Slack Investor Market Timing Experiment brings no joy
Slack Investor is aware that there are some people who state that they can ‘time the market’. Marcus Padley, and others, offer such a service to their subscribers.
Slack Investor doesn’t dispute Padley’s claims and has admiration for those who can perform this amazing feat. However, he is convinced that, without following daily, or even hourly, fluctuations in the markets, that this stuff is best left to professionals. The market swings are just getting a little too rapid, short-term and meaningless.
As the result of the China/USA trade talks, the US will lower tariffs from 145% to 30%, while China’s tariffs on US goods will drop to 10% from 125%. This caused the S&P 500 to surge and create enough momentum to trigger the 11-week Directional Movement System (DMS). Slack Investor uses the change in slope of the DMS in his market timing experiment to determine a BUY signal.
Slack Investor’s market timing is below par on the US market and, he will be glad when his 25-yr index experiment, with this small part of his portfolio (<2%), will be over in 2029. On current figures, his market timing for the US Index is 18% behind the ‘Buy and Hold’ strategy. Not very good!
Slack Investor should stick to his strengths
It’s time to stick to things that Slack Investor has been good at. For example, finding profitable and growing companies – that are not too expensive.
In the ongoing examination of my portfolio, Slack Investor has resolved to slowly concentrate the companies that he owns so that they are at the upper end of profitability, growth and affordability. This means a bit of weeding on the companies with a lowSlack Factor and, a bit of buying on those with a highSlack Factor.
In the past few weeks, he sold his positions in Macquarie Group (MQG) and Cochlear (COH). Both are solid companies but, they were either, getting too expensive – or slowing down in growth. Both had a relatively low Slack Factor.
To decide what to buy, Slack Investor got off the couch and went to the Market Screener site to gather information on the companies where he would like to increase his holdings.
Name
Symbol
PE (2027)
ROE (2027)
EPS GROWTH (3-YR AV)
SLACK FACTOR
Telix Pharma
TLX
23
27
50
59
Supply Network
SNL
31
38
18
22
Codan
CDA
22
23
20
21
Megaport
MP1
58
18
64
20
Pro Medicus
PME
130
53
36
15
XRF Scientific
XRF
17
18
13
14
CSL
CSL
19
18
14
14
Cochlear
COH
34
25
13
9
Macquarie Group
MQG
17
12
9
6
Where, PE (2027) is the forecast P/E Ratio for 2027; ROE (2027) is the forecast ROE for 2027); EPS Growth is the forecast EPSG for the next three years (EPSG AV). The Slack Factor is a combination of these metricsusing the formula defined in previous posts.
The standouts, with a high Slack Factor, were TLX, SNL, CDA and MP1. MP1 is a newcomer to the Slack Portfolio and hasn’t got much of a track record yet. SNL is a great growing company but is already over 10% of the Slack Portfolio. That leaves TLX and CDA. I bought more of both of these to build up their positions in the portfolio.
Mining for coal must have been a tough gig back in 1909. Slack Investor has had it far sweeter in his mining for good companies that have been beaten up by the recent Trump escapades. Sadly, in these lower price times, he is fully invested. But, even after a beating, it doesn’t stop him thinking about possible future investments. Sometimes the best ideas come from other people.
Quality at a Discount
Livewire is a financial newsletter that offers free subscriptions and Slack Investor is a keen reader. Livewire depends on contributors from the financial industry and is always worth a look. An article by Tom Stelzer of Bell Potter caught his eye on April 8, 2025.
Tom seems like an astute fellow and his methods for sifting through stocks rang a bell with Slack Investor. Similar to Slack Investor he combines growth, profitability and P/E Ratio to come up with a stock list – in an organized way. Slack Investor might argue that the method is not quite as elegant as his Slack Factor analysis, However, Bell Potter do have a standard screen for ‘quality at a discount’ – and this seems far less effort.
(Tom) assesses their potential for growth, earnings momentum and looks for stocks with notable P/E compression over the last few weeks to produce a list of 20 quality mid and large-cap companies that are well-positioned and likely undervalued – Tom Stelzer, Bell Potter
Slack Investor notes that 9 of the 20 stocks presented are currently in the Slack Portfolio. The above tables were just the first sort. Tom then looked hard for those quality companies that were not overpriced. The Post 12MF PE column (12-month future P/E ratio) was used here.
Bell Potter came up with four companies that they consider good buys after the recent slump – they are listed in the table below. Slack Investor has also provided a further screen by calculating the Slack Factor for each of the companies.
The ingredients in the Slack Factor were obtained from Market Screener. Where ROE is the forecast ROE (ROE 2027), EPSG is the forecast EPSG for the next three years (EPSG AV) and, PE Ratio is the forecast PE Ratio (PE 2027). The Slack Factor is then calculated – a high Slack Factor is usually good news.
Of the 4 recommended Bell Potter stocks. The Slack Factor indicates that TLX and REA are the standout buys for Slack Investor – at the moment.
