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Australian Stock Market
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Tail Gunner Offline
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Post: #51
RE: Australian Stock Market
(01-03-2018 11:18 AM)JimBobsCooters Wrote:  
(01-02-2018 06:13 PM)Tail Gunner Wrote:  
(01-02-2018 05:48 PM)Cane Toad Wrote:  
(01-02-2018 12:02 AM)Tail Gunner Wrote:  If there is a substantial stock market correction, these sectors will likely become even more undervalued and become a distressed asset.

A mine might be worth $1 on paper today, but it's not a distressed asset. It only becomes a distressed asset when the owners are forced to sell - and for $1 most owners will just sit on their assets until market conditions improve.

So anyway, hope that clears up my initial comments.

Fair enough. I agree with most of your analysis. I used the phrase "distressed asset" in the broader sense, as when an asset's value is severely depressed -- thereby presenting a great bargain when buying a company's stock. Often the value of an entire business sector can be severely depressed, which often occurs at the bottom of a cycle in a business sector. If the bottom of such a cycle also happens to coincide with a stock market bottom where investors are frightened and deleveraging, then you can really pick up very deeply discounted stocks.

When you use a very specific term, such as "distressed asset" incorrectly it makes everything you say harder to trust or believe and generates worthy questioning of your post.

While your overall point is actually a good one in regards to market cycles it is being undermined greatly by your misuse of that term.

I did not misuse the term. Words have various connotations. I used the broader meaning. When Warren Buffet invested in the stock of Amex and Bank of America they were "distressed assets." Such assets tend to become distressed at sector cycle bottoms or market bottoms.

Quote:"Bank of America plays into Buffett's affection for distressed assets. Bank of America is turning into Wells Fargo right now."

In recent years, how much Buffett has made from the deals to buy into Bank of America and Goldman Sachs during financial distress highights his rule to be greedy when others are fearful, and a lot of bank investors have been very afraid since 2008.

https://www.cnbc.com/2014/09/25/why-buff...tocks.html
(This post was last modified: 01-03-2018 03:45 PM by Tail Gunner.)
01-03-2018 03:39 PM
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Post: #52
RE: Australian Stock Market
(01-03-2018 03:39 PM)Tail Gunner Wrote:  I did not misuse the term. Words have various connotations. I used the broader meaning. When Warren Buffet invested in the stock of Amex and Bank of America they were "distressed assets." Such assets tend to become distressed at sector cycle bottoms or market bottoms.

This is an interesting one. The banks main asset is its loan book. Bank of America's assets became distressed due to the rising bad/ doubtful debt situation which in turn created the requirement for them to raise additional capital to meet their capital adequacy requirements. They had to do something to remedy their situation, which in this case was to do the deal with Buffet.

I say it's interesting because the sector (the banks etc) largely bought this situation on themselves due to the lending practices at the time. When the extent of the bad loan situation became apparent it resulted in the freeze in the lending markets and resultant share market collapse.

The point is that the opportunity for Buffet to swoop as he did was caused by the lending practices of Bank America itself (and arguably a few other factors). Buffet wasn't looking at market cycles, though ironically the impact of the banking sector crisis resulted in a lot of other market opportunities ie; panic driven selling, forced selling etc. Interesting if Buffet took advantage of that, or whether he stuck to his usual approach.

I think I read somewhere that Buffet doesn't really worry about market cycles. He instead looks for value.
01-03-2018 07:38 PM
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Tail Gunner Offline
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Post: #53
RE: Australian Stock Market
(01-03-2018 07:38 PM)Cane Toad Wrote:  I think I read somewhere that Buffet doesn't really worry about market cycles. He instead looks for value.

Haha. That is an understatement. He and Benjamin Graham are widely acknowledged as the forefathers of popularizing value investing.

https://en.wikipedia.org/wiki/The_Intelligent_Investor

But when does value most often present itself? At cycle or market bottoms. Buffet acknowledges that fact in his most famous quote:

Quote:“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”


(01-03-2018 07:38 PM)Cane Toad Wrote:  though ironically the impact of the banking sector crisis resulted in a lot of other market opportunities ie; panic driven selling, forced selling etc.

