portfolio construction: duncan wiech director thornton group (australia) pty ltd 20 october 2010 key...
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Portfolio construction:
Duncan WiechDirector
Thornton Group (Australia) Pty Ltd
20 October 2010
Key concepts
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This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034.
This presentation contains general information only. This presentation was produced for informative purposes only without assuming a duty of care. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice.
This presentation does not take into account your particular objectives, needs or full financial situation. Before making a decision relating to this presentation you should assess whether the advice is appropriate to your objectives, needs or financial situation. You may wish to make this assessment yourself or seek the help of an adviser. No responsibility is taken for anyone acting on the information provided and anyone doing so, does so at their own risk.
No part of this presentation should be used elsewhere without prior consent from the author. Should you wish to obtain personal advice regarding anything in this presentation please contact Anthony Prior on 8561 2400.
The information in this presentation is based on our interpretation of relevant laws as at the date of this presentation and is subject to change.
DisclaimerThornton Group
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Portfolio construction
RULE: oneUnderstand what you’re trying to achieve - not all portfolios are the same
1one
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RULE: twoKnow your investment timeframe
2two
now
1 yr2 yrs
3 yrs 5 yrs10 yrs
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RULE: threeUnderstand the trade-off betweenrisk and reward
3three
low
risk / r
eturn
high
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6%
%chasing returns
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%
%
Historical Sector Returns as at 30 June of each year
Chasing returns
%
SOURCE: Lonsec, 30-06-10, "Annual Investment Returns to 30 June 2010"
%
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7”“Portfolio construction
If past history was all there was to the game, the richest people would be librarians.
Warren Buffett
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Chasing returns
Risk Profiles Historical characteristics for the 10 year period to 30 June 2010
SOURCE: Lonsec 08-2010, “Risk Profiles: Historical Characteristics”
2010
Growth assets 60%Property : 12%International shares
: 14%Australian shares : 34%
Growth assets 80%Property : 12%International shares
: 20%Australian shares : 48%
Growth assets 100%Property : 10%International shares
: 30%Australian shares : 60%
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Growth stockwhat is it?
”“Stock of a company which is growing earnings and/or revenue faster than its industry or overall market.
Such companies usually pay little or no dividends, preferring to use the income to finance further expansion.
www.investorwords.com
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Propertywhat we look for
Diversified exposure achieved via: Managed funds, direct, indirect, listed, unlisted,
syndicated sectors
Factors considered: • debt structure• structure of cash flow / rental income• quality of tenant & level of tenancy• capital expenditure on the building• green & water ratings• regularity of valuations & timing of rent reviews• physical location of assets
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International shareswhat we look forDiversified exposure achieved via: Managed funds
Factors considered: • preferred economies (mature or emerging)• managers with consistent performance in selected country• management of currency risk (hedged vs. unhedged)• absolute return funds - no index hugging!
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Australian shareswhat we look for
Australianshareswhat we look for
7Know when
to RUN
1Strength of domestic &
global economies
2Appealing
sectors
3Strength of companies
• barriers to entry• comparative
advantages
4Health of Balance Sheet
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Reliability of cash flow & profit
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Sector weightings
variable risks &
opportunities
Monetary policy
Media sentiment
Environmental factors
Legislative changes
Global influences
(trade policies / war)
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what makes our market
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Example portfoliowhat we look for
example portfoliowhat we look for
Core stocks “long”
Spreads via listed managed funds & indices
“Un-lo
ved”
Trade stocks “short”
Takeover targets
Break-ups
Prospective
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Core stocksPopular picks
Core stocks “long”
Ausbil Aviva Fortis K2 Tyndall
Financials ANZ CBA ANZ ASX ANZ
CBA NAB CBA MQG CBA
MQG WBC NAB NAB
NAB WBC WBC Resources,
materialsBHP BHP BHP BHP BHP
RIO NCM RIO ORI
RIO RIOTransport,
Telecom, MediaAIO TLS - AIA NWS
NWS QAN TLS
Energy OSH STO -
Retail WES WOW WOW RFG -
JBHHealth, Biotech
- CSL CSL - -
PRY
Real estate - - - WDC LLC
Other (ins, cap goods) - QBE QBE CSR -
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Growth stockswhat we look for
CBA BHP CSL
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RULE: fourIf it seems too good to be true...it usually is!
4four
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Questions ???
??? ??
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