5 comments

  • I own a few of the companies you discuss above (let Acrux through to the keeper though). One stock I think may be growth at a great price is CPT Global (ASX:CGO). The lowest seller is 90c at the moment, which seems too high for me (av entry price about 73c).

    However, one way or the other these results will be very important. They will show whether the 1st half was an anomaly or whether it reflects favourable business conditions are returning (the business – IT performance testing and tuning is contract based.) If the first half’s results are repeated then at 85c – 90c the company looks cheap if you take the view it’s a decent business over the long term. If the results are significantly lower than the first half, then the growth looks to have been anomalous and there is no way I’d call it a buy at 90c. Once the results are released it wouldn’t take long to examine the risk/reward based on profit, cashflow and dividend. If all three are maintained or increased, then there might be a decent albeit low liquidity opportunity.

  • Great post, thanks Dean!

    I’ve only recently started reading one of Peter Lynch’s books (One Up On Wall Street) so his ideas are new to me but seem to resonate with me from what I’ve read so far and what you’ve written here. Thinking about my own portfolio and Lynch’s categorisations as you’ve quoted, I don’t have any slow-growers as such and with cyclicals generally keep these to a minimum and am more selective about which ones I hold. I largely have a combination of stalwarts and fast-growers that make up most of my portfolio, with an eye on a couple of turnarounds that I am monitoring, but no asset opportunity type stocks as such at this stage. Your comment about stalwarts has got me thinking though!

    For my family trust, I have this anchored by a few large-cap / stalwart-like stocks, and as I invest with margin here I prefer it this way as this provides a higher LVR buffer in case of a significant market correction. Along with this the higher yield and cash flow from these stocks allows me to pay my margin interest and remain in positive cash flow and also invest in mid-cap and small-cap stocks that have a lower maximum LVR and are lower yielding, and are in some ways more akin to the fast-grower category. Structuring this portfolio this way also keeps it fairly tax-neutral whilst I don’t have any lower tax-rate beneficiaries and am building up my asset base.

    For my SMSF, I have a broadly similar approach, but with much less of the stalwarts and more of the fast-growers. That being said, as there is no gearing involved here and the yield is less important to me today as I am in accumulation mode, your post has got me thinking about whether I should sell these completely and re-invest in a few more fast-growers.

    When I started my SMSF a couple of years ago I rolled over my entire industry super fund balance into my SMSF and bought just four bank stocks! Since then these stocks have gone up 40-50% over a couple of years, with forward expectations of further capital growth being more subdued. As the tax implications of selling stocks inside super are less onerous than outside super, and as I already hold these same stocks outside super in my family trust anyway, I am thinking that re-allocating this portion of my SMSF to fast-growers may be a better approach.

    This would seem to fit with Lynch’s approach to investing in stalwarts (if you consider banks to be in this category).

    Do you think my line of reasoning makes sense?

    You’ve discussed your SMSF portfolio returns in this post, I am also wondering whether you invest the same way in your family trust? Do you use leverage here either through line of credits against property or with margin lending? Or do you have a different approach here?

  • Two other potential winners we hold outside of this fund are Nearmap (ASX:NEA) and pSividia (ASX:PVA) (Nasdaq:PSDV).
    We hold PSDV as liquidity is better.

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