Slack Investor | How to invest successfully without too much effort

July 2018 – End of Month Update … and Upcoming Reporting Season

Slack Investor remains IN for US, UK and Australian index shares.

It has been a good start to the financial year in all followed markets. Rises in the Australian Index (+1.4%), the UK Index (+1.5%), and the US index up a remarkable 3.6%. Slack Investor is cautious – but not afraid. Bull Markets are where the investor makes money. Stop losses are the insurance that enables sleep at night.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Reporting season for end of FY 2018

Related image — Robert Hays as Ted Striker apprehensive about landing the plane in Flying High (Airplane!) gif from source – may be subject to copyright.

Despite the general market indicies doing well, July 2018 has seen some of the big Slack Portfolio achievers in the last financial year lose a bit of their froth. Although not quite as nervous as Ted Striker, Slack Investor is a “on alert” about the impending reporting season. The animated gif above is from the classic 1980 film Airplane (or Flying High) – and the full movie is most worthy of a viewing when the tension of the season becomes too great.

Australian companies are obliged to report on their earnings at least twice a year within two months of putting a line under their balance sheet. As 30 June marks the end of the financial year, the main reporting season takes place during August when most companies release their full-year results to the market. The accountants have been busy collating the figures and the management team has crunched the numbers and are ready to give updates on their company earnings and project some earnings outlooks. The CEO may offer his take on any changes to the economic environment at the shareholder meeting.

The day of this report release is usually the most momentous …

51 per cent of the two hundred and sixty major results (Last year) saw their share prices move more than 3 per cent on the day of their results. 35 per cent moved more than 5 per cent and 11 per cent moved by 10 per cent. – Marcus Padley in this report

There are strict rules on keeping this financial market sensitive information “in house” till the date that the results are announced. This way, everybody gets this information at the same time. Sounds fair … but sometimes information inadvertently leaks out and a decline in the share price is noticed before the actual reporting date … or, it might just be that after a sharp rise in price, the short term traders are just taking profits. There are a lot of possibilities – and it appears that something is going on with one of my major holdings Altium (ALU). There is a distinct decline in price since financial year 2019 started.

Daily chart Altium – from Incredible Charts

Regardless, I will leave action to the short-term traders, as at the end of July, ALU finished above my monthly stop loss ($19.16). Slack Investor has a plan and remains above the daily market murk and has an approach that has got him through so far. Let the market do what it must do – and if, at the end of the month, the stock price is below the monthly stop loss – then sell.

In Flying High (Airplane!), Ted Striker had a pretty good result. He overcame his fear of flying, landed the plane safely and won back the affections of his ex-girlfriend. Slack Investor is not aiming for this Hollywood finish but I have overcome my fear of rapid price declines – they are just part of investing in growth stocks.

I am diversified, have a plan and have stop losses for protection. (OK … slightly flushed with the exhilaration of reporting season!)

Financial Year 2018 – Slack Portfolio Review

As Slack Investor is a student of the financial arts and a lover of measurement, the end of the financial year is a great time to review and see how the Slack Investments performed. The Index funds were reviewed last post. Index funds are a great way to start investing in shares – as you are spreading your risk over at least a hundred companies.

The next step, as you become more familiar with investing and can start running a critical eye over individual companies, is to invest in individual stocks.

Over 75% of Slack Investor’s share investments are in individual stocks. See Portfolio

Most of my holdings are in growth stocks. These stocks usually have a high Return on Equity (ROE>15%) – with a track record of increasing dividends. By their nature, they have a relatively high PE ratio and are usually punished in the markets during reporting season if there is any bad news affecting future earnings. This I accept.

Slack Investor Stinkers – FY 2018

Each year I expect a few stinkers and dont beat myself up about them when they occur. If they breach the monthly stop loss – I usually sell at the start of the next month.

-24%

A special mention for IPH. Although some investors have done well with this stock. this company has a prawn heads in the bin on a hot day type of stink for me. Slack Investor likes the idea of the company -and it seems to be making a bit of a recovery since I sold it! However, I have had difficulty trading it successfully as it would go into long periods of declining price immediately after my buys. I should have learned my lesson years ago with Slater and Gordon – Never trust Lawyers!

-22%

HSO has got caught up with a tightening on government health spending and a decline in private health care admissions.

