ASX Investor Hour DISCLAIMER: The following material was presented at ASX Investor Hour. The views, opinions or recommendations of the presenter are solely those of the presenter and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate (“ASX”). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX and its employees, officers and contractors shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided or omitted or from any one acting or refraining to act in reliance on this information. Presenter: Julia Lee, Equities Analyst, Bell Direct Topic: Investing in turbulent times Date: 2 November 2011 Location: Melbourne Investor Hour
Investing in times of turbulence Julia Lee Equities Analyst
Disclaimer The information in this presentation is of a general education nature only. It does not take into account the investment objectives, financial situation or needs of any individual investor. Before making an investment decision we recommend that you consult a professional advisor. The Bell Direct service is provided by Third Party Platform Pty Limited trading as “Bell Direct” (ABN 74 121 227 905) an Australian Financial Services licensee (AFSL314341) and a Participant of the ASX Limited Group. 3
Performance in last 52 weeks Month 3 months Annual Shanghai 4.8% -8.5% -17.0% Comp ASX 200 7.2% -2.9% -7.8% Nikkei 225 4.0% -8.0% -1.7% S&P 500 13.6% -0.6% 8.6% Dow Jones 12.1% 0.7% 9.2% NASDAQ 13.3% -0.7% 10.0% Source: IRESS, 31 October 2011 4
Quote of the day Markets can stay irrational longer than you can stay solvent. -John Maynard Keynes 5
What is a bear market * Change from general optimism to pessimism Euphoria Anxiety Thrill Denial Excitement Fear Optimism Optimism Desperation Relief Hope Panic Depressio n Despondency * Technically a fall of more than 20% from peak 6
Secular vs Cyclical bear market • Secular bear market – once in a generation Primary trend • Cyclical bear market – happens regularly Secondary trend 7
Japan’s secular bear market Source: IRESS, Nikkei quarterly price chart, 1981-2011, 26 October 2011 8
Australian market 1960-2011 Source: IRESS, XAO quarterly price chart, 1960-2011, 22 Sept 2011 9
Secular bear market 1969-1979 (1974) Source: IRESS, XAO quarterly price chart, 1960-1983, 22 Sept 2011 10
Defensive strategies * Sector rotation * High yielding stocks * Corporate bonds 11
11 April – 9 August 2011 Source: IRESS, XJO daily price chart, 11 April – 9 August 2011 12
11 April – 9 August 2011 WORST BEST Energy -27% Telecom -1% Discretionary - Utilities -6% 22% Materials -21% Staples -11% Source: IRESS, XJO daily price chart, 11 April – 9 August 2011 13
4 October – 28 October 2011 Source: IRESS, XJO daily price chart, 4 October – 28 October 2011 14
4 October – 28 October 2011 WORST BEST Healthcare Financials +2.5% +17% Telecom +3.3% Energy +17% Staples +3.5% Materials up 14% Source: IRESS, XJO daily price chart, 4 October – 28 October 2011 15
11 April – 28 October 2011 Source: IRESS, XJO daily price chart, 11 April – 28 October 2011 16
11 April – 28 October 2011 Defensive + growth = Avg. +9% Market down 12% Source: IRESS, XJO daily price chart, 11 April – 28 October 2011 17
Identifying turning points • Moving average: long term 200 day • Overlap generates buy/sell signal • Works well in trending market • Whip-lashing in sideways market 18
Moving averages – ASX 200 2002- 2011 Source: IRESS, XJO, 18 May 2011 19
Defensive – high yields • Stable, income from portfolio • Buffer against bear markets • Tax advantages: franking credits 20
Stability • Large established businesses • Return on equity • Low levels of debt • Great track record 21
Sustainability • Dividend payout ratio • Increasing earnings • Past dividend history 22
Sectors Sector Yield Sector Yield Telecom 8.7% Staples 4.8% Utilities 6.8% Industrials 3.7% Financials 7.1% Healthcare 2.7% Property 6.5% Energy 2.6% 5.7% Materials 2.5% Consumer Discretionary 23 Source: IRESS 30 September 2011
Payout Sector Payout Sector Yield TLS 107% WOW 71% AGK 64% BXB 78% CBA 73% CSL 46% WDC 84% WPL 57% NWS 15% BHP 26% 24 Source: Bell Direct website
Valuations are crucial for performance Source: IRESS, PERXAO 1981-2011 25
Looking at yields 26 Source: IRESS, DYXAO, 17 Aug 2011
Making it easy with ETF’s - Simple, liquid & flexible - Low fees compared to managed funds - Trade near or at net asset value - Backed by physical assets 27
SYI – SPDR MSCI Select High Div Yield Fund Source: http://www.spdrs.com.au 28
IHD - iShares S&P/ASX High Dividend Source: http://au.ishares.com/fund/fund-overview-IHD-ASX.do 29
RDV – Russell High Dividend ETF • + 1% from around 50 blue chip Australian shares Source: Bell Potter – Exchange Traded Funds report, Feb 2011 30
Growing demand for corporate bonds • ANZ CPS3: Increased from $750m to $1.34b • WOW Notes II: Increased from $500m to $700m 31
Convertible notes * Debt & equity features * Evaluate risk * Higher yield, higher risk 32
Listed debt securities Source: Bell Potter Fixed Interest Weekly: 28 October 2011 33
Primary Heathcare Bonds • PRYHB $97.50 • 9.98% gross yield to maturity • Margin high 400bp • Medium risk • Maturity reset Sept-15 • Quarterly dividend $2.19 34
Growth strategies * Sector rotation * High growth stocks * High gearing 35
Investing in times of turbulence Julia Lee Equities Analyst
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