That is the key point. Whatever it was that caused the bear market presented a great buying opportunity in many sectors. While the S&P and DJIA went down 50%, many sectors fell far greater than that.
(This post was last modified: 01-03-2018 07:56 PM by Tail Gunner.)
01-03-2018 07:50 PM
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Post: #54
RE: Australian Stock Market
Pot stocks doing well today on the back of federal regulation to allow export of cannabis products.
01-03-2018 11:33 PM
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Post: #55
RE: Australian Stock Market
(01-03-2018 07:50 PM)Tail Gunner Wrote:  
(01-03-2018 07:38 PM)Cane Toad Wrote:  I think I read somewhere that Buffet doesn't really worry about market cycles. He instead looks for value.

Haha. That is an understatement. He and Benjamin Graham are widely acknowledged as the forefathers of popularizing value investing.

https://en.wikipedia.org/wiki/The_Intelligent_Investor

But when does value most often present itself? At cycle or market bottoms. Buffet acknowledges that fact in his most famous quote:

Quote:“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”


(01-03-2018 07:38 PM)Cane Toad Wrote:  though ironically the impact of the banking sector crisis resulted in a lot of other market opportunities ie; panic driven selling, forced selling etc.

That is the key point. Whatever it was that caused the bear market presented a great buying opportunity in many sectors. While the S&P and DJIA went down 50%, many sectors fell far greater than that.

True but you also have to have the money at the time the value presents itself. So how do you do that? Always keep a cash reserve ready to invest? But then that money is doing nothing, just earning bank interest when it could be in a stock potentially making capital gains and dividend income.
If you happened to have a whole bunch of money ready when the market crashed in 07/08 and had the timeline to wait for the inevitable rise then great, you'd make a killing.
But how do you know when that crash is coming? Very few people do/did and they made a lot of money from that.

This can cause you to get stuck in the trap of always trying to pick stocks at the bottom which is a mugs game. Unless you know very well that the reason for the bottom is overblown, you can just as easily buy into a company that is tanking due to valid reasons like market destruction or poor management causing the company t go bust. Ask anyone who bought stock in Slater & Gordon in 2015.

When Buffet talks about buying value he means buying into a solid business and backing that businesses fundamentals to generate growth over the years to improve the share price.
He doesn't mean buying something speculative hoping it goes big i.e. an oil/mineral exploration company with no finds yet.
01-10-2018 09:40 AM
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Tail Gunner Offline
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Post: #56
RE: Australian Stock Market
If you happened to have a whole bunch of money ready when the market crashed in 07/08 and had the timeline to wait for the inevitable rise then great, you'd make a killing. But how do you know when that crash is coming? Very few people do/did and they made a lot of money from that.

Many people knew that the crash was coming, because it was inevitable as a matter of logic. Few people had the exact timing right, because that is almost impossible to predict. Watch the film "The Big Short," which revolves around both these issues: someone who correctly knew what the future would bring by applying logic and also had the fortitude to stay the course, even though he was wrong on the timing.


This can cause you to get stuck in the trap of always trying to pick stocks at the bottom which is a mugs game.

Compiling a fortune in paper profits only to have it wiped out in the next bear market is also a mugs game. Buying with greed near a market top and then selling in fear near a market bottom is also a mugs gain. The vast majority of retain investors fall into one of these two categories. Even most hedge fund managers underperform the market indices.


When Buffet talks about buying value he means buying into a solid business and backing that businesses fundamentals to generate growth over the years to improve the share price. He doesn't mean buying something speculative hoping it goes big i.e. an oil/mineral exploration company with no finds yet.

Re-read what I wrote. He is a value investor, but also pounces on a company like a cat on a mouse when the company is distressed but still financially sound. I never said anything about pure mindless speculation.


True but you also have to have the money at the time the value presents itself. So how do you do that? Always keep a cash reserve ready to invest? But then that money is doing nothing, just earning bank interest when it could be in a stock potentially making capital gains and dividend income.

Invest in real things that produce an income with high yields and low risks. These investments are hard to find, but available to those who seek them out. Placing all your money (or even half of it) in the stock market is a fool's game. You will never beat the market makers, quants, supercomputers, and algorithms -- much less the out-of-control government intervention in the markets. Set aside speculative money for the stock market and wait for asymmetric trades. Play by your rules, not theirs. You win by not playing the game.



(This post was last modified: 01-10-2018 11:19 AM by Tail Gunner.)
01-10-2018 11:07 AM
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Post: #57
RE: Australian Stock Market
(01-10-2018 11:07 AM)Tail Gunner Wrote:  If you happened to have a whole bunch of money ready when the market crashed in 07/08 and had the timeline to wait for the inevitable rise then great, you'd make a killing. But how do you know when that crash is coming? Very few people do/did and they made a lot of money from that.