April 2025 – End of month update
Slack Investor is OUT of the US Index (S&P 500)! He sold his small US Index holding on Monday 07 April, 2025 at 5048. After the rebound, the latest monthly chart indicates this might have been a mistake – and reinforces his belief that Slack Investor has no great skill in timing the market. The 25-yr market timing experiment will continue till 2029. Slack Investor remains IN for Australian index shares, and the FTSE 100 as, at the end of the month, they were above their stop losses.
Slack Investor has never been a huge fan of the ‘American Way’ but did hold an admiration for their ingenuity and general work ethic. I have never seen such wilful destruction of American international standing in such a short time. As well, Trump’s capricious economic policies have the S&P 500 all over the place. The US Index recovered its losses and rose 10.3% since its 10.0% slump early April. Trump is 100 days in … 1461 to go.
For the ASX 200 (+3.6%) and the FTSE 100 (-1.0%), it has also been a wild month.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Apologies for intruding into your inbox. I like to keep the Slack Investor blog folly to twice a month. But these are unusual times.
The Slack Investor Market Timing Experiment
Slack Investor started his ‘index-timing’ strategy in 2004 with the ASX Index, UK Index, US Index. An earlier version of Slack Investor thought that by monitoring the market at weekly and monthly intervals and setting ‘stop losses’ to know when to sell the index. To know when to buy, he used a momentum indicator called the Directional Movement Index.
Although, there was some initial success over the ‘buy and hold’ strategy, the benefits work out to be quite small on a yearly basis. For example, for the Australian Index there is a 1.2% p.a. outperformance for Slack market timing strategy over ‘buy and hold’.
These relatively small gains would have probably been offset by earned share dividends if I was using the alternative ‘buy and hold’ strategy. Market timing works well when there are sustained periods of bull and bear markets and the changes between the two are not too rapid. The short transitions and the speed of market fluctuations in the last 20 years has forced a bit of a rethink on Slack Investor’s timing the markets strategy.
Instead of monitoring the markets monthly, he has been looking for weekly changes as well. He is also taking the current market value and recent trends into account. Slack Investor is a man of routine and he has now decided to keep the experiment going for 25 years (till 2029). After this, he will probably go for the more appropriate Slack Investor method of doing nothing and adopting a ‘buy and hold’ technique for index funds (ASX Index, UK Index, US Index).
At the end of the past week, Slack Investor conducted a review of the Index charts and noted that the US Index price has slipped below the stop loss (thick red line). As the trend is still downward, and the market is overvalued (see below), it is time to get out. As part of this experiment, I will sell my small holding of S&P 500 Index tomorrow and update the US Index page.
US CAPE values – up till the end of March 2025 showing the index is still overvalued (at March 31). The CAPE ratio is above the green zone.
What about the rest of the Slack Portfolio?
Deep down, Slack Investor doesn’t believe he is very good at timing the markets. The bulk of the Slack Portfolio (97%) is not in index funds, but in growth companies – that are taking a bit of a beating at the moment. That’s what the stock market does in times of uncertainty.
Mostly, Slack Investor will be doing nothing. He will try and distract himself from the self-destructing behaviour of Trump. I cannot remember a time where the whole world was so united in its resolve against the USA. Slack Investor knows that good times (and prices) will return. Slack Investor has his Stable Income Portfolio if he needs cash.
The worst thing to do, from a long-term wealth perspective, is to convert shares to cash in a down market – Slack Investor (and other wise investors!)
On the back burner is my project to sell some of the Slack Investor owned companies with a relatively lowSlack Factor – and invest more in those with a highSlack Factor.
A WordPress AI generated weird image that reassuringly does not make any physical sense.
Reporting Season
During February, most companies report on their progress up to the end of December. There is a similar reporting season in August for the period up to 30 June. Once all the analyst projections for future earnings are in, it is a good time to update the state of play for companies in the Slack Portfolio.
It took a while for Slack Investor to understand that a company could come in with a great report on the business and still, the price of the shares might go down. This is because reporting season is all about expectations. If a company was expecting an increase in earnings of 22% – and they ‘only’ achieved 20%, the share price is likely to get knocked down on the announcement.
As the Slack Portfolio consists of mostly growing stocks with a relatively high Price to Earnings Ratio. The growing stocks usually have high prices as the company’s growth is priced in. These stocks can get punished severely when an earnings target is missed – price falls of 10-20% are not uncommon. But, it is long term results that really count and Slack Investor is willing to endure any short-term pain for a growing company. This period of ‘Trumpenomics’ is an example of such a time.
Slack Investor uses the excellent Market Screener site (requires email registration) to get information from the Financials tab for each company. Analyst information is not available for ETF’s so, only data on the individual companies that are in the Portfolio is gathered.
