The Motley Fool says sell Maverick

oil derrick and the statues kneeling before it

Has The Motley Fool called Maverick a Sell?

Investment forum Hot Copper has banned any mention of The Motley Fool on its Maverick Drilling & Exploration forum page due to the Australian investment newsletter’s reputed sell on Maverick.

Wasn’t it only a month ago that head honcho of The Motley Fool Australia Bruce Jackson said

“The addition was to my holding in a company that might be familiar to long-term readers of The Motley Fool — an oil producer called Maverick Drilling & Exploration (ASX: MAD).

It was just over a week ago when Motley Fool Share Advisor — our premium stock picking service — published an exclusive one-on-one interview with Maverick’s executive directors, Don Henrich and Brad Simmons.

This may give you a quick flavour of the interview, and as to why I added to my holding.  As a clue, it’s all about risk versus reward”

I have not seen the sell report and know little about it. But I’m happy to discuss it here. Please comment below.

Anyone know the key points of TMF’s sell call? Who wrote it? Was it part of Share Advisor? Or was this simply Bruce Jackson selling? Please share any details below in the comments. Or contact me via the form at the bottom of this page http://www.fusioninvesting.com/about/

Hot Copper has moderated an entire thread discussing the controversial sell call by The Motley Fool.

This post has been moderated on 21/05/13 13:00 (Copyright)
Comments: how many times do we need to address this issue ?? the organization you refer to is monitoring the thread and reporting copyright violations. Leave this subject alone altogether (entire thread moderated)

As this chart shows the sell call – if that is what it was – by TMF sent the shares in to a tailspin, down 17% on Tuesday and down another 6 percent this morning.

Maverick ASX MAD TMF sell

Then the brains at Macquarie Group woke up and realised they were over 2 years late in filing a Notice of ceasing to be a substantial holder. Compounding their idiocy by filing in the middle of a shit storm.

Update on foolish sell recommendation

Motley Fool recommended Motley Fool Share Advisor members still holding shares sell Maverick. The analysis was brief; Maverick is speculative and hasn’t delivered the results TMF had hoped for.

Here is a quote from TMF Share Advisor newsletter.

Since then, the company continues to drill new wells in the hope of drilling success that might turn what appear to be significant reserves into sizeable revenue and profits. As yet, those efforts haven’t delivered the material results we (and the company) had hoped for. Maverick remains at heart a speculative explorer that is hoping for commercial success from its new exploration wells.

As such, it doesn’t really have a place here at Motley Fool Share Advisor, reserved for our ‘best of the best’ stock ideas. We’re recommending Motley Fool Share Advisor members still holding shares sell Maverick Drilling and Exploration (ASX: MAD).

If that TMF sell recommendation caused the 25 percent sell-off then market participants are definitely irrational!

Long Maverick Drilling & Exploration. Longer now.

What if Jeremy Grantham is right?

What if Jeremy Grantham is right and this time is different? What if this secular bull commodities run doesn’t bring enough new resources online to meet the growing demand?

While there are certain to periods of weakness in demand for resources and in the very long run a revolutionary technology or fundamental change in the way we live will bring balance, over the next 20-50 years there seems to be a good chance that Grantham is right and this time is indeed different. We appear to be running out of what we currently “need”.

If that is so then the resource rich countries will do well. While the Australian market may be expensive on a USD adjusted basis right now, it is, as usual, comparatively cheaper than US markets when judged by P/E. There are also many bargains to be had in Australia which I can find no comparable ones to in the US. Take Telstra, which is yielding 10% and in the long term is likely to yield more. For Australian’s the pre-tax yield is 14%, for owning the dominate telco and best known brand in Australia. If you can point me to a US company like that please do.

If you prefer riskier, then Australian biotech and rare earth companies are more attractive than their US counterparts, compare Biota to Biocryst for an example. Lynas Corp gets ignored by US investors who fork out for less advanced and certain rare earth projects.

If you prefer the overall market then this post compares Australian All Ords to S&P500. The Australian market trades at a lower P/E to the S&P500 as it has for most of the last 20 years. However, sadly as always it is not all beer and skittles. A lot of those earnings come from the cyclically high resources sector and if China slows Australian overpriced residential real estate will provide a double whamy as banks earnings and equity is hit. Materials and financials make up 2/3’s of the S&P ASX 200. It’s fair to say Australian company earnings are subject to substantial China risk. That coupled with the currency risk deteriorates the risk return payoff for USD investors. While the AUD could strengthen in the short term, the money flow indicates a pull back is coming.

