios if they wish to reduce their overall risk profile. For many, the changes to be considered include reducing their gearing levels and/or increasing their exposure to overseas assets not necessarily shares."

Hang on. You're suggesting that instead of taking some of the profits from our international holdings and rebalancing into the ASX, we instead rebalance by selling down our ASX holding (at the lowest price it has been in forever), and buy international (at the highest it has been since 2008)? Just like the institutional investors have already done?

------

I don't know about everyone else but if I were doing a periodic rebalance then all signs at the moment are pointing to lower international exposure, higher ASX exposure. Include gold and bonds into the mix and I should be selling off these too in order to buy more of the ASX.

I agree, seems crazy to invest fully in International equities now with the slump in the AUD and focus should be on adding AUD denominated holdings while the ASX is hovering around 5000.

dungoofed

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Re: Australian Investing Thread
« Reply #1374 on: September 11, 2015, 09:17:58 PM »
Hi Banksie,

Yes your reasoning is correct on DRP and bonus share plans. Lots of LIC's offer that option.

DRP's can get a bit messy for trusts (like VAS) because of tax deferred components of distributions.

Holding VAS for 10 years with reinvested dividends can result in over 40 individual acquisition parcels. Every time you get paid a distributions you then have to do cost base adjustments to all of them to account for the tax deferred income.

Doing large DRP's on companies that pay unfranked dividends can be problematic because you have to pay the tax on them but you've got no cash because you've reinvested the dividend...

One more product that might be worth comparing is endowment warrants. I haven't tried them myself, first mentioned them here: http://forum.mrmoneymustache.com/investor-alley/australian-investing-thread/msg711255/?topicseen#msg711255

I haven't looked into them beyond what I wrote before, ie it looks to me like it could be a tax-effective way of accumulating dividend-paying stocks.

FFA

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Re: Australian Investing Thread
« Reply #1375 on: September 13, 2015, 07:39:19 AM »
DRP's can get a bit messy for trusts (like VAS) because of tax deferred components of distributions.

Holding VAS for 10 years with reinvested dividends can result in over 40 individual acquisition parcels. Every time you get paid a distributions you then have to do cost base adjustments to all of them to account for the tax deferred income.
Marty, is it adequate to do once per year, just pro rate the tax deferred income across all units' cost base ? A bit tedious indeed, but only few minutes job once per year i guess is manageable (Assuming you already maintain a spreadsheet of all your purchases and cost base)

marty998

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Re: Australian Investing Thread
« Reply #1376 on: September 13, 2015, 03:24:17 PM »
DRP's can get a bit messy for trusts (like VAS) because of tax deferred components of distributions.

Holding VAS for 10 years with reinvested dividends can result in over 40 individual acquisition parcels. Every time you get paid a distributions you then have to do cost base adjustments to all of them to account for the tax deferred income.
Marty, is it adequate to do once per year, just pro rate the tax deferred income across all units' cost base ? A bit tedious indeed, but only few minutes job once per year i guess is manageable (Assuming you already maintain a spreadsheet of all your purchases and cost base)

Yeah once a year is what I do, (thought for the ~$100 tax deferred income I got on my VHY this year I found it simpler to just declare it as income).

Last line of yours is the clincher - it assumes your mathematically inclined enough to keep a spreadsheet. Most people are not...

FFA

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Re: Australian Investing Thread
« Reply #1377 on: September 13, 2015, 05:07:51 PM »
Certainly worth doing. I used to scribble on paper but might as well keep somewhere more useful. I have a trades log sheet to record each deal. Price, brokerage and now add a column each year for share of tax deferred. I also link it automatically to the asset allocation sheet, using sumif() to track number of units and manually input current prices. Helpful each month to work out which one i need to buy and then update trades log straight afterwards, so it's ready for the next month...

marty998

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Re: Australian Investing Thread
« Reply #1378 on: September 14, 2015, 06:22:23 AM »
anyone wanna have a guess what the installation of Australia's 29th PM will do for the stockmarket tomorrow?

bigchrisb

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Re: Australian Investing Thread
« Reply #1379 on: September 14, 2015, 04:56:37 PM »
Today?  Not so much I reckon  Maybe a little bounce on confidence.  Medium term I'm hopeful that he will have a confidence effect on the AU economy, and longer term followed up with some good economic reform. 

Without wanting to drag this thread political, I'm pleased we finally have a leader who isn't a missionary relic of old empire, or a criminal union thug.

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Re: Australian Investing Thread
« Reply #1380 on: September 15, 2015, 01:34:34 AM »
the $A bounced a little last night on the news but it appears general world crap continues to send the ASX down. Off another 1.5% today, with most banks getting hammered over 2%.