In the table below, information is listed for the forecast P/E Ratio (PE 2027), the forecast Return on Equity (ROE 2027), the forecast Earnings Per Share Growth (EPSG 2025) (EPSG 2026) (EPSG 2027) and the average of the three Earnings Per Share Growth figures (EPSG AV). There is some fudging of the figures as some of the forecast EPSG figures were unavailable. Also, for some of the companies that are new to profit, their EPSG figures are skewed – I have limited the EPSG (AV) to a maximum of 50. I have ranked the companies in order according to their Slack Factor.
The Slack Factor
What is the Slack Factor? It is well known that Slack Investor likes
Profitability – measured in terms of the forecast Return on Equity – ROE 2027
Growth – measured as the average forecast Earnings Per Share Growth – EPSG (AV) for the three years 2025, 2026 and 2027.
It is well known that Slack Investor does notlike
High Price to Earnings Ratios – measured in terms of the forecast Return on Equity – PE 2027. Sometimes, great companies are just too expensive.
ROE is the forecast ROE (ROE 2027), EPSG is the forecast EPSG for the next three years (EPSG AV) and, PE Ratio is the forecast PE Ratio (PE 2027).
So, things he likes go on the top line and the things that he doesn’t like go on the bottom line. This reduces a lot of the complicated information in Slack Investor’s tiny brain to one number. He has made no attempt to scale (normalise) each input into the Slack Factor. It is just a simple way to rank companies with qualities that he thinks are good. The bigger the number, the more likely the company has attributes that Slack Investor likes – profitability, growth and a price tag that is not too expensive. With these traits … surely good things are more likely to happen?
The fast growing Telix Pharmaceuticals (TLX) is a company that Slack Investor is a fan of, and it has a high Slack Factor of 52. The growth dullard Commonwealth Bank (CBA) has a Slack Factor of only 3 – and, is of no interest to Slack Investor.
Name
Symbol
PE 2027
ROE 2027
EPSG 2025
EPSG 2026
EPSG 2027
EPSG (AV)
SLACK FACTOR
Telix Pharmaceuticals
TLX
25
26
230
70
30
50
52
REA Group
REA
40
32
98
11
17
42
34
Codan
CDA
19
23
20
23
18
20
25
Alphabet (US)
GOOGL
15
25
12
14
16
14
23
Supply Network
SNL
29
38
23
14
15
17
23
Megaport
MP1
50
19
-9
160
40
50
19
Pro Medicus
PME
115
53
40
42
30
37
17
WiseTech Global
WTC
42
20
32
38
34
35
17
Technology One
TNE
48
34
18
20
19
19
13
CSL
CSL
20
18
12
15
16
14
13
Goodman Group
GMG
18
11
34
12
20
12
Coles Group
COL
18
32
-2
17
5
7
12
RPM Holdings
RUL
38
18
10
25
40
25
12
XRF Scientific
XRF
20
18
17
11
11
13
12
CAR Group
CAR
28
15
35
18
12
22
12
ResMed
RMD
20
23
9
10
11
10
12
Wesfarmers
WES
24
33
3
13
9
8
11
Nick Scali
NCK
15
29
-28
29
14
5
10
Cochlear
COH
34
25
15
7
16
13
9
Macquarie Group
MQG
15
13
6
18
8
11
9
Botanix Pharma
BOT
Not
Ranked
–
Not
Enough
Info
Over the next quarter, I will try and sell some of the Slack Investor owned companies with a relatively low Slack Factor – and invest more in those with a high Slack Factor. For homework, using Market Screener, try to work out the Slack Factor for some of the companies in your own portfolio.
March 2025 – End of Month Update
The current ‘Trump Slump’ in stock prices can be attributed to the largest upheaval to global trade since the Second World War – Thanks Donald! All followed markets fell this month. The ASX 200 down 4.0%, the FTSE 100 down 2.6%, and the S&P 500 down 5.8%. For now, each Index remains above their stop losses. Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.
Slack Investor took the opportunity to tighten up his stop loss values for the FTSE 100 and the ASX 200. On the UK Index chart below, by drawing a black wavy line under the monthly minimum values, it can be seen that some new ‘higher lows’ have been established. It made sense to move up the stop loss to the most recent ‘higher low’.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.
Most of the time, Slack Investor indulges in the zen of long-term investing and leaves most of his portfolio alone. But, there are times when a little tinkering is advised. Having raised some cash with the sale of DHHF, it is time to put the money to work.
The Return of The Wedgie
Slack Investor introduced the wedge-shaped chart pattern ‘The Wedgie back in 2019′. Technical chart purists will boringly describe this pattern as ‘breaking a long-term downtrend line’. But, Slack Investor hopes that you agree, The Wedgie is more amusing to his child-like mind.
The pattern forms when there is a lot of negative sentiment about a stock and the price is in decline for about six months (or longer). There comes a point where the price gets so low that the sentiment reverses – and the buyers come back in. On the charts, this shows as a leap in price above the wedge-shape (see below) as the institutional investors and other buyers gradually push the price up. Slack Investor loves this pattern as it has had a good (but not perfect!) track record in the past.