Australian All Ordinaries Index (^AORD) P/E (PER) compared to S&P500

Here’s an updated chart covering the last three years.

It’s also worth noting the big four Australian banks constitute 20% of the worlds AA banks and Australia will not run out uranium, gas, coal or iron for, we may as call it forever!

Top all that off with 9% and increasing compulsory super and an endless supply of skilled labour wanting to live in Australia promising to keep our generational balance positive, Australia is, as my kiwi cousins say, “choice”. No wonder the Global Gains Fools are coming here this month.

Bubbles Always Pop

Real Australian House PricesNot only do bubbles always pop, but as Jeremy Grantham points out in his latest brilliant quarterly letter the assets always reverts back to at least its long term trend. Always have.  Grantham even called out the Australian property bubble.

At some point the Australian residential property bubble will pop. It’s not a matter of if, it’s simply a matter of when. Everything else is noise. The worst of that noise is always the same during any bubble. The meme changes, but at it’s core is the scariest phrase of all, it is different this time. The particular refrain in this bubble is demand exceeds supply.

I concede that there is often little difference from between being early and being wrong. Sometime being early even results in a long walk. However, if you pull up any long term housing chart, besides a demand, you should be scared by the distance the Australian housing market could fall. Traditionally the Australian residential market hasn’t fallen

First I want to make sure I won’t be hurt by the fallout and then I’d like to figure out a way to profit from it. One way should be shorting companies exposed to the residential property boom?

Will Canberra’s back-flip on  foreign students’ continued ownership of property once they leave Australia be the pin to pop the bubble? If not the pin, then surely one of the pins.

I said we were in a property bubble eleven months ago, and while I’m still won’t put a time frame on it popping, I give within 13 months a 50% probability and within two years 80%. That’s my estimate now. The wonderful thing about estimates is that they’re fluid and every estimate in probability is practice and opportunity for internal feedback. More valuable than that guessing game is knowing that making excellent long term returns from an above trend asset is improbable. Though short term gains in the final phases of bubbles can be sensational for those nimble and lucky enough.

Many futures are possible, here is but one. Interest rates continue to climb in Australia, local investor and buyer interest decreases, then the Chinese property bubble bursts and they are too busy licking the wounds to worry about Australia.” I said that in a comment a week ago to someone insisting the bubble would continue. A few days later the government back-flipped and another possible future appeared. The key is not knowing what event will pop the bubble, but simply knowing that an event or series of events will. It worth having faith in events with high probabilities.

All Ords Sounds the Retreats

Time to change time frames.  Early this week I posted All Ords Set for a Nasty Snap Back check out that post for the long term chart 1984 to present. Today lets zoom in to the last nine months. Since the All Ords closing low of 3111.7 on 6 March 2009 the 200 DMA divergence from price has gone from incredibly fearful to if not quite greedy certainly over confident.

The green line of 200DMA divergence to price uses the right axis. It has risen from –28% to a high of 25% on 15th October.

A pull back to the 200DMA seems to be odds on favourite, so that’s probably not going to happen. Now is one those times to up your focus on the market, to check up on your watchlist candidates and a final check for dross you should have been selling into this rally. At least that’s what I’m doing.

My only tinkering this month has been selling calls, the three I mentioned and then $75 FDX Calls [I originally posted $80, but on checking they were $75 calls]. AEO is the only one currently in the red and the current SP is only 8 cents above my if called price (strike+call). Need to decide what to do on MMA, any ideas?

All Ordinaries short term peak or small pullback?

All Ords Set for a Nasty Snap Back

Here is a chart of the Australian All Ordinaries Index viewed as the index’s percentage divergence from the 50 and 200 day moving averages. Click the chart to enlarge it.

All Ordinaries Price Divergence from 50 adn 200 day moving averages

As the chart highlights the elastic band is very stretched. Since 1984 the price has only been this far above the 200 DMA on two occasions, 1986 and 1987. While I doubt we’re in for a Black Monday style correction that is not good company to keep. The price can stay stretched at these levels for some time, but invariably the resolution is to the downside as the price snaps back to the long term moving average.

