I recently took a long hard look at our portfolio and, of our 24 stocks, I really liked 20. They were all “in the money” and paying pretty good dividends. But there were four stocks that were out of the money that I had bought for the wrong reasons and had never delivered. Fortunately, they were small investments, no punts, and were funded from the small amount we allocate to speculative plays.
Looking at them, their track record, their management and the competitive environment, which included that new age dog – Newcrest – I argued the case with my fellow trustees that we should kill them off and go for a real punt with potential — freelancer.com!
Freelancer (FLN)
I like and believe in chief executive officer Matt Barrie and think the company has potential but there could be some competitive threats out there, though I think Barrie and his team could be up to those threats. But it is a punt and I am happy to run with it, as it is a small outlay.
In talking about this at our editorial meeting the other Friday, the editor of the Switzer Super Report, Penny Pryor, shot the following questions at me and here are my answers.
Q: How often do you rebalance/clean out your portfolio?
A: I regularly look at the stocks we hold. As I am across a lot of economic, business and company news, I’m always wondering if we should hold more or less of a stock. Peter’s interviews on Switzer with Bank of Queensland CEO, Stuart Grimshaw was a reason we bought BOQ and when real estate experts such as John Edwards of Residex and Century 21’s Charles Tarbey told him that the Gold Coast property markets were improving, we bought more BOQ.
Q: How important is it for SMSF trustees to do this regularly?
A. Looking at the portfolio regularly is better than setting and forgetting but it does not mean you have to do regular clean outs.
Q: What time of year do you usually do it?
I do it a lot (I like checking how our money is going!) but after earnings season and after outlook statements have been digested makes sense.
Q: What are you doing this time?
A. We have given the four companies we have persisted with enough time to turn around their stories and while I think they have some upside as their share prices were on the too low side, I didn’t think the upside was going to be huge.
Q. Why is that?
A. Their competitive environment was tough and their management was not impressive.
Q. How long does it take you (ie do you do it in a day or over a week or longer)?
A: As it is not a scheduled clean out but one that can be determined by two issues – say, continued poor performance and then the arrival of a better opportunity – it can be done in one go to realise the money to then put it into the alternative investment.
Q: What sectors/stocks do you like in this current market?
A: Our freelancer.com play was a speculative one for a nice result in a few years time, hopefully, but generally I am looking for companies that have been ignored in the current rally. I am looking for smaller companies that have potential for capital gain as the market does well in 2014, but at the same time I want them to have a history of being a good dividend payer. It means I could miss out on big capital gains but for my super fund I want companies that pay dividends – even through market crashes. Call it boring but I know there are a lot market slumps ahead so I know my capital will go up and down and that’s why I want the certainty of dividends.
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Also in the Switzer Super Report:
- Charlie Aitken: It’s all about the cyclicals – JBH, WOW and a Dick Smith float [1]
- Penny Pryor: Message to SMSFs – we love you just the way you are [2]
- Ron Bewley: How I’m topping up my energy stocks [3]
- Penny Pryor: Buy, Sell, Hold – what the brokers say [4]
- Tony Negline: How to supplement your income with Centrelink benefits [5]
- Questions: Time to look outside the big stocks [6]