Megaport (MP1)
In a world where the cloud and networking are important, the Australian company Megaport puts its own equipment in data centres across the globe. MP1 creates high-speed virtual ‘ports’ that other businesses can connect with. This would seem a useful thing for their customers who need secure data ports and connectivity with AI gateways.
Megaport (MP1) weekly price chart showing the price breakout from the Wedgie –Incredible Charts
What initially attracted Slack Investor to this growing stock is the promising projected numbers and the trend of increasing sales and projected sales shown in the income chart below. Despite these glowing numbers, my initial purchase of MP1 was sold at a loss in September 2024 after a reporting season miss. Sometimes, even with the best of projections, things just don’t work out.
From Market Screener, the current PE Ratio is very high (144) but, as its profits increase over the next few years, the projected PE for 2027 comes down to 42. Accompanied with an acceptable 2027 ROE of 19% (above 15%) and, EPS projected growth rates of 44% and 34% (above 10%) for 2026 and 2027 – this is a growing stock. It is a good exercise to look up the financial metrics on some of your own stocks with the Market Screener – Financial Tab (email is required to register). It might be enlightening to see if they qualify as growing stocks.
The good news is that MP1 achieved its first profit in FY24. There is some uncertainty though, as Megaport has some competitors in this data connectivity field and, it is a relative minnow with less than 2% market share. This could also be seen as an opportunity!
Slack Investor is taking a risk with this buy. However, in his favour are the good forecast profits and the powerful Wedgie pattern. MP1 had an earnings downgrade in 2024 but, he will give it another chance.
If the projected numbers come to pass, all will be well. I have re-bought MP1 @ $8.34 with a small position (0.4% of Slack Portfolio). This post is published a little earlier than the mid-month as, Slack Investor has already done the tinkering – and, at least in the short-term (MP1 $8.99 on 07/02/25), this Wedgie is working. Who doesn’t love a Wedgie!
The takeover of Altium (ALU) has been done and Slack Investor had some cash at his disposal. At the end of April 2024, he went through the Slack Process of deciding which stocks to buy with the money that Altium was about to provide. In the spirit of this great company, he concentrated mostly on growth stocks and presented the list below.
Some of the stocks that Slack Investor owns are like old friends. He is always looking to add to ‘tried and true’ stocks with a good track record of growth and good management. All of the above were considered. However, as REA was already a large holding (7.9%), Slack Investor passed on REA. He did buy some TLX and also added to his holdings of TNE, SNL, NDQ, CAR and PME.
One thing he insists on however, is that they have a pleasing income chart that shows both historical growth (Black bars) and projected growth (Grey bars) – from Marketscreener.
Income growth and projected growth for XRF Scientific – From MarketScreener – Financial tab
As well as increasing income, Slack Investor likes his stocks to be profitable – a projected ROE (in 2026) to be more than 15%. He also wants them to be not too expensive – a projected P/E ratio (in 2026) of less than 40-50. Of course, he also screens for growth, using the 3-yr CAGR – and hope that it is also above 15%.
Slack Investor is not sure how any of these stocks will fare – but if you get the numbers right, good things will happen on most occasions. The 3-yr CAGR for Nick Scali is low at 8%, but past results were affected by COVID 19. Slack Investor has bought some NCK as they have just expanded into the UK and, if anyone can make this work, it will be the crack management team at Nick Scali.
Company
Ticker
ROE 2026
P/E 2026
CAGR 3-yr
Buy Price
Price 9/10
Megaport
MP1
25
37
35
$9.03
$7.39
Nick Scali
NCK
36
13
8
$13.73
$16.13
XRF Scientific
XRF
18
20
24
$1.55
$1.70
Betashares Diversified Growth
DHHF
–
–
–
$34.01
$34.78
Botanix Pharma
BOT
27
18
–
$0.37
$0.37
Betashares NextGen NASDAQ
JNDQ
–
–
–
$15.47
$15.80
Webjet
WEB/WJL
16
22
16
$9.03
$7.89
RPM Holdings
RUL
15 (?)
39
18
$2.57
$2.86
These newer stocks are in the Slack Investor ‘nursery’ for now. Sometimes a company looks good on paper – but fails to keep growing for a number of reasons (often these reasons are opaque to Slack Investor)! While in the nursery, Slack Investor keeps a weekly watch and if they fall below the buying price by around 15%, he will usually cut his losses and sell.
This happened to Megaport (MP1). He sold the holding a few weeks ago for around $7.90. Webjet (WEB) has just gone through a stock split into WEB and WJL – and is on a close watch.
Slack Investor is off on holiday to Thailand tomorrow … and, has pushed this post out early (before his usual mid-month burst of activity).
The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use the incredibly useful Market Screener to analyze the financial data from each company and extract the predicted 2o26 Price/Earnings (PE) Ratio and Return on Equity (ROE). This excellent site allows free access (up to a daily limit) to their analyst’s data, on the financials tab for each stock, once you register with an email address.
