The regular meeting on Tuesday 12 November 2013 is at the Melbourne PC User Group headquarters at 10.30 am (location details as for Melb PC monthly meetings, 479 Warrigal Road, Moorabbin).
This meeting focused on personal learning investment experiences from 2013. Members attending contributed from their personal learning experiences. The case of Forge Group Ltd (ASX symbol FGE) was discussed. This stock had long been recommended as a “Value Stock”.
Factors that contribute to the Value of a Stock were discussed at the meeting. These included those based on figures from financial reports which can lead to a numerical Value for a Stock. Variations in these numerical values from different sources for selected stocks were considered. Also included was non numerical parameters such as a business advantage held by a stock, the influence of directors, the prospects for individual stocks sectors and the impact of external factors.
The principle of “Value Investing” is to buy a stock when it is “Undervalued” and to sell it when it is “Overvalued”. Whereas the principle is sound, deciding when a stock is undervalued or overvalued was the art and the topic of the meeting.
The influence of fiscal matters in the United States was weighing on world share markets at the time. The biggest fear was that the US government would remain financially shut down until the October 17th debt ceiling deadline and even default on its debt. The later was predicted to precipitate a 2008 GFC type event with possibly greater consequences. Historical and current stock price charts were considered in looking at the current situation. Possible actions were considered for scenarios such as active or passive, value or growth.
Comparison of relative performance is one of the pillars of the investment industry. Comparison with an overall indices is often used. More specific comparison may be obtained by comparison with the performance of reference shares in reference sectors. Not only will this comparison provide a specific indication of performance, but the reference shares also become potential candidates for consideration for a portfolio.
The meting considered criteria for selection of the reference shares and the reference sectors. This lead to a reference portfolio of “momentum shares” utilising prominent tools such as StockDoctor, VectorVest and online broker research tools. The performance of this “momentum share portfolio” will be compared to reference indices sectors at future meetings.
The meeting discussed alternatives to direct share investing, primarily those in the form of exchange traded products. The various types of products and their possible role in an investment strategy were considered.
Investment books available in electronic book format were discussed. Among those highlighted were “Think Like the Great Investors” by Colin Nicholson 2013 and “Technical Analysis of Gaps” by Julie Dahlquist and Richard Bauer 2012.
Following the consideration of stock filters in recent meetings, the application of the arrays of filters in the recent introduced Commonwealth Securities (Comsec) toolbox was demonstrated and discussed. Comsec provides both predefined and custom stock screeners for all categories in recent discussions, very fast access to the internal database and multiple output display selection. Other aspects of the toolbox such as sector comparison were also considered.
Following the overview of share decision making filters at the May meeting, there was a focus on the logic and mechanism of the decision making. In particular, the means by which terms such as Growth, Value and Dividend can be applied to share filters will be considered. In this application of terms to filters, the means to apply the terms Small Caps, Large Caps and Blue Chip to filters were discussed. Databases from online brokers were used for the examples.
Share decision making filters were the topic of the meeting discussed from the three factors:
a) The logic of the decision making
b) The database to which the logic is applied
c) Computer software or method by which the logic is applied to the database
The logic may be generic, but the database and computer software are generally specific. Objectives of the decision making and examples and data from available packages and online brokers formed part of the discussion.
The theme of diversification from the March meeting was continued. The characteristics of Australian Real Estate Investment Trusts (A-REITS) were considered. As a category, on a number of occasions in the last 10 years, these have been among the top performing Australian investment type. The meeting focused on the performance of individual ASX listed A-REITS in considering their characteristics as pointers for their investment potential.
Diversification is a widely recommended procedure for reducing the risks associated with investments. With a focus on shares, the meeting considered practical means of investment diversification from both Australian and International shares. Diversification to US shares has lead to one of the better performing categories in recent times. Among the means of doing this is direct investment using US based financial accounts. A member enlightened the Group with his experience in doing this. This may be compared to International share diversification using ASX based or other sourced International funds. Very shortly, the ASX will introduce retail Australian Government Bonds and anticipated results will be discussed. Historical comparison of the performance of diversification categories and reported diversification in SMSF funds will be included in the discussion.
The range of investment strategies proposed in reports, presentations and papers from professional firms and individuals was discussed. Included in these reports were more detailed and possible alternate model for Dividend Investing.