With a large portion of my allocation in resources and mining services, I am not as balanced as I would like. One of my stocks, Lynas (LYC), took off in 2010/11.
As I had bought a decent-sized parcel at the depths of the bear market in February 2009, to add to the small holding I had built up over two or three years, I had to sell the “darling” of the market to de-risk when I would otherwise have been a buyer – if I had not already been set. I had bought at prices between 16 cents and about $1.12 – so I started selling at $1, then $1.32, and a few above $2, including a $2.57.
Some of the proceeds of these sales went into the index (STW), until I can find a better home for it. And STW gives me a little extra diversification.
The impression I am trying to give is that I think discipline is so important – as is research. I choose not to follow any one broker but the consensus of them – and I rely heavily on my forecasts and pricing signals that I derive from consensus (and place on my website from time to time).
I make it my full-time job to watch the market. I start the day with my alert from afr.com on my iphone – and watch the US close on Bloomberg TV when I wake in time. I watch Sky Business TV in the evening and the European markets open again on Bloomberg. During the day I update my models from Thomson Reuters Datastream.
So, every day I work hard but rarely buy or sell. But I am ready for almost anything, any day. I have a plan for all sorts of eventualities – including one for when Lynas went into a trading halt on June 30. When something goes wrong, I want to spend all of my energy on doing stuff – not thinking about what my options are!
I didn’t start out in equities like this. Next month I will show how and why I use consensus recommendations and from where they can be found. In the following two months I will outline a potential strategy for the new equities investor to start on a path that will eventually lead them to the sort of way I manage my SMSF – in case anyone is interested.
But, unless you are qualified to advise on direct equities, you will need an adviser. It is simply not possible to write down a simple set of rules to cover everyone in every condition.
Ron Bewley is executive director of Woodhall Investment Research – www.woodhall.com.au
