The last few months have been more kind to Australian stock market investors however I have mainly been on the hunt for stock bargains rather than in selling mode. Therefore since May this year my focus has been on trying to buy some small parcels of shares in companies that I feel will do well over the next few years rather than profit taking.
Generally speaking, I am betting that commodities hard and soft will remain fairly weak in the short term but over the next few years I feel fairly confident that prices will rise for most commodities such as oil, wheat, iron ore, copper etc. As a result I have been slowly picking up stocks in two of my preferred commodities plays:
AWE – as I wrote last week (see Stockwatch: Australian Worldwide Exploration) I reckon that oil is not a bad way to hedge against inflation and so when the AWE share price dipped the other day on the back of some weak profit results, I decided to pick up a few more shares in this company.
I am not expecting to get a good return from these stocks for more than a year but will be ready to sell if they get up near $4 again. My average buy price for these shares is now around #3.05 so I am still in the red at the moment.
PAG – Prime Ag has been on my shopping list for some time and I have continued to snap up the odd parcel of shares. I have now paid an average of $1.52 for each share and so yes, once again I am sitting on a unrealised loss at the moment.
Nothing to worry about though and I am still looking to pick up more of these shares if the price falls much below $1. My guess is that in future years Prime Ag will benefit from the growing demand for food from Asia and increased prices for soft commodities.
In addition I have also been topping up some holdings in some other stocks and doing housekeeping as follows:
WIL – Wilson Investment Fund is my way of tapping into a range of stocks that I simply do not have the time to watch. It is a Listed Investment Company (LIC) that is basically a long term value investor and that sort of strategy appeals to me. I picked up another small batch of these stocks for one of the portfolios I manage at $0.65 in July and as of today they are trading around 71c, so at least things are heading in the right direction.
My average buy price for these stocks is around $0.87 so again I am still in the red but they do pay a reasonable fully franked divided, so I am quite happy waiting for better days.
GLI – Well what can I say about Goldlink Incomeplus? It used to pay a very healthy fully franked divided (around 10%) but as the saying goes, higher returns equal higher risk and unfortunately things came unstuck for this company. I ended up selling all GLI shares and this little venture probably left me with a loss on capital invested of around 60% or so. Ouch.
Some people who write about stocks never talk about their losses, I do and it hurts. But I hope it helps me become a better stock market investor in the future.
AAU – Adcorp is my preferred small cap stock and from time to time I try to buy some stocks in this company on any price weakness. The stocks pays a healthy dividend, appears well managed and is debt free, so I am quite happy hanging onto these shares as an income stock. I don’t expect to be looking at any significant capitals gains with this AAU for at least another year.
WES – I purchased stocks in Wesfarmers simply as a bear market play and this strategy paid off. I sold out at $22.50 but could have waited and maybe received a better return, however the whole point of the exercise was to take profits when a capital gain of around 20% was achieved. Anyway a return of around 25% is not bad in less than a year during a bear market I reckon.
Another reason I sold my holdings is because the company is too diversified to really understand. Not only do you need to understand retail (Coles, Bunnings, Officeworks etc) but also commodities (coal, gas), insurance and more! Trying to keep across how all the various companies within the Wesfarmers conglomerate were tracking was beyond me.
Overall the portfolios I manage are doing much better now then they were just six months ago, but there is still a long way to go before the damage caused by the global financial crisis will be fixed. My view at this stage is that I do not expect to be happy with how the portfolios look for at least another year, but in the meantime a steady stream of dividends will ease the pain. (especially full franked dividends!)
Also readers need to take into account that I tend to be a long term investor and not a short term stock trader, so my strategy/outlook will probably not suit some stock market investors. My aim is to try and buy into the market when things are looking bleak with the long term aim of selling when stock prices recover.
Remember to make sure you have read the Site Disclaimer. As always I am not suggesting anyone buy, sell or hold anything. I am simply indicating what I have done so that perhaps other investors can learn from my errors!