Forum Archive Index - May 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi smasha,
 
> 
> Here's my loosely defined goal:
> 
>"build a portfolio of shares which will, over time (long certainly,
>short optimistically), return in the order of 15% per annum".
> 

A tough target.  But not unattainable.

>
>You could add to that these general considerations:
> * the goal is to buy and build, not sell, making this a long-term
> portfolio; * fees need to be kept to a minimum, to maximise the amount
> invested; * it should make use of the opportunities that exist in the
> NZ market; * it should comprise in the order of 8 to 10 different
> companies.
>

Deja vu.    That is darn similar to my own overall strategy

> 
> These three particular characteristics I ascribed to the market (there
> are of course others): * it pays a consistently high degree of
> dividends; * it has a number of well-defined market leaders - either
> in their fields or the so called "Blue Chips"; * a number of companies
> are either "in play" or on the rebound from a hammering, making good  
>  sized gains possible.
> 
> <Excuse the brevity of the description.>
> 

Makes sense.    If you are going for 15% pa, you need to go after 
companies that have been hammered.

>
> After a look through the Share Indexes in the paper, and an ear to the
> hubbub of the business and investment publications, a result:  an
> eight-stock portfolio covering each of the three opportunities
> described:
> 
> * Income Shares:     WRI, PWC, CNZ
> * Balanced Shares:  CEN, FBU, WAM
> * Growth Shares:     BCA, TWR
>

You've got quite a nice balance there between shares that are likely to 
grow their profit over time and defensive shares that should take out 
some of your portfolio volatility if we get some custard.     Well done
 
> 
> The portfolio started in February 2003, 
>

It's only a baby :-)

>
>accumulating shares in one company per month. 
>

Not a bad way to minimise the fees, I'd venture to guess.

>
>The second round of purchases has deepened a
>selected number of these holdings.  It has gained a decent 13.2% in
>that time, which must be within one standard deviation of my target!
> 
>Individually?  BCA and TWR (entry at $1.65 and $1.27 respectively)
>have performed in a big way, though BCA looks tapped out until
>something new happens, like a profit;
>

BCA is in an industry that is difficult to predict, even more so now our 
resident expert has departed for warmer climes ( come back Gerry! ).

TWR really is a problem child tied to the fate of the market.  A classic 
high risk/high return play I would say.

>
>PWC and CEN have been solidly higher; 
>CNZ, FBU and WRI haven't moved; 
>

They have paid good dividends though, which is what you selected 
them for.

>
>and WAM, a modest gain.
> 
> You can see that three of my top performing stocks appear to be "in
> play", which underpins a lot of that performance.  
>

I must admit, one of my investing rules of thumb is to never sell a share 
that is 'in play'.  I try to hang in until the final act.

> 
> I'm pretty comfortable with this set of companies (getting an itch to
> punt on a oil & gas explorer tho'), 
>

Resist, resist ;-)  ( I didn't see 'punting' in your original investment 
plan.)

>
>and all the time I spent looking
> at them has helped me feel I know what's going on - which is a great
> help when you're building something for the long term.  
> 

It sounds to me like you are learning this investment game indecently 
fast ;-P.

You learn the best lessons from your mistakes and it doesn't look like 
you've made any yet.   Thanks for outlining your strategy.  It made 
good reading.

SNOOPY




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