Oil Search rejected a takeover bid from Woodside. Most news reports sighting lack of synergies and wondering why would Woodside bother, other than trying to be sneaky and opportunistic while a low oil price is dragging down valuations.

Also I reckon the Oil Search Directors and Management are none too keen to give up their cushy positions.

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Re: Australian Investing Thread
« Reply #1381 on: September 15, 2015, 01:40:37 AM »
Also announced today the results of the CBA Insto book-build for retail rights not taken up.

The Instos paid $73.50, so anyone who did not take up their entitlements will be paid $2 per right.

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Re: Australian Investing Thread
« Reply #1382 on: September 16, 2015, 10:56:42 PM »
Any thoughts here about diversifying in stocks outside the index?

I'll use SOL as an example that I hold.  Really a closed end investment company, but not really a LIC either.  Gets exposure to a number of businesses that are either outside of, or under represented in the index due to cross ownership or liquidity.  Examples from holding SOL include:
- TPM
- BKW
- NHC
- Copperchem
- ampcontrol
- Apex
- API
- CLV
- RHL
- TPI
- Plus a whole lot of listed securities

Basically, I see companies like SOL a bit like I see BRK in the states - they have diverse holdings, but often with substantial holdings (and a board seat), or full control.  I see these working more like private equity vehicles, but with internal funds management, and providing exposure to a number of companies that I'm not getting through ETFs

I hold BRK-B as part of my international holdings for the same reason. 

Anyone else do the same, or have any thoughts?

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Re: Australian Investing Thread
« Reply #1383 on: September 17, 2015, 01:56:17 AM »
Yeah in Oz I hold both SOL and SVW both conglomerates with operating businesses and listed stock portfolios....fingers in a number of pies...both family controlled by the Millners and Stokes respectively. WES also is a conglomerate covering a lot of ground and I think will further diversify and can be opportunistic too.

Internationally, they have some similarities with the likes of Berkshire Hathaway, Markel Corp , Jardine Matheson Holdings (all of which I hold) and Fairfax Financial Holdings (which i'm watching) to name a few I suppose. All of these businesses have very long term minded management with a very large portion of their family wealth in the business....sort of takes care of the agency risk matter.

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Re: Australian Investing Thread
« Reply #1384 on: September 17, 2015, 06:36:31 AM »
Yeah, I also picked up some SVW in the last couple of weeks while it was under $4.50.  The main trouble I have with these is trying to get a reasonable sum  of the parts valuation.  Its pretty easy to tell if a LIC is above or below NTA, harder with  these.  Guess that also provides an opportunity from greater price variation from NTA  though.

detrimental12

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Re: Australian Investing Thread
« Reply #1385 on: September 19, 2015, 01:50:08 AM »
Hey guys, if anyone here is on reddit come and join us to discuss all things FI / RE related to Australia

http://www.reddit.com/r/fiaustralia

Cheers!
FI by 30 baby!

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Re: Australian Investing Thread
« Reply #1386 on: September 19, 2015, 04:47:41 AM »
Anyone else enjoying all the coverage of Turnbull's portfolio?

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Re: Australian Investing Thread
« Reply #1387 on: September 19, 2015, 03:31:40 PM »
Yeah all kind of what you would expect I suppose for a portfolio of that size...pretty diversified, core - satellite, lots of ETFs and some active management and alternatives....lots of stuff that the retail investor cant access.

The Falcon

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Re: Australian Investing Thread
« Reply #1388 on: September 19, 2015, 03:41:58 PM »
One for BigchrisB and others that buy individual stocks as well as ETFs and LICs......does anyone else look through fundies (that you like) portfolio updates for ideas based on their top disclosed holdings?

The cloning thing has historically worked well, if following the right kind of investor - ie. ones that buy stocks to hold (ie. very low turnover) it becomes hopeless if following someone who has high turnover as you will never get the timing right as you only know after the fact. In the US the mandatory filing of holdings quarterly (13F) is pretty helpful, but we can get similar from most fundies regular updates....top 10 holdings at least. I guess the big 3 LICs top 20 holdings aren't a bad start for a buy and hold portfolio (as the LICs select these stocks to do just that) but another one I like to get less index correlation and small cap ideas is IML. These guys are one of the few fundies who are very tax aware and have low turnover....and very good performance over the long term. Does anyone else get ideas this way?

superannuationfreak

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Re: Australian Investing Thread
« Reply #1389 on: September 19, 2015, 09:59:53 PM »
I've recently accepted a job within the Superannuation sector.  While this is great news, it does mean I have a conflict of interest and am not able to continue writing my blog or posting on specific investment products here.  Hope people have found it useful, and I'm sure I'll be lurking around here from time to time.

ozbeach

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Re: Australian Investing Thread
« Reply #1390 on: September 19, 2015, 11:36:37 PM »
...
A small number of companies (QBE for example) offer what called bonus share plan (BSP). This is where you surrender your right to a dividend, and instead the company will give you free shares. So no dividends = no tax to pay. You also surrender your right to the franking credits.