Slack Investor Stinkers – FY 2024
Financial year 2024 was generally a “boomer”. All of Slack Investors followed markets (Australia, the UK and the US) have had a pretty solid year … especially the US! However, Slack Investor knows that stinkers are a part of the game, even in good years – and managed to attach himself to a few stinkers along the way.
Global X Battery Tech & Lithium ETF (ACDC) -15%
(ACDC –2024: PE 11, Yield 3.0%) I have owned this ETF for 3 years now – and I think I might have fallen for the “Theme Dream”. Despite some early promise in the “sexy” sector of electric cars and lithium batteries, this ETF has started to disappoint. There has been a string of bad news in the electric vehicle sector with an oversupply of vehicles. Both the EU and the US have slapped large tariffs on the Chinese EV exports – this has further slowed demand. Slack Investor is just holding on and has set a stop loss at $82. Current price is about $83, so I am very close to selling – and moving on.
Coles Group (COL) -8% (Mostly sold Nov 2023)
(COL – Forecast 2026: PE 19, ROE 32%) Coles is where I often buy my groceries and I like the idea that you can regularly inspect your holdings. However, Coles Group are profitable but not really growing. This company does not really belong in my investments pile, so I mostly sold this holding. I might buy some for my stable income pile if there is a future weakness in price.
Computershare (CPU) -5% (Sold April 2024)
(CPU– Forecast 2026: PE 16, ROE 36%) Computershare was a stinker last FY for Slack investor. In retrospect, I can’t believe Ibought in again for further punishment. I keep falling for the high ROE (36%) and relatively low PE (16) for a tech stock. Might have been a little early here in folding again – the share price has risen about 12% overall in FY2024.
Slack Investor Nuggets – FY 2024
Nuggets were everywhere this Financial Year. Slack Investor continues to invest in high Return on Equity (ROE) companies with a track record of increasing earnings. Companies with these qualities sometimes behave as “golden nuggets”.
Pro Medicus (PME) +118%
(PME – Forecast2026: PE 76, ROE 46%) Pro Medicus is a developer and supplier of healthcare imaging software and services to hospitals and diagnostic imaging groups. In 2019, Slack Investor met the CEO and co-founder of Pro Medicus, Dr Sam Hupert. I was impressed by his humility and passion for his great products. I’m obviously glad I bought in – but naturally wish I’d bought more! The very high predicted PE ratio (+76) is worrying but, in the past, product sales have just kept growing above expectations as PME expands into the US.
Altium (ALU) +106% (Sold pending takeover)
(ALU – Forecast 2026: PE 32, ROE 33%) Altium is an Australian based developer and seller of computer software for the design of electronic products worldwide. My ode to this great company expands on why I originally bought it and its great management team. Good luck with the new Japanese owners Renesas. For current holders, I think the cash payment per share is due today (1 August, 2024)
Goodman Group (GMG) +75%
(GMG – Forecast 2026: PE 23, ROE 12%) Goodman Group owns, develops, and manages (mostly industrial) properties all over the world. On a weekly bike ride, I go past a succession of Goodman warehouse properties – and they always seem to be thriving with activity. They even develop data centres that will hopefully be full of machines to manage the AI trend. Glad to be an owner.
Codan (CDA) +54%
(CDA – Forecast 2026: PE 20, ROE 21%) Codan is a technology company that specializes in communications and metal detecting. It is one of Slack investors core holdings that has taken him on what can only be described as a “journey”. A nugget in FY 2021 (+161%), a stinker in FY2022 (-58%) – and now back to a nugget (+54%). What has kept me in the stock was the low debt (generally) increasing earnings, and the high profitability (ROE 21%).
Supply Network (SNL) +54%
(SNL – Forecast 2026:PE 18, ROE 36%) Supply Network are a bus and truck parts distribution company using the Multispares brand. Although there are competitors in the big-vehicle parts business, what sets SNL apart from the rest is their great management and strict adherence to processes and efficiency. They have consistently held a profitability advantage over their rivals. They have maintained a high Return on Equity (ROE) of 36% even as the company has expanded and grown in price.
Alphabet (GOOGL:NASDAQ) +52%
(GOOGL– Forecast 2026: PE 17, ROE 25%) For more good things on this company that is everywhere. High profitability (ROE 25%) and the predicted 2026 PE of 17 makes this still a good buy at current prices – in Slack Investor’s head.
CAR Group (CAR) +52%
(CAR – Forecast 2026: PE 31, ROE 14%) Car Group is a collection of digital marketing vehicle businesses that are now in Australia, Brazil, Canada, Chile, China, Malaysia, New Zealand, South Korea, Thailand and the United States. The Australian business is still carsales.com. The ROE is slipping below 15%, but happy to hold on for now.