Many people knew that the crash was coming, because it was inevitable as a matter of logic. Few people had the exact timing right, because that is almost impossible to predict. Watch the film "The Big Short," which revolves around both these issues: someone who correctly knew what the future would bring by applying logic and also had the fortitude to stay the course, even though he was wrong on the timing.

Seen it 3 times and read the book. I didn't say that no one knew, I said that very few people did and those that did made a lot of money out of it. As you are pointing out and is shown in that movie and the book it's based on.

My point is that very few people manage to do that and you will note that those that did were all in the finance industry. If you're a regular retail investor, like most of us, then seeing that crash coming is very hard because there are predictions of doom and gloom, bear or bull, every day from all sorts of experts. Whose opinion do you trust?

(01-10-2018 11:07 AM)Tail Gunner Wrote:  This can cause you to get stuck in the trap of always trying to pick stocks at the bottom which is a mugs game.

Compiling a fortune in paper profits only to have it wiped out in the next bear market is also a mugs game. Buying with greed near a market top and then selling in fear near a market bottom is also a mugs gain. The vast majority of retain investors fall into one of these two categories. Even most hedge fund managers underperform the market indices.

100% agree with you. Those who sell for a loss during a bear market are stupid. Much better to hold on and ride it out until the market turns again, like it always does.
Avoiding buying near the top though is much harder. How do you know where the top is?

(01-10-2018 11:07 AM)Tail Gunner Wrote:  When Buffet talks about buying value he means buying into a solid business and backing that businesses fundamentals to generate growth over the years to improve the share price. He doesn't mean buying something speculative hoping it goes big i.e. an oil/mineral exploration company with no finds yet.

Re-read what I wrote. He is a value investor, but also pounces on a company like a cat on a mouse when the company is distressed but still financially sound. I never said anything about pure mindless speculation.

I wasn't having a go at you mate or saying that you said anything about mindless speculation. I was talking in general terms.

(01-10-2018 11:07 AM)Tail Gunner Wrote:  True but you also have to have the money at the time the value presents itself. So how do you do that? Always keep a cash reserve ready to invest? But then that money is doing nothing, just earning bank interest when it could be in a stock potentially making capital gains and dividend income.

Invest in real things that produce an income with high yields and low risks. These investments are hard to find, but available to those who seek them out. Placing all your money (or even half of it) in the stock market is a fool's game. You will never beat the market makers, quants, supercomputers, and algorithms -- much less the out-of-control government intervention in the markets. Set aside speculative money for the stock market and wait for asymmetric trades. Play by your rules, not theirs. You win by not playing the game.

Finding high yield, low risk investments is the holy grail for any investor but as you say, very hard to find. If you've got some advice on finding them I'd love to hear it.
01-10-2018 09:04 PM
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Tail Gunner Offline
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Post: #58
RE: Australian Stock Market
(01-10-2018 09:04 PM)Roardog Wrote:  Finding high yield, low risk investments is the holy grail for any investor but as you say, very hard to find. If you've got some advice on finding them I'd love to hear it.

Here you go:

https://www.rooshvforum.com/thread-33145...pid1656129


Quote:Avoiding buying near the top though is much harder. How do you know where the top is?

You do not need to identify the top of the market. You just need to be out of the market and invested in real tangible high-quality investments that produce yields that are superior to the stock market with lower risk (see above) -- and then have the speculative funds available for the bottom of the market. That way, you can make high-reward asymmetric trades with limited risk. That is what I meant by "Play by your rules, not theirs." Learn to think outside the box.
(This post was last modified: 01-10-2018 11:19 PM by Tail Gunner.)
01-10-2018 11:12 PM
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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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Post: #60
RE: Australian Stock Market
(01-10-2018 11:12 PM)Tail Gunner Wrote:  
(01-10-2018 09:04 PM)Roardog Wrote:  Finding high yield, low risk investments is the holy grail for any investor but as you say, very hard to find. If you've got some advice on finding them I'd love to hear it.

You just need to be out of the market and invested in real tangible high-quality investments that produce yields that are superior to the stock market with lower risk

Ok, so if you are invested at a superior yield and lower risk...why are you even in the stock market in the first place?
01-12-2018 06:26 AM
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Post: #61
RE: Australian Stock Market
(01-12-2018 04:14 AM)Australia Sucks Wrote:  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 would not necessarily consider such companies low quality, especially if they are established high-cap companies. Moreover, regarding whether or not they will survive the downturn, if you buy after the market bottoms and then begins to turn you will already know that they survived the bear market. OK, I guess that you indicated that in your last sentence.