-21%
RHC is also in the healthcare sector and has the same challenges as HSO. But, it is a well managed company and Slack Investor will look for an opportunity to get back in this stock.

Slack Investor Gold Nuggets – FY 2018

The wonderful thing about owning growth companies is that sometimes they surprise on the upside and grow faster than expected. Altium is the “Welcome Stranger” of gold nuggets.

+166% ALU makes software for the designing of integrated circuit boards that are used widely in a range of technology products. Some analysts fear that the stock is overpriced. Its PE ratio is currently an eye-watering 74 – but this is rapidly reducing with projected earnings over the next few years. I am still holding as we go into the reporting season – the optimist in me thinks that there may be more good news on future earnings. There are even rumours of a takeover by larger company. But if not, my end of month stop loss is $19.61.

+71% A2M’s brand relies on a patented process that makes milk with only the A2 protein. A2M has been the subject of a previous post, and it is true that I’m yet to be convinced of the health benefits attributed to A2 Milk – But their marketing is very good and the trend is more powerful than logic in my book! Slack Investor was stop-lossed out of this stock earlier this year, but has bought in again -and hope for good news this reporting season.

Honourable mentions for Slack Investor portfolio stocks that increased more than 30% in this remarkable financial year. These nuggets include APX, CSL, MQG, NCK (no longer held), PMC, REA, SEK and WOR.

Slack Investor SMSF performance – FY 2018

I have written extensively on calculating Portfolio returns. I run a few separate portfolios but only quote the SMSF annual returns as this portfolio is externally audited. All percentage earnings quoted include brokerage and portfolio costs. Both raw and franked dividends are included as income. So essentially, the percentage returns include costs but are before tax. This raw figure can then be compared with other investment returns.

In what can only be described as a high-water mark for Slack Investor’s SMSF portfolio investing prowess. (and the luck of holding ALU inside it), Portfolio return FY18 was 37.6%.

One-year high returns are welcome but Slack Investor puts more weight on multi-year performance. The past 5-yr progress of the Slack Portfolio is 23.6%, 2.6%(whoops!), 14.2%, 19.5%, and 37.6%. This gives a compounding annual 5-yr return for the Slack Investor SMSF portfolio of 18.9%. The benchmark ASX 200 Accumulation Index (Including dividends) 1-yr and 5-yr compounding annual returns are 12.7% and 9.9% , respectively.

“Good luck is a residue of preparation.”

– Jack Youngblood – Hall of Fame American Footballer

Slack Investor readily acknowledges the luck factor in the stock selection process and realises that this FY18 as an extraordinary year for the portfolio (I expect more moderate returns!). I have found that a disciplined stop loss process, a bit of effort and research on stock selection, and following of trends on share charts (technical analysis) can yield very good results.

Over the next year I will post on how to start investing and the specific techniques that Slack Investor uses – It is not difficult … Empower Yourself!

June 2018 – End of Month Update … and end of Financial Year Review

Slack Investor remains IN for US, UK and Australian index shares.

The Australian Index (+3.0%) has had a good month. While the UK Index (-0.5%) and the US index (+0.5%) have ended the Australian Financial Year (FY) in a steady fashion.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Goodbye FY 2018

Slack Investor loves a review … and the end of the financial year is always a good time for introspection. Overall, it has been a good year to take some calculated risk and be involved in the satisfying world of investing in companies through the share market. Safe money in a bank is returning under 3% per year.

ASX 200 – Despite a mediocre performance by the Australian Banks (which make up a large porrtion of the ASX 200), You would have to say it was a good year for the Australian Index (+8.3%). If you take into account dividends, the ASX200 accumulation index increased a bumper 12.7%.

Weekly Chart FY18 – From Incredible Charts

FTSE 100 – It was a bit of a struggle for the UK Index this year (+4.4%) with a lack of clarity on what Brexit will mean for the UK economy. Slack Investor left the index briefly as it plunged below a stop loss at the end of March, but rising momentum in April got me back in.

S&P 500 – The US Index was heading for a monster year with President Trump reducing taxes … and then he started talking about new trade tariffs There were also concerns about high valuations. But, overall, +11.8% is a very fine return in the current low interest environment for cash.

Financial Year Slack Investor Resolution – A recent ASIