1. Would you mind telling me in percentage terms the position of your portfolio you hold in cash? I am in pension phase and not sure what to do.
I keep very little money in cash (less than 1%), but I am not in pension and I invest for growth. I do have money in term deposits, hybrid securities and higher risk credit funds, and take the view that I can readily liquidate most of these investments to either raise cash or re-allocate to other growth-based investments.
What is right for you depends on your risk appetite, your need for income, how important capital preservation is, whether you can liquidate other investments readily and your need (or not) for growth. As a rule of thumb, some persons in your situation ensure that they have as cash on hand the next 12 to 18 months’ pension – this buys time and they shouldn’t be forced into a situation where they may have to hurriedly liquidate other investments.
2. I currently own MFF Capital Investments (MFF) and have been thinking of selling it and buying WCMQ. I have had a great run with MFF over 6 years. I am a bit cautious with WCMQ as it has not had a long history. I know you speak highly of the investment manager WCM.
The Chris Mackay managed MFF Capital Investments Ltd (MFF) is a big play on Mastercard, Visa and cash. Sounds like a stock for the “true believers”! They are not particularly forthcoming on performance data, so it is a little hard to tell just how well they are doing in relation to their investment objectives.
While I wouldn’t suggest a “sell” per se of MFF, diversification into other managers is a sound strategy and WCM is one of the best, if not the best available locally. They have been running this strategy for close on 20 years. I am biased because I am a Non-Executive Director of WQG (the listed investment company managed by WCM). It is still trading at a discount to NTA, so I would buy that in preference to the quoted managed fund (WCMQ).
3. Do you recommend subscribing to the upcoming Challenger Financial Group (CGF) share purchase plan?
My inclination is “no” (I find Challenger a really difficult stock to analyse and the annuity market faces headwinds), but you won’t need to make the call until just shy of the close date on July 21.
The stock is now trading below the institutional placement price of $4.89 (it closed yesterday at $4.74), which is not a particularly encouraging sign. You are protected in that the SPP is the lower of $4.89 and a 2% discount to the average trading price in the last week of the SPP offer period.
As for the brokers, all the 7 majors are “neutral” on the stock. The consensus target price is $5.09, with a range of $4.40 as the low by Ord Minnett through to a high of $5.50 by Credit Suisse.
4. I want to invest in quality – the issue I face is spotting that quality. I’m not that financially literate, but I’d like to learn more about how to look at a company’s books and other financial information and know what it means in a real sense and from that, be better at assessing its quality. Can you recommend any good books that teach how to analyse a company?
Answer by Peter Switzer: Thanks for the question. I have a new book on Shares coming out shortly – it should be available in a couple of months. In the interim, one of my favourite books on this subject is Bulls, bears and a croupier by Matthew Kidman.
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