I am approaching this from the American market perspective. Things may be different in the Australian market.
(This post was last modified: 01-12-2018 11:50 AM by Tail Gunner.)
01-12-2018 11:25 AM
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Post: #62
RE: Australian Stock Market
(01-12-2018 06:26 AM)Cane Toad Wrote:  
(01-10-2018 11:12 PM)Tail Gunner Wrote:  
(01-10-2018 09:04 PM)Roardog Wrote:  Finding high yield, low risk investments is the holy grail for any investor but as you say, very hard to find. If you've got some advice on finding them I'd love to hear it.

You just need to be out of the market and invested in real tangible high-quality investments that produce yields that are superior to the stock market with lower risk

Ok, so if you are invested at a superior yield and lower risk...why are you even in the stock market in the first place?

For some inexplicable reason, you cut off the rest of my quotation, which was the answer to your question. An asymmetric trade is a trade where the potential gains are very large relative to the possible loss.

Quote:You do not need to identify the top of the market. You just need to be out of the market and invested in real tangible high-quality investments that produce yields that are superior to the stock market with lower risk (see above) -- and then have the speculative funds available for the bottom of the market. That way, you can make high-reward asymmetric trades with limited risk. That is what I meant by "Play by your rules, not theirs." Learn to think outside the box.
(This post was last modified: 01-12-2018 11:38 AM by Tail Gunner.)
01-12-2018 11:38 AM
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Post: #63
RE: Australian Stock Market
Tail Gunner, in Australia most of these deep cyclical businesses in Australia have a very patchy earnings track record and if you look at the earnings of companies like Qantas (QAN), Bluescope steel (BSL), Fortescue Metals (FMG), BHP Billiton (BHP), Rio Tinto (RIO), Virgin Australia, etc you will see that over the long term (10+ years) earnings performance is very woeful. Even our largest supermarket Woolworths (WOW) and another large retailer (Metcash) have been struggling and these aren’t even deep cyclicals. Go on, look up the long-term performance of these companies if you don’t believe me.

These type of deep cyclicals (most of them are rubbish in Australia) are very different to a high quality deep cyclical like Catapillar in the U.S. now if you are talking about buying into quality deep cyclicals like Caterpillar then yes I agree it’s a good strategy but we just have very few of those types of high quality large cap deep cyclicals in Australia. It’s a different market to the U.S.
(This post was last modified: 01-12-2018 02:57 PM by Australia Sucks.)
01-12-2018 02:56 PM
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RE: Australian Stock Market
One stock that I own (very small position size due to the high risk) that is worth a closer look and I have not mentioned in this thread before is Bubs Australia (ASX code: BUB). They produce baby products such as goats milk infant formula and baby porridges, etc.

https://www.bubsaustralia.com/collections/all

It is a highly risky and speculative company which is currently loss making.

It could go to zero or could be a 5 bagger (or more).

Its vertically integrated to some extent and after a recent(ish) acquisition owns Australia's largest herd of milk producing goats. So they produce the goats milk (in Australia) which goes into their goats milk baby formula. Goats milk is an upcoming trend because a lot of people who have sensitivities/allergies to cows milk based products are able to consume goats milk products without the same issues. Also its becoming trendy.

It currently has a market capitalization of less than $300 million (Australian dollars). It is rapidly growing sales and has especially strong momentum in the Chinese market. Just to give you an idea of how much upside their is if the company is successful in the next 5 years lets look at other companies for comparison. Synlait Milk which produces dairy products and infant formula (SM1) has a market cap of 1.87 billion (AUD), Bellamy's (BAL) which also produces infant formula (and other baby products) and sells heavily into China has a $2 billion (AUD) market cap. A2 Milk (A2M) which sells specialized milk based only on the A2 protein (instead of normal milk which has A1 and A2 proteins) also sells heavily into China and has a $7.2 billion (AUD) market cap. Blackmores (BKL) which sells vitamins and supplements and also sells heavily into China has a $2.6 billion dollar market cap. In China there is huge demand for dairy and vitamin products, etc from Australia and New Zealand as the locals do not necessarily trust Chinese made products and will pay a premium for stuff from Australia and NZ. Demand for these types of products in Australia is strong and steady (albeit not showing the rapid growth of China). So for companies in this space if they manage things right they can really do well.