Now is not the time to be adding exposure to the Australian market.  The 200 DMA currently sits at 3938, but is climbing quickly.

Australia is all that and more

australia

Not only is Australia yet again officially the second the best country in the world, it’s the first to raise interest rates.

See you at parity my US friends 😉 See you real soon! This raise took AUD over 88 cents. I’ve been banging on about the short USD long AUD trade for most of this year and despite the sudden rush of people late to the party I don’t see it breaking down yet.

I love this comment “Only one of 20 economists surveyed by Bloomberg News forecast today’s move. The rest predicted no change.”

Someone better get the sheep dog out to herd that stray economist back in line. Though I imagine Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who forecast today’s move is having quite a celebration tonight.

Julian Robertson’s favoured currency is the local currency of the best country in the world. It would appear you don’t loose points for freezing your nuts off. Norway probably only pipped Australia by having a higher life expectancy and that’s only because they’re living in partial cryogenic suspension.

In other news I placed four orders on US markets tonight, all November covered calls, above the current offer. Let’s see if anyone living in the cough cough 13th best country bites.

Bill Gross says Buy Australia

If you’ve already read Bill Gross’s August missive you’ll know I’ve taken a liberty with the title, but please stick with me. Here is what he actually said

There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms.

While Mr Gross didn’t actually say buy Australia can you name a country which better fits Bill’s bill?

Consider the S&P ASX 20 (top 20 companies in Australia) where the average yield is 5% and the highest is 9.6% and the balance sheets are strong.

Australia’s GDP growth prospects are tilted upward as it continues to supply the raw materials for the growing number of global consumers.
Global consumers

Roger Nausbaum continues to talk about doubling his Australian allocation to 6%. For a guy who invests internationally I’m surprised that he doesn’t use Interactive Brokers and restricts himself to ADRs and OTC. Though as he is managing other people’s money I am sure he has good reasons.

I continue to up our Australian allocation as I pull back from my favoured investing destination of the US. Regularly taking your Australian potion should help with some of the common side side effects of a devaluing greenback and inflation.

Want to read more of my investing in Australia cheer leading? Keep in mind I am talking long term and I am not nearly as optimistic in the short term.

Australian Investing Overview

This is an overview for international investors on why and how to invest in Australia via American Depository Receipts (ADRs), index funds, ETFs and direct investing.australian-investing

First I should confess I am a half cast. I come from two generations of Australian mothers and New Zealand fathers and my life imitates theirs. Growing up in New Zealand I firmly believed Australia was a great place…except for all the Australians. As a child I rejoiced when the then Prime Minister of New Zealand, Sir Robert Muldoon, responded to a question about New Zealanders migrating to Australia by saying “Kiwis migrating to Australia raised the average IQ in both countries.

Twenty three years on, living with an Australian gal and kids who want to play Australian Rules Football, I like the place. I quickly found Austalians weren’t that bad after all and once you’ve had a few beers even their nasal accents are no longer grating.  Australia a beautiful country and the people are relaxed and friendly.

Donald Horne in The Lucky Country said the following about Australia.

“Australia, is run mainly by second-rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise. A nation more concerned with styles of life than with achievement has managed to achieve what may be the most evenly prosperous society in the world. It has done this in a social climate largely inimical to originality and the desire for excellence (except in sport) and in which there is less and less acclamation of hard work. According to the rules, Australia has not deserved its good fortune.”

This is the lucky country and investing in Australia provides international investors a chance to sit at our table and feast on our easy bounty.

But where should international investors start looking for exposure to Australia? ETFs and ADRs are favoured by many. While both are valid options and I will discuss them,  to me that’s like walking into Japanese restaurant and only ever ordering a bento box. There is so much more on offer and in our ever shrinking world it’s pretty easy to get your hands on a wide range of delicacies.

Why Invest in Australia

The Department of Foreign Affairs and Trade, DFAT, hits most of the high notes; economic strength, a global financial services industry (more on that in a moment), democratic and stable, highly skilled workforce, 30% flat corporate tax rate and don’t forget the early bird gets the worm and we get up each day before everyone in the world (except the Kiwis, but they don’t count).

