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Australian Stock Market
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Australia Sucks Offline
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Post: #59
RE: Australian Stock Market
Burner82 even though I believe crypto is a speculative bubble and is high risk I have recently started speculating in crypto (a little late to the party I know) because I have decided (changed my thinking) even though its a bubble its likely to keep inflating (not withstanding the current pull back) for at least another year or 2 (possibly longer) before imploding and I plan to bank profits and get out way before then.

I will address a few other points. In relation to what sectors I would invest in during a market crash (PK1098 thanks for your question) You can make money buying low quality deep cyclical stocks such as airlines, mining stocks, steel makers, auto companies, traditional retailers, etc but its not a strategy I would use. These companies have a higher risk of not surviving the downturn. The ones that do manage to survive the downturn and cut costs, etc do tend to provide solid returns when the market/economy starts recovering.

I believe as a retail investor you should leave that strategy to institutions who have large sums to invest (they are often too big to be solely focused on small and mid cap stocks) and instead you should focus on micrcocap, small cap and mid cap "industrials" (industrials in the share market sense meaning any companies that are not in the materials, banking and REIT sectors). Because in this space you can find micro-cap and small cap and sometimes even mid cap stocks which have decent balance sheets and are well managed but whose share prices are very low. You can get returns exceeding the returns generally available from buying low quality deep cyclicals and do it with less risk. Also its a more long-term strategy because low quality (most of them are low quality) deep cyclicals are typically not stocks you want to hold for the long-term so you would likely be selling after say 2-4 years and realizing gains and hence potentially paying tax whereas quality small and mid cap stocks you can keep holding for the very long-term.

Historical examples of buying such stocks during the GFC (global financial crisis) on the Australian share market and making massive returns would be (note price references in AUD and ticker codes are the ASX codes):
-Credit Corp Group (CCP) GFC low of around $0.39 per share in 2009 its now over $23 (A debt collection and consumer lending company)
-McMillan Shakespeare (MMS) GFC low of under $2.00 in late 2008, now $16.52 (A salary packaging and car leasing business)
-FSA Group (FSA) went from a GFC low of around $0.20 to now around $1.60 (a debt agreement, insolvency management and home/consumer lending business)
-ARB (ARP) Corporation (the company designs and sells 4 wheel drive accessories, etc) went from a GFC low of around $2.50 to over $17.70 currently.
-Seek Limited (SEK) owner of Australias largest jobs website Seek.com as well as owning stakes in overseas jobs websites and a few other activities also. The GFC low on this was around $2.50 per share its now around $18.85.
-Blackmores (BKL) hit a GFC low of under $12 and is now over $150. Its arguably Australias most well known vitamin and supplements company
-IMF (IMF) shares hit a GFC low of less than $0.60 and today the shares are $2.93. IMF is Australias largest litigation funder.

You can see buying these types of small to mid cap "growth" companies tends to give you a better return than buying low quality deep cyclicals like Qantas (QAN) or Fortescue Metals (FMG), Bluescope Steel (BSL) etc. Qantas hit a GFC low of around $1.63 and today is $5.03. Fortescue metals hit a GFC low of around $1.94 and is around $5.33 now. Bluescope steel was a little under $10 in the GFC and is now close to $16. Qantas is Australias largest airline, Fortescue is Australias 3rd largets Iron Ore Miner and Bluescope is a major Australian steel manufacturer.

Now you could try and argue all the examples I used were cherry picked but I think the general point still stands.

Now with the "good" companies I mentioned these companies are all much larger and more well known than 10 years ago so who knows if they would ever get as cheap during the next crash but the point is look for stocks with a strong earnings track record, good management and decent balance sheets in the microcap, small cap and midcap space and exclude "deep cyclicals" such as airlines, miners, banks, retailers, REITS, etc. This way you can get high returns while keeping risk to a a modest level. I would be looking at companies with a good long-term earnings track record and a market capitalization under $1 billion dollars who are in sectors other than REITs, banking, airlines, auto, retail, telecom, etc. You want to be focusing on services companies, financial (non bank) companies, niche manufacturers, healthcare companies, software companies, etc. who are not too big and have a good track record.

Also during the next crash I would be looking to buy into listed investment companies (LICS) or ETFs with an emerging markets or Asian focus as those markets tend to get hit harder during a downturn than markets like the U.S.A., U.K. or Australia.