REA Group (REA) +39%
(REA – Forecast 2026: PE 41, ROE 32%) Like Carsales.com, REA has dominated the space left by the old newspaper classifieds in selling real estate in Australia and has continued to expand overseas. A high PE ratio (41) but while projected Return on Equity (ROE) remains high (32%), this is OK.
Wesfarmers (WES) +39%
(WES – Forecast 2026: PE 27, ROE 33%) Wesfarmers is Australia’s largest conglomerate. Great retail outfit (e.g. Bunnings) and chemical manufacturer. High profitability (ROE 33%) but like Coles, seems low on earnings growth lately.
Some honourable mentions to some top results this year that didn’t make the nuggets. BetaShares NASDAQ 100 ETF (NDQ) +32%; BetaShares Global Quality Leaders ETF) +27%; BetaShares Global Cybersecurity ETF (HACK)+26%; Dicker Data Limited (DDR.AX)+26%. A special mention also to a recent buy, Telix Pharmaceuticals (TLX) +23% in two months!
Slack Investor Total SMSF investments performance – FY 2024 July 2024 end of Month Update
Slack investor has just two piles of funds for his retirement – the Stable Income pile (Cash and Conservative) and an Investments pile. The Stable income represents just 25% of total retirement funds. I used to rebalance each of my piles after every year, but the stable pile now has enough in it that, together with dividends from my investments, could supply me with enough living expenses to last out an extended (3-yr) bad run of the stock markets – without having to sell stocks. The stable pile produces a moderate return of about 5%. The Investments pile is much more fun and the figures below represent (before tax) performance of my investmentspile only.
After a difficult 2022, a solid 2023, some very good fortune was had with a ripper FY2024. Some fortuitous selections with growth stocks have really paid off (Thank you PME and ALU). In the Australian superannuation scene, the median growth fund (61 to 80% in growth assets) returned +9.1% in FY 2024. The ASX 200 chart shows a gradual climb after a shaky start for the financial year.
A record result for Slack Investor in his growth investments portfolio. His preliminary total SMSF performance looks like coming in at around +39% for the financial year. Including the relatively low returns from my stable income pile (~5%) – overall, my retirement funds grew about 30%. A very good year!
For Slack Investor, the 5-yr performance is a more useful way of measuring – as it takes out the fluctuations of yearly returns. At the end of FY 2024, the Slack Portfolio has a compounding 5-yr annual return of around 13%.
July 2024 – end of Month Update
The new financial year has started off positively for Slack Investor markets. The ASX 200 + 4.2%; FTSE 100 +2.5%; and S&P 500 +1.1%. He remains IN for all index positions.
I have taken the opportunity to adjust upwards the stop losses on all followed index markets. The prices have crept up to more than 15% above their old stop losses. See Index pages for details.
All Index pages (ASX Index, UK Index, US Index) and charts have been updated to reflect the monthly changes.
After narrowing down my personal buying list to just 5 stocks – BetaShares NASDAQ 100 ETF (NDQ), Telix Pharmaceuticals (TLX), Technology One (TNE), Supply Network (SNL) and REA Group(REA), Slack Investor is always keen to get a second opinion – and that’s where the “fish whisperers” come in.
At this stage, I have so far bought into just one of the prospects (TLX) as, I’m hoping for a bit of a price contraction in the other stocks over the June/July period. I am not in a particular hurry to buy – as there has been recent news of “Interest cuts delayed” that might present a bit of downward pressure on stocks.
Sometimes, it makes sense to listen to the “Fish Whisperers” – those with special knowledge of the stock market. One of the financial sites that I will always look at for ideas is Livewire. Slack Investor is a subscriber to their free financial news email – just register with them. There is nothing more that I like than to saddle up to the hard work of financial experts – the hard thing, of course, is sifting through the chaff, for the wheat. But there are ways of identifying quality information – Do their methods echo with your own sound thoughts?
Let’s first have a look at Michael’s established record. He helped set up a Medallion Australian Equities Growth Fund in March last year, so there is only limited data on performance as there is a short track record. The fund growth since inception is very good (net 12-mth performance (+17.69%) – c.f ASX 200 (+10.68%) – but you would have to say that these are “early days”. Consistent long term fund performance is notoriously hard with 75% of Australian Mid to Small Cap funds underperforming the index over 10 years.
Medallion charges a management fee of 1.5% plus an outperformance fee of 20% (Oooohhh … that hurts!!) – but in fairness, their net results are, so far, exceptional – and their methodology of screening stocks looks fundamentally sound.
Long Term Compounders
These are three of the most beautiful words to Slack Investor – they exactly describe the type of stocks that I want to own. A stock that will generate growth over the long term. Let’s have a more detailed look at how the Medallion Financial Group approaches this search for long term compounders.
A consistent compounder is essentially a business that’s able to deliver consistent or persistent earnings and revenue growth over time in a reliable nature. So these are businesses that are price makers, not price takers
Michael Wayne prepared the list by screening the whole ASX for companies that have a five-year sales Compound Annual Growth Rate (CAGR) of above 5%, and a CAPE 10-year CAGR of more than 5%. Slack Investor is happy to have a further look at all of these companies.