When thinking about investing in Australia most international investors first think of mining. They may be surprised to find that “Australia’s economy is now a service-based economy, with service industries accounting for around 70 per cent of total gross value added. The finance and insurance industry is larger than the booming mining sector…

Here’s what our Prime Minister, or Prime Nerd as he is called in my house, said in a major daily newspaper last weekend. “Australia is performing better than most other economies, with the fastest growth, the second lowest unemployment and the lowest debt and deficit of all the major advanced economies. And we remain the only advanced economy not to have gone into recession, so stuff that in your pipe and smoke it.” Yeah OK, I added that last bit, but he’s right, Australia rocks! I know some of you don’t like vague statements like ‘performing better’, so cop a look at the chart below.

Australian unemployment rates comparison Check back in a few days for more charts!

While all that’s nice, let’s be honest. The main reason you should consider investing in Australia is to diversify out of your failing empire, be that Great Britain, USA or one of those once great European nations.

Your proliferate ways have sealed your demise, so bring your money over here where the gravy train will continue for a bit longer and you can ride the mining, banking and consumption carriages all the way to the end of the line.

Let’s begin with the easiest way to buy your ticket for the Australian Gravy Train and then move on to some direct alternatives.

How To Invest In Australia

Australian Index Funds and ETFs

Pre-packaged bento box it is. Whether you’re a top investors who regularly outperforms their local bourse or an amateur, you’ll probably struggle to outperform the Australian Indices from your desk on the other side of world.

There are three Australian ETFs available from State Street Global Advisors; SFY for S&P/ASX 50 Fund, STW for S&P/ASX 200 Fund and SLF for S&P/ASX 200 Listed Property Fund. Read more.

iShares produce the MSCI Australia Index Fund (EWA).
Investors in any of these products need to be aware of the weighting of BHP and the top four banks; CBA, ANZ, NAB and WBC. Combined they make up 41% of the ETF, with BHP alone making up over 15%. For those looking for a play on the secular mining boom, then Australia is certainly the right country, but index funds like EWA only give you limited exposure to mining. With 41.5% in Financials, EWA is more a play on banking than mining which has a 26.1% weighting this ETF. Read more

(once again, more on this later – this is a working document)

American Depository Receipts (ADRs)

Here’s a full list of America Depositry Receipts (ADRs) and Pink Sheets/Over the Counter (OTC) for Australian Stocks. It’s a fairly long list, but many are thinly traded and of a more speculative nature.

Here’s the financial visualisation of Australia by Finviz.com. There is a lot more to Australian shares than represented by the image; that’s a topic for another day.

Australia according to Finviz

Direct Investing on the ASX

The easiest way for international investors to invest directly in Australia is to use a broker such as Interactive Brokers (IB). IB provides easy access to most international stock exchanges including the ASX. Note that IB does pass through real time data costs which are around $49/month for ASX data, IIRC. You’re probably better opting for no real time data and using delayed quotes from another source or market orders. Besides the real time data costs the transaction costs on IB are incredibly low, it is cheaper for me to use IB, to buy Australian shares, than a local online broker.

(and again more on this later)

Top 10 Australian Business, Finance and Investing Sites

ASX logo

Use the Source Luke, use the source – Key Australian Finance, Business and Economic Data

  • Australian Securities Exchange is the number one place for all company filings. The site also includes good educational material and charting on Australian shares for up to 10 years.
  • Australian Bureau of Statistics for all the data on the economy, housing, national accounts and more scintillating economics data.
  • Reserve Bank of Australia (RBA) for Australian financial statistics, speeches, publications, research and more. Always worth browsing as this is the horses mouth. The following graph of consumer sentiment is from The Road to Recovery speech by RBA Governor Glenn Stevens.

Consumer Sentiment in Australia vs Other Zones

Australian Business New Sources

Before you start puking up news, lets move on to some data.

Australian Shares and Financial Data Providers

Play Safe

I hope you find these sites of use. I think these are the best Australian business sites. If you think I’ve missed any sites out that should be in the top ten then please leave a comment with a link.

Thanks for reading, here’s a few bonus sites.

All sites on this list are free to use. I’ll cover paid providers of opinion, stock recommendations for investors and data in another post.

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