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ASX Investor Hour DISCLAIMER: The following material was presented - - PowerPoint PPT Presentation

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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,

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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

  • nly and does not constitute financial advice. Independent advice should be
  • btained 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

  • r 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

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Investing in times of turbulence

Julia Lee Equities Analyst

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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.

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Performance in last 52 weeks

Month 3 months Annual Shanghai Comp 4.8%

  • 8.5%
  • 17.0%

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

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Quote of the day

Markets can stay irrational longer than you can stay solvent.

  • John Maynard Keynes
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What is a bear market

* Change from general optimism to pessimism * Technically a fall of more than 20% from peak

Optimism Optimism Relief Hope Depressio n Excitement Thrill Euphoria Anxiety Denial Fear Desperation Panic Despondency

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Secular vs Cyclical bear market

  • Secular bear market – once in a generation

Primary trend

  • Cyclical bear market – happens regularly

Secondary trend

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Japan’s secular bear market

Source: IRESS, Nikkei quarterly price chart, 1981-2011, 26 October 2011

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Australian market 1960-2011

Source: IRESS, XAO quarterly price chart, 1960-2011, 22 Sept 2011

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Secular bear market 1969-1979 (1974)

Source: IRESS, XAO quarterly price chart, 1960-1983, 22 Sept 2011

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Defensive strategies

* Sector rotation * High yielding stocks * Corporate bonds

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11 April – 9 August 2011

Source: IRESS, XJO daily price chart, 11 April – 9 August 2011

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11 April – 9 August 2011

WORST BEST

Energy -27% Telecom -1% Discretionary - 22% Utilities -6% Materials -21% Staples -11%

Source: IRESS, XJO daily price chart, 11 April – 9 August 2011

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4 October – 28 October 2011

Source: IRESS, XJO daily price chart, 4 October – 28 October 2011

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4 October – 28 October 2011

WORST BEST

Healthcare +2.5% Financials +17% Telecom +3.3% Energy +17% Staples +3.5% Materials up 14%

Source: IRESS, XJO daily price chart, 4 October – 28 October 2011

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11 April – 28 October 2011

Source: IRESS, XJO daily price chart, 11 April – 28 October 2011

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11 April – 28 October 2011

Market down 12% Defensive + growth =

  • Avg. +9%

Source: IRESS, XJO daily price chart, 11 April – 28 October 2011

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Identifying turning points

  • Moving average: long term 200 day
  • Overlap generates buy/sell signal
  • Works well in trending market
  • Whip-lashing in sideways market
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Moving averages – ASX 200 2002- 2011

Source: IRESS, XJO, 18 May 2011

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Defensive – high yields

  • Stable, income from portfolio
  • Buffer against bear markets
  • Tax advantages: franking credits
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Stability

  • Large established businesses
  • Return on equity
  • Low levels of debt
  • Great track record
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Sustainability

  • Dividend payout ratio
  • Increasing earnings
  • Past dividend history
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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% Consumer Discretionary 5.7% Materials 2.5%

Source: IRESS 30 September 2011

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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%

Source: Bell Direct website

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Valuations are crucial for performance

Source: IRESS, PERXAO 1981-2011

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Looking at yields

Source: IRESS, DYXAO, 17 Aug 2011

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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
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SYI – SPDR MSCI Select High Div Yield Fund

Source: http://www.spdrs.com.au

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IHD - iShares S&P/ASX High Dividend

Source: http://au.ishares.com/fund/fund-overview-IHD-ASX.do

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RDV – Russell High Dividend ETF

  • + 1% from around 50 blue chip Australian

shares

Source: Bell Potter – Exchange Traded Funds report, Feb 2011

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Growing demand for corporate bonds

  • ANZ CPS3: Increased from $750m to $1.34b
  • WOW Notes II: Increased from $500m to $700m
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Convertible notes

* Debt & equity features * Evaluate risk * Higher yield, higher risk

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Listed debt securities

Source: Bell Potter Fixed Interest Weekly: 28 October 2011

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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
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Growth strategies

* Sector rotation * High growth stocks * High gearing

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Investing in times of turbulence

Julia Lee Equities Analyst

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ASX Investor Education

Keep improving your knowledge of the sharemarket:

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  • www.asx.com.au/education
  • ASX Customer Service 131 279
  • investor.education@asx.com.au