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Re: [sharechat] Portfolio Theory


From: "tennyson@caverock.net.nz" <tennyson@caverock.net.nz>
Date: Mon, 29 Sep 2003 10:27:47 +1200


Hi Matt,

>
>Alright guys, here's a different topic.  I'm interested in what sort
>of concepts different people use to construct their portfolios.  
>how do you hang it all together?
>

Good question.    I will answer 'for me'.

> 
>Some of the questions that come to mind are:
> have you got a balance between
>income producing assets and growth assets?  
>

My own long term goal is to have all my money invested in companies 
that have characteristics as defined in the 'sharechat' focus investment 
group.  In summary this involves looking for companies that have a 
sustainable competitive advantage and a good profit history.

Whether those investments are 'growth' or 'income' type investments is 
a secondary consideration.   However, taking a retrospective view, I 
have generally found that superior growth *and* income *and* lower 
risk of losing capital (yes, you can have it all) can be found from 
concentrating on income type shares, bought at the right price.

>
>What sort of sectoral exposure do
>you have to the main drivers of the NZ economy?  
>

Well, I don't own a farm so I'm stuffed.    Actually I do own WRI which 
is probably as good a proxy as any for not owning a farm.

>
>Are you thin in one area, thick in another etc etc etc .....
> 

Up until now I have favoured exporters over importers quite heavily, 
and missed many good importers opportunities along the way.  I am 
now working towards a more balanced strategy balancing importers 
with exporters (I include tourism in exporters) and quality infrastructural 
assets.   

> 
>So that's what we've done.  Anybody got anything they want to
>share....? 
> 

Three more things.   Investments in a sharemarket should be regarded 
as only one part of anoverall  investment strategy.   Many New 
Zealanders have a lot of money tied up in property, often their own 
residence.  To me it doesn't make a lot of sense to own property 
shares if you are in this situation.  For the average home owner, 
buying property shares is likely to severely overweight them in 
property.

Second point.   It is probably a good idea to have a small but not 
insignificant warchest of cash to take advantage of those unexpected 
opportunities that Mr Market throws up from time to time.

Lastly it is probably unfair to categorize shares as 'growth' and 'income' 
if you believe those labels will have any permanence.     The two 
categories of shares can cross the border.

>
> Our Portfolio (fair's fair: can't receive without giving)
> 
> Income Shares
> * Capital Properties
> * Wrightson
> * Powerco
> 
> Core Shares
> * Contact
> * Fletcher Building
>

FBU could be quite cyclical with the building/construction market.

>
> * Waste Management
> 
> Growth Shares:
> * Baycorp Adv.
> * Tower
> 

I would classify those last two as 'recovery prospects' rather than 
'growth shares'.   Having said that there is research out there that says 
that carefully selected recovery prospects will give you a better return 
than 'growth' shares ( high P/E shares with a strong profit growth 
record) anyway.

SNOOPY


--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."




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