The catch is, for CGT, you are deemed to have brought the shares for $0.00, and therefore the total sale price is a capital gain.

I am in the Bonus Share Plan with AFIC. My understanding is that you are deemed to have bought the shares at the same time and for the same price as the base shares that you are receiving the bonus for. So, if you bought 1,000 shares for $5 ea in 2010, and you get 50 allocated as a bonus today when they are trading at $10 each, if you sell you will pay CGT as if you had bought them five years earlier at $5. Makes sense only if your marginal tax rate is currently high and you plan on selling when you can afford the CGT hit.

Tax office advice here:

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Events-affecting-shareholders/Current-year/Australian-Foundation-Investment-Company-Limited-(AFIC)--bonus-share-plan/

I assume other Bonus Plans work in a similar way.


Late to FI; but better late than never!

bigchrisb

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Re: Australian Investing Thread
« Reply #1391 on: September 20, 2015, 12:36:42 AM »
...
A small number of companies (QBE for example) offer what called bonus share plan (BSP). This is where you surrender your right to a dividend, and instead the company will give you free shares. So no dividends = no tax to pay. You also surrender your right to the franking credits.

The catch is, for CGT, you are deemed to have brought the shares for $0.00, and therefore the total sale price is a capital gain.

I am in the Bonus Share Plan with AFIC. My understanding is that you are deemed to have bought the shares at the same time and for the same price as the base shares that you are receiving the bonus for. So, if you bought 1,000 shares for $5 ea in 2010, and you get 50 allocated as a bonus today when they are trading at $10 each, if you sell you will pay CGT as if you had bought them five years earlier at $5. Makes sense only if your marginal tax rate is currently high and you plan on selling when you can afford the CGT hit.

Tax office advice here:

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Events-affecting-shareholders/Current-year/Australian-Foundation-Investment-Company-Limited-(AFIC)--bonus-share-plan/

I assume other Bonus Plans work in a similar way.

Maybe double check the link and example?  My understanding of the wording is that the initial cost base is now divided across the total number of shares.  So each bonus parcel reduced the average cost base.  Makes a CGT problem down the track if you intend to sell.  I use BSPs with stocks I'm prepared to hold forever, and will eventually start collecting the dividends as opposed to selling down shares.

dungoofed

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Re: Australian Investing Thread
« Reply #1392 on: September 20, 2015, 01:21:26 AM »
I've recently accepted a job within the Superannuation sector.  While this is great news, it does mean I have a conflict of interest and am not able to continue writing my blog or posting on specific investment products here.  Hope people have found it useful, and I'm sure I'll be lurking around here from time to time.

:(

Well thanks for everything to date and good luck with it!!

btw if you're keen on your writing, keep doing it but don't publish anything. Wait until you are next "between jobs" and upload the lot.

ozbeach

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Re: Australian Investing Thread
« Reply #1393 on: September 20, 2015, 02:18:25 PM »
Maybe double check the link and example?  My understanding of the wording is that the initial cost base is now divided across the total number of shares.  So each bonus parcel reduced the average cost base.  Makes a CGT problem down the track if you intend to sell.  I use BSPs with stocks I'm prepared to hold forever, and will eventually start collecting the dividends as opposed to selling down shares.

Yes, you're right. I oversimplified and ended up getting it wrong! The tax office guide (and your explanation) are pretty easy to follow. I won't be holding these shares forever - thanks to five years spent with a financial advisor I am carrying forward a large capital loss for the tax man, so I intend to sell after I FIRE in a year without any income, but before I touch super at 60.
Late to FI; but better late than never!

bigchrisb

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Re: Australian Investing Thread
« Reply #1394 on: September 20, 2015, 05:56:55 PM »
One for BigchrisB and others that buy individual stocks as well as ETFs and LICs......does anyone else look through fundies (that you like) portfolio updates for ideas based on their top disclosed holdings?

The cloning thing has historically worked well, if following the right kind of investor - ie. ones that buy stocks to hold (ie. very low turnover) it becomes hopeless if following someone who has high turnover as you will never get the timing right as you only know after the fact. In the US the mandatory filing of holdings quarterly (13F) is pretty helpful, but we can get similar from most fundies regular updates....top 10 holdings at least. I guess the big 3 LICs top 20 holdings aren't a bad start for a buy and hold portfolio (as the LICs select these stocks to do just that) but another one I like to get less index correlation and small cap ideas is IML. These guys are one of the few fundies who are very tax aware and have low turnover....and very good performance over the long term. Does anyone else get ideas this way?