Like I said before its a speculative play because its loss making has a limited history as a listed company and is subject to increased competition (it is to some extent still a commodity product) and changing/increased Chinese import regulations/taxes. This is on top of execution risk from a management team that while doing well has not yet fully proven itself due to the short track record.

However given its strong sales momentum, its balance sheet is in reasonable shape, its first mover advantage (in promoting the goats milk baby products), the distribution deals it has already signed in China and the fact that its partially vertically integrated (guaranteed supply and quality of goat's milk as well as better marketing proposition) it has reasonable chance of making a success of things.

Of course do your own research and if you decide to invest it should only ever be a very small (speculative) position.
(This post was last modified: 06-03-2018 04:20 AM by Australia Sucks.)
06-03-2018 04:17 AM
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RE: Australian Stock Market
It was just in the business news today that quarterly corporate profits in Australia are up 6% continuing the bullish run for business conditions. Australian businesses post the last financial crises have generally been lagging their global peers and are finally gaining some earnings momentum. Business confidence is generally strong as are business investment numbers.
06-04-2018 04:33 AM
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RE: Australian Stock Market
I think Credit Corp (ASX code: CCP) currently presents a good buying opportunity. It is a stock I have owned for many years. An anonymous report which lacked credibility and was mostly wild unproven speculation was recently released (presumably by a short seller) and has pushed down the company's share price (despite a strong rebuttal statement from the company).

The share price last closed at $17.46 (AUD). Based on the top end of its current earnings guidance of $1.34 AUD it is trading at around 13 times this years forecast earnings. This is for a high quality business which will keep compounding its earnings at more than 15% per annum while paying an attractive dividend.

Credit Corp is Australia's largest debt collection company and it also has a fledgling U.S. debt collections division as well as an Australian consumer lending business. The management team which has been in place for a long time is top notch (with a history of under-promising and over delivering). The company generates consistent high returns on equity and the balance sheet is in reasonable shape.

I think at current prices its a buy and people looking for a solid Australian company to invest in should research it further. If anybody has questions about the company post your questions here and I will try to answer.
(This post was last modified: 06-24-2018 09:30 AM by Australia Sucks.)
06-24-2018 09:29 AM
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Post: #67
RE: Australian Stock Market
Currently full year earnings season in Australia is in full swing with more companies to report this month.

Credit Corp (ASX code: CCP) came out with its full year results yesterday and the stock reacted positively. The shares today closed at $21.90 (AUD) up substantially since the last post I made (when it traded at $17.46). All three divisions (Aussie/NZ debt collection, Aussie consumer lending and U.S. debt collection) of the company were showing growth and sound fundamentals. Productivity (hourly collection rate) improved, the NPAT margin edged slightly higher and balance sheet gearing was reduced (whilst return on equity simultaneously increased to over 24%). Fully diluted e.p.s. growth was around 16.5%.

The company gave a solid outlook declared its second half dividend and gave positive (increased) earnings guidance for the year ahead. I think based on the company's history of beating its own guidance and the positive business outlook for all 3 of its divisions that they will lift their earnings guidance at the November AGM. I continue to hold the shares and believe its one to watch and accumulate on any dips.
08-01-2018 05:53 AM
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Post: #68
RE: Australian Stock Market
Bubs (ASX code: BUB) share price has gotten smashed (down from around $0.75 when I last posted about it to $0.47 now) as China related stocks seem to be on the nose at the moment (coupled with concerns about the regulatory environment for consumer products companies exporting to China). With China sentiment not looking like turning in the near term it looks like the stock could remain in the doldrums for a while longer. However the company is still showing strong revenue momentum and the long-term story appears to be unchanged. Its still a speculative stock to potentially buy (for a very small position no more than a few thousand dollars) on any further dips.

Credit Corp Group (ASX Code: CCP) recently suffered substantial share price declines in part due to the overall stock market going down and in part due to a recent proposed senate economics committee investigation/commission into payday lenders, debt mediators and certain other types of financial businesses. Even though technically according to the terms of reference of the proposed senate economics committee on the topic Credit Corp will not be directly involved/affected politicians do have a tendency of wandering off topic (and are not strictly bound by the terms of reference) and the consumer lending business they operate is not too far away from pay-day lending. Therefore in theory they could potentially be hit with tougher regulations. My understanding however is that based on the past regulatory reforms (they were not affected and got the bonus of taking market share) to consumer credit laws, etc as well as the company's current product offering that they have the most ethical and sustainable loan products of any major Australian company operating in the credit impaired consumer segment. Therefore I think any potential regulatory changes will not hit them very hard if at all but that some of their shadier competitors will be hit much harder giving them an opportunity to gain market share in the longer-term if the regulations are tightened.