These businesses also have a dividend per share CAGR over 10 years of more than 5%, five-year average gross margins above 10% and a five-year average return on equity over 10%. Yes Michael … keep up this research – as this is the sort of stuff that makes Slack Investor swoon!
May 2024 – End of Month Update
Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.
There is a bit of end of Financial year calm with the ASX 200 (+0.5%). The FTSE 100 (+1.6%) is moving on and, in a moment that seems to celebrate ex-President Trump’s guilty verdict on all 34 counts of falsifying business records, the S&P 500 moves on (+3.7%).
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
After the excitement of catching a fish there is the relatively unpleasant process of gutting the fish before things get exciting again – the cooking and the eating!
Same with stocks, the financial media is full of “darling” stocks. However, Slack Investor likes to take a deep look into the entrails before parting with his precious funds for the glorious pleasure of share ownership. The data gathering is not the most exciting part of investing and Slack Investor likes to keep things simple here – and finds the best way to sort out the worthy fish is to put them on a list with a few relevant numbers ” the guts”.
The companies that Slack Investor did a bit of research on is not definitive … I usually look into my own portfolio first to see if the investment case still stands … and, if the company has been performing well, I like to add to my holding.
The newer stocks come from a variety of sources – usually the financial press. I tend to stay away from mining and retail stocks because of the uncertainties present in these sectors. As these potential buys are a replacement for my largest portfolio member, Altium (Potential Takeover target), I have concentrated on the “growth stocks” The first screening is for growth using the CAGR and the ROIC.
Gather the Data
I have put all my prospective BUYS in a list
Company
Ticker
ROIC 23
CAGR 3-yr
Alphabet (US)
GOOGL
24
19
Altium Ltd
ALU
23
13
Audinate
AD8
12
32
Car Group
CAR
7
25
Cochlear Ltd
COH
17
14
Codan Ltd
CDA
14
9
CSL Ltd
CSL
10
13
Dicker Data
DDR
16
4
Fisher & Paykel Healthcare Corp Ltd
FPH
14
8
Microsoft (US)
MSFT
29
14
NextDC
NXT
-133
22
NVIDEA Corp (US)
NVDA
66
54
Pro Medicus
PME
50
30
REA Group Ltd
REA
20
16
Resmed
RMD
15
13
Seek Ltd
SEK
-1
-8
Supply Network
SNL
24
23
Technology One
TNE
30
13
Telix Pharmaceuticals
TLX
35
380
WiseTech
WTC
60
24
Xero
XRO
-5
23
The list needs a bit of narrowing down so I applied a filter to reduce the field to a top 10. I refined the list to those companies that have a historical ROIC of greater than 20% and a 3-yr CAGR of greater than 12% – this now becomes a list of great, profitable, efficient companies that are growing. I also added Forecast P/E ratios for 2026 from MarketScreener.
Company
Ticker
ROIC 23
CAGR 3-yr
P/E 2026
NVIDEA Corp (US)
NVDA
66
54
26
WiseTech
WTC
60
24
60
Pro Medicus
PME
50
30
82
Telix Pharmaceuticals
TLX
35
380
35
Technology One
TNE
30
13
33
Microsoft (US)
MSFT
29
14
26
Alphabet (US)
GOOGL
24
19
18
Supply Network
SNL
24
23
21
Altium Ltd
ALU
23
13
45
REA Group Ltd
REA
20
16
36
The Price/Earnings Filter
The above list represents some profitable, growing companies – but they might be priced too highly. Slack Investor generally doesn’t like to pay for a forecast P/E ratio of over 40 when I’m buying a new growth stock – that means the projected earnings are 40 times the current price of the stock. This reduces the table to 7 stocks. I can reduce the table even further by taking out the 3 US based stocks (MSFT, NVDA, GOOGL) – which I can buy in one trade by purchasing more of the ASX listed NDQ . The Betashares NASDAQ 100 ETF was already on my BUY radar. Have a look at the 1-yr returns on these amazing growth companies in the table below of top NDQ holdings – It is unlikely that this stellar growth will continue … but there is certainly momentum here.
BetaShares NASDAQ 100 ETF (NDQ) top ten holdings – Morningstar
The Final List – this is not advice!
Company
Ticker
ROIC 23
CAGR 3-yr
P/E 2026
Price
Telix Pharmaceuticals
TLX
35
380
35
$15.05
Technology One
TNE
30
13
33
$16.25
Supply Network
SNL
24
23
21
$20.05
REA Group Ltd
REA
20
16
36
$179.64
Betashares NASDAQ 100
NDQ
–
18
27 (2024)
$41.35
As well as BetaShares NASDAQ 100 ETF (NDQ), I will be looking forward to topping up my supplies of Technology One, Supply Network and REA Group and hoping for a bit of a price contraction over the next couple of months. The share price shown in this table is at the end of April 2024.