I keep an eye on what the larger LICs are exposed to - mainly because LICs make up a big slice of my asset allocation.  I break this down by the holdings and NTA premium/discount, so I can track my underlying holdings, and hence get a feel for my actual asset exposure.  I don't try to mirror these holdings in my individual stocks as:
a) I'm already heavily weighted to these stocks through my LIC holdings, and I would prefer to diversify rather than concentrate my exposure
b) I buy LICs heavily when they are at a discount to NTA for this part of my holdings.  Why would I try to mirror these stocks in my own name, if I can buy them for 90c in the dollar through a low cost LIC?

Haven't looked at IML - they seem to have had reasonable performance, but at a fairly high cost.  I wonder how much of their performance has been driven by their largest single holding, Energy Developments, which has been on a tear the last three years up until takeover.  Also be more interested to benchmark them against small cap industrials  - they don't have any resources in their top holdings, which has been a good move over the last few years.  i.e. how repeatable is the performance, and is it worth 1%p.a.   


The Falcon

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Re: Australian Investing Thread
« Reply #1395 on: September 20, 2015, 09:28:58 PM »

I keep an eye on what the larger LICs are exposed to - mainly because LICs make up a big slice of my asset allocation.  I break this down by the holdings and NTA premium/discount, so I can track my underlying holdings, and hence get a feel for my actual asset exposure.  I don't try to mirror these holdings in my individual stocks as:
a) I'm already heavily weighted to these stocks through my LIC holdings, and I would prefer to diversify rather than concentrate my exposure
b) I buy LICs heavily when they are at a discount to NTA for this part of my holdings.  Why would I try to mirror these stocks in my own name, if I can buy them for 90c in the dollar through a low cost LIC?

Haven't looked at IML - they seem to have had reasonable performance, but at a fairly high cost.  I wonder how much of their performance has been driven by their largest single holding, Energy Developments, which has been on a tear the last three years up until takeover.  Also be more interested to benchmark them against small cap industrials  - they don't have any resources in their top holdings, which has been a good move over the last few years.  i.e. how repeatable is the performance, and is it worth 1%p.a.

Re your points A/B ; the point here is you are in a position to add the beat up stocks when they, individually are out of favour, while the LICs themselves are holding well above NTA...and I am not advocating mirroring the portfolio weightings either. And as for 10% NTA discounts on LICs you'd want to hold, you may be waiting some time for that opportunity to come around again.

My further point was not around IMLs relative performance, but around idea generation. However, put aside IMLs small cap funds and you will see their large cap fund has also outperformed over the long term , with low turnover historically. This is not about their fee basis as I am not advocating investing in their funds, but about their methodology being one that I like and that if they have run the ruler over it and decided to add something, then I will also take a look at it. Trying to generate some discussion around idea generation here...that's all.

bigchrisb

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Re: Australian Investing Thread
« Reply #1396 on: September 20, 2015, 11:48:04 PM »
Sorry - was not trying to put down the idea!  Just explaining why I haven't done it.

I did spend a bit of time in the past following what Allan Grey was doing in the small cap space.  For me, I wasn't able to generate a premium from doing so. 

Agree that 10% discounts to NTA are uncommon - however 5% discounts are semi-regular - take the data from AFI here http://www.afi.com.au/How-We-Invest/shareprice-NTA-chart.aspx

marty998

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Re: Australian Investing Thread
« Reply #1397 on: September 29, 2015, 01:55:06 AM »
Ouch (again). Down 187 points today.

BHP slaughtered today... not really sure why (except falling in sympathy with all other global miners), my theory is that it's one of the few companies that could cash in and buy up Glencore's assets on the cheap should a fire sale happen.

I don't believe this is going to be a short sharp bear market... thinking it could persist well into next year. There's just no growth in the economy this year.

dungoofed

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Re: Australian Investing Thread
« Reply #1398 on: September 29, 2015, 02:10:29 AM »
Does anyone know the quote that went something like "the Australian economy is extremely well managed during a crisis and extremely poorly managed during times of prosperity"? Who said it, what the exact quote was, etc.

steveo

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Re: Australian Investing Thread
« Reply #1399 on: September 29, 2015, 03:08:43 AM »
Ouch (again). Down 187 points today.

BHP slaughtered today... not really sure why (except falling in sympathy with all other global miners), my theory is that it's one of the few companies that could cash in and buy up Glencore's assets on the cheap should a fire sale happen.

I don't believe this is going to be a short sharp bear market... thinking it could persist well into next year. There's just no growth in the economy this year.

I'm starting to increase my investments in the stock market and I honestly hope this happens. I'd like to see 5 years of dud returns. I reckon this is realistic as well.