The Annual general meeting of the company is on 1st November 2018. I think the company will show strong performance and give a positive outlook statement and has a good chance of upgrading its earnings guidance for FY2019. the stock is undervalued now and I think it will rally after the AGM presentation is released. On Friday the share price closed at $18.45. I believe its a strong buy at current levels and I am adding to my position. Its the type of stock which could be suitable as a core/large position in a long-term stock portfolio. I think it will beat guidance and earn at least $1.55 per share in FY2019 and pay at least $0.75 per share in dividends. That is therefore a forward price to earnings ratio of less than 12 times and a 4%+ dividend yield for a high quality company (ROE consistently in the 20-25% range and consistent double digit EPS growth, strong balance sheet, good management, good long-term growth prospects, etc). I reiterate my thesis that the mature Australian business will be a more or less steady performer with no long-term growth but the consumer lending and debt collection businesses will show good growth.


Due to emerging markets tanking as well as the China-Trump "trade war" Asian stocks (especially China related stocks). Have taken a beating. Therefore its a good time to but into the listed investment company Platinum Asia Investments (ASX code:PAI). Its managed by Platinum Asset management (ASX Code: PTM) run by the legendary Neil Kerr a billionaire fund manager/stock picker with a good track record. PAI floated at $1.00 per share in 2015 and after rising to over $1.32 it has now fallen back to $1.015. Long-term investors should look to accumulate some shares at $1.00 per share or below.

In the next few days there are some other stocks I will talk about. Basically I think its time to be bullish now and accumulate good stocks while they are on sale. I think despite a few big disappointments that the current U.S. earnings season will meet or even beat expectations overall and U.S. stocks will overall rally in the coming weeks (with other markets likely following wall street higher). Even if stocks do not rally I definitely think a crash is not on the cards.

There are few more Australian stocks that I will post about in the coming days so keep an eye on this thread.
(This post was last modified: 10-28-2018 07:52 AM by Australia Sucks.)
10-28-2018 07:50 AM
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Wingman
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Post: #69
RE: Australian Stock Market
There are some more Australian companies I wanted to talk about but it might be better to let the thread die. The thread is beginning to feel like a monologue.
11-03-2018 01:05 AM
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JimBobsCooters Offline
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Post: #70
RE: Australian Stock Market
Hey, I'm always interested in other peoples insights if you want some encouragement!
11-03-2018 03:15 AM
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Post: #71
RE: Australian Stock Market
Anyone thinking of partaking in the Coles IPO? Seems like a solid income stock given the nature of the underlying business, but the analysis I have read suggests it won't be sold at a discount. So you would basically get what you pay for.
11-19-2018 07:12 AM
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Australia Sucks Offline
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Post: #72
RE: Australian Stock Market
I recently posted this in another thread but I will re-post it here because its relevant to the thread:

In order of attractiveness (my opinion) I think you should consider the following 4 shares:

1) Credit Corp Group (ASX code: CCP). Today's closing share price $18.40 which i have mentioned in another thread already. Australia's largest debt collection company. Today's closing share price was $18.40. I have been buying in recent months at anything below $19 per share. I forecast (I think they will beat their own guidance) earnings per share of at least $1.50 and dividends per share (fully franked) of at least $0.75 for FY2019. That is a fully franked yield of over 4% and a price to earnings ratio of less than 12.5 times for a company that will continue to grow earnings per share at double digit rates and has a 24% return on equity.

Broadly speaking the company has 3 major divisions:

First division is the Australia and New Zealand debt collection division (primarily the purchasing of defaulted credit card debt, personal loans, utility bills, etc). The second division is Australian consumer lending (e.g. personal loans, car loans, small business loans, etc). The third division is the U.S. debt collection division.

If you break down the 3 divisions the largest division of Australia and New Zealand debt collection will be steady (most likely no or minimal growth). This is due to unsecured consumer lending being largely static in Australia (the credit growth in Australia in recent years has largely occurred in the areas of mortgage debt and government debt) and them operating in a highly concentrated and competitive market where they are a price taker. this division can be considered fully "mature" (i.e. low growth).