As for the issue of Warren Buffett saying turnarounds seldom turn and his investment in American Express it depends on what your definition of a turnaround is. Buffett's approach generally (once he got over the cigar butt strategy) has been to buy quality companies with a strong track record experiencing temporary/one off problems as opposed to buying rubbish companies that have been rubbish for a long time and now have a new strategy to try and turn the company around. Now some people might lump together both types of business in the "turnaround" category but they are clearly not the same. Buying shares in General Motors after its reemergence from bankruptcy is a completely different type of investment to buying American Express after the salad oil scandal. The comparison is apples and oranges.
(This post was last modified: 01-12-2018 04:25 AM by Australia Sucks.)
01-12-2018 04:14 AM
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Messages In This Thread
Australian Stock Market - Australia Sucks - 09-13-2016, 07:58 PM
RE: Australian Stock Market - Julio - 09-14-2016, 02:30 AM
RE: Australian Stock Market - TheFinalEpic - 09-14-2016, 06:13 PM
RE: Australian Stock Market - Kangaroo - 09-18-2016, 07:08 AM
RE: Australian Stock Market - BB1 - 06-06-2017, 05:23 PM
RE: Australian Stock Market - BB1 - 08-23-2017, 02:29 AM
RE: Australian Stock Market - BB1 - 12-22-2017, 12:38 PM
RE: Australian Stock Market - BB1 - 02-09-2019, 05:47 PM
RE: Australian Stock Market - BB1 - 07-15-2017, 12:43 AM
RE: Australian Stock Market - Tail Gunner - 01-01-2018, 10:47 PM
RE: Australian Stock Market - Justinian - 07-28-2017, 12:55 AM
RE: Australian Stock Market - Atticus - 01-01-2018, 07:07 AM
RE: Australian Stock Market - PK1098 - 01-01-2018, 05:11 AM
RE: Australian Stock Market - Tail Gunner - 01-01-2018, 10:21 PM
RE: Australian Stock Market - Cane Toad - 01-01-2018, 10:29 PM
RE: Australian Stock Market - Tail Gunner - 01-01-2018, 10:38 PM
RE: Australian Stock Market - Cane Toad - 01-01-2018, 11:00 PM
RE: Australian Stock Market - Tail Gunner - 01-02-2018, 12:02 AM
RE: Australian Stock Market - Cane Toad - 01-02-2018, 05:48 PM
RE: Australian Stock Market - Tail Gunner - 01-02-2018, 06:13 PM
RE: Australian Stock Market - Tail Gunner - 01-03-2018, 03:39 PM
RE: Australian Stock Market - Cane Toad - 01-03-2018, 07:38 PM
RE: Australian Stock Market - Tail Gunner - 01-03-2018, 07:50 PM
RE: Australian Stock Market - Roardog - 01-10-2018, 09:40 AM
RE: Australian Stock Market - Tail Gunner - 01-10-2018, 11:07 AM
RE: Australian Stock Market - Roardog - 01-10-2018, 09:04 PM
RE: Australian Stock Market - Tail Gunner - 01-10-2018, 11:12 PM
RE: Australian Stock Market - Cane Toad - 01-12-2018, 06:26 AM
RE: Australian Stock Market - Tail Gunner - 01-12-2018, 11:25 AM
RE: Australian Stock Market - Tail Gunner - 01-12-2018, 11:38 AM
RE: Australian Stock Market - PK1098 - 01-01-2018, 03:22 PM
RE: Australian Stock Market - Cane Toad - 01-02-2018, 12:36 AM
RE: Australian Stock Market - Tail Gunner - 01-02-2018, 01:37 AM
RE: Australian Stock Market - Cane Toad - 01-02-2018, 02:45 AM
RE: Australian Stock Market - Tail Gunner - 01-02-2018, 12:45 PM
RE: Australian Stock Market - Mig Picante - 01-03-2018, 11:33 PM
RE: Australian Stock Market - Australia Sucks - 01-12-2018 04:14 AM
RE: Australian Stock Market - Bucephalus - 12-10-2018, 06:47 AM
RE: Australian Stock Market - Blue Streak - 11-19-2018, 07:12 AM
RE: Australian Stock Market - Mig Picante - 12-10-2018, 08:19 AM
RE: Australian Stock Market - Mig Picante - 12-10-2018, 06:35 PM
RE: Australian Stock Market - Blue Streak - 01-15-2019, 06:15 AM
RE: Australian Stock Market - Mig Picante - 02-11-2019, 08:47 AM
RE: Australian Stock Market - Mig Picante - 02-19-2019, 08:54 AM
RE: Australian Stock Market - BigTedSven - 02-21-2019, 02:33 AM
RE: Australian Stock Market - Mig Picante - 04-14-2019, 06:30 AM
RE: Australian Stock Market - TDevil - 04-14-2019, 07:29 AM
RE: Australian Stock Market - Tail Gunner - 04-19-2019, 12:24 AM
RE: Australian Stock Market - Mig Picante - 04-20-2019, 03:11 AM
RE: Australian Stock Market - Mig Picante - 04-21-2019, 04:06 AM
RE: Australian Stock Market - BigTedSven - 05-21-2019, 09:47 PM
RE: Australian Stock Market - BigTedSven - 05-21-2019, 09:48 PM
RE: Australian Stock Market - Tail Gunner - 05-21-2019, 10:00 PM
RE: Australian Stock Market - Bogart - 05-22-2019, 10:54 PM
RE: Australian Stock Market - Mig Picante - 05-24-2019, 07:16 AM
RE: Australian Stock Market - BB1 - 05-25-2019, 02:31 AM
RE: Australian Stock Market - outback - 05-25-2019, 02:33 AM
RE: Australian Stock Market - Mig Picante - 05-25-2019, 03:51 AM
RE: Australian Stock Market - BB1 - 05-27-2019, 06:38 AM
RE: Australian Stock Market - BB1 - 06-10-2019, 06:54 AM
RE: Australian Stock Market - UnW - 05-27-2019, 07:16 AM
RE: Australian Stock Market - Mig Picante - 06-04-2019, 08:36 AM
RE: Australian Stock Market - BalanceLife - 09-08-2019, 06:18 AM
RE: Australian Stock Market - Mig Picante - 09-24-2019, 07:05 AM

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