A newcomer to this list is Telix Pharmaceuticals (TLX) – a relatively new entry to the ASX that develops radiopharmaceuticals for cancer diagnosis and treatment. There is a lot of talk of this companies potential.
“It’s developing into a premier global radiopharmaceutical company … I see this as going on to become the next CSL in Australia.”
A CAGR of 380 is skewed by recent figures – but they definitely are a growth company – but there is risk here! Slack Investor will roll the dice and add a bit of this to his portfolio while it is still around the $15 mark – there is a bit of momentum with this stock – might have to get in soon! He likes that they already have a money-making product and they have a further product pipeline ready to roll out.
(Telix Pharmaceuticals) has demonstrated extraordinary progress by generating over $100 million in revenue in the March 2023 quarter, a remarkable leap from zero, less than twelve months ago.
Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.
A bit of the froth has settled down with the ASX 200 (-2.9%) and the S&P 500 (-4.2%). However, the FTSE 100 (+2.4%) is powering on at the moment. After a while in the doldrums, the FTSE 100 is now reaching record highs with the expectation of some interest rate cuts soon.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Slack Investor is always on the lookout for growth companies … particularly when he is on the BUY! Since retirement, I haven’t had much chance to be on the Buy side of a transaction lately – as there isn’t that flow of fresh new money coming into the coffers from employment. Pre-retirement, any new money would flow into the cash reserves of my Super (SMSF -Self Managed Super Fund). When a sufficient amount of cash had built up, I would look around for some company shares to buy.
However, with the expected inflow of a bit of cash with the impending sale of Altium, I am starting to look around for suitable receivers of Slack Investor loot. Slack Investor is “Going Fishing”. The first thing I want in my pond is profitable companies – but I also want them to have a record of growth. In the second part of this fishing series, I will try to narrow things down to companies that I would actually like to buy.
Measures of Profitability
Slack Investor likes a company, that he invests in, to not only make a profit – but to use its shareholder funds in the best way to make a profit. There are many ways to look at profitability, but Slack Investor is pretty lazy in this regard and you won’t find him forensically gazing over profit and loss statements from a company report. I prefer couple of simple ratios to get an overview – I am no expert accountant.
Return on Equity (ROE)
ROE = Net Income/Shareholder Equity
I have always used Return on Equity (ROE) as a simple measure to give an idea on how a company is growing. Strictly speaking, the ROE is more a measure of profitability and how well it grows each dollar of company funds.
The higher the ROE, the more efficient a company’s management is at generating income and growth from its equity financing.
This metric is very easy to find in market aggregator sites such as Yahoo.com, Morningstar, or Investing.com. For a deep dive, I prefer Marketscreener.com – which has the advantage of showing Predicted ROE for the next few years on each companies financial page. One of the problems with ROE is that, companies with debt can present an inflated ROE.
Return on Invested Capital (ROIC)
ROIC = Net Profit (After Tax)/Average Invested Capital
The purest way of looking at how good a company is in converting shareholders money into profit is the ROIC. Unfortunately, this figure is harder to come by on the generic financial aggregator sites. This ratio is superior to the ROE as it accounts for the debt levels of a company – as the Average Invested Capital is the Average Equity – Average Debt.
Measure of Growth
Compound annual growth rate (CAGR)
A quick way of determining if a company is growing is the CAGR. It is often constructed from past , data. The “Compound Annual Growth Rate”—is the annualized rate of growth in the value of the Earnings, or Revenue, over a stated period. The maths is a bit complicated and best done on a spreadsheet or a search around the financial sites. I found limited CAGR data for stocks at Morningstar and finbox.com
CAGR is defined as the annualized growth rate in the value of a financial metric – such as revenue and EBITDA – or an investment across a specified period.
Fortunately there are some really nice blokes in the financial world that share the burden of responsibility to educate people about the share market as well as operating a profitable business. A shout out to Owen Raszkiewicz of the RASK Group. A great place to start your financial education with Owen is his Australian Finance podcast that he co-hosts with Kate Campbell. Slack Investor will often tune in to their discussions.
Below is a table Owen prepared in August 2023 that ranks Australian stocks in terms of their profitability (ROIC – Return on Invested Capital – Column F). He also shows, in the last column, the stock’s historical growth rate for the 5 years 2017-2022.
From Rask Media – ASX’s best companies published August 2023 – ranked in order of ROIC- Click on image to enlarge
This is a great place to start fishing, metrics for profitability and growth in one place. Pro Medicus is standing out here – High profitability (ROIC 55.48%) and high historical growth (5-yr CAGR 24.22%). A complete picture needs both of these metrics. For example, Woolworths has a high profitability (ROIC 41.28%) but is laggard in historical growth (5-yr CAGR 2.10%).
The next article in this series will look at how Slack Investor narrows these stocks down and then screens them further with the P/E Ratio to try to make sure that each potential buying stock is not overpriced.