The consumer lending division will continue to grow at a rate of knots. Other companies operating in the consumer lending sector such as Cash Convertors, Thorn Group, etc are still reeling from the effects of tougher regulations, whereas the products they provide are designed to be more consumer friendly and thus have and will continue to avoid the harsher levels of regulatory scrutiny that other companies in the sector have faced. This means they will continue to gain market share. Tougher regulations that are likely coming through the pipeline will only strengthen their lead over competitors.

U.S. debt purchasing. Dynamics in the U.S.A. debt collection industry are favourable after a number of difficult years. A number of the large companies in the sector are struggling with weak balance sheets (meaning less competition), meanwhile banks are offloading a higher portion of their bad debts to debt collectors. This has resulted in ample supply and attractive pricing for U.S. debt ledgers. It appears these favorable tailwinds will continue for some years to come.
Disclosure: I own shares

[b]2) Platinum Asia Investments (ASX code: PAI). Todays closing share price $1.01[/b] This is a listed investment company run by Platinum asset management (ASX code: PTM) who have a good track record in outperforming the market. It had its IPO in late 2015 at $1.00 per share and ran up to around $1.35 earlier this year before tumbling recently. I would recommending buying at or below $1.00 per share (i.e. if the share price falls further). The shares are around NTA and it represents a good opportunity to benefit from the undervaluation/weakness of Asian stock markets.
Disclosure: I own shares

3) Sunland Group (ASX Code: SDG) Current closing share price $1.34. The management and directors own over 30% of the company and it has been around a long time. Its a property developer (and property owner) that is heavily/primarily weighted towards the Queensland property market. They do a mix of residential, retail, office property, etc. The last reported NTA was $2.50 per share (notwithstanding any potential declines due to property price declines which could occur). If it keeps falling I would recommend buying some at anything below $1.25 per share (i.e. half NTA). The current guidance for FY2019 is around 27 - 30 million (AUD) in NPAT. Even if you downgrade it to $25 million NPAT that is more than $0.16 in earnings per share. If you buy at $1.25 that is less than 8 times earnings and half NTA for a well established company. It pays a healthy dividend and if you are willing to look past the current impending property downturn (i.e. take a long-term view) it offers good value.

4) Thorney Technologies (ASX Code: TEK). It today closed at $0.185 per share. I would be buying at these levels. Recent market declines and the rotation out of tech stocks has seen its share price plummet. Its a listed Investment Company (specializing in Australian technology companies) run by Alex Waislitz the clever and successful Jewish businessmen (and also the son in law of billionaire businessman Richard Pratt). Disclosure: I own shares.

If I had to pick only one stock it would be Credit Corp Group (ASX code: CCP).
(This post was last modified: 12-10-2018 05:22 AM by Australia Sucks.)
12-10-2018 05:13 AM
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Bucephalus Offline
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Post: #73
RE: Australian Stock Market
(11-03-2018 01:05 AM)Australia Sucks Wrote:  There are some more Australian companies I wanted to talk about but it might be better to let the thread die. The thread is beginning to feel like a monologue.

AS, I've only just come across this thread and find it incredibly interesting (don't let it die!)

Can I ask how you got started in the Australian stockmarket? Is there a good book you can recommend?

I'm financially literate and confident with Australian property, but I'd like to diversify and am really very new to shares. So much so that a lot of your talking points are over my head.

I'm particularly interested in ETFs or other long-term ventures that are more of a "hands-off" approach.
12-10-2018 06:47 AM
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JekyllAndHyde Offline
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Post: #74
RE: Australian Stock Market
(11-03-2018 01:05 AM)Australia Sucks Wrote:  There are some more Australian companies I wanted to talk about but it might be better to let the thread die. The thread is beginning to feel like a monologue.

Vanguard ETFs are all the rage and some of the best portfolios net upwards of 10 to 15% p.a. predicted returns with minimum 5000 bucks initial investment.

Raiz formerly known as Acorns is only ideal for the late teen who wants to get into investing. The returns on a moderately aggressive portfolio are reasonable at just under 10% p.a.

Do you use the CommSec app?
12-10-2018 07:01 AM
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Mig Picante Offline
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Post: #75
RE: Australian Stock Market
Australian stock market looking pretty beat up at the moment. Lots of good companies on sale.
Lots of crap too.
12-10-2018 08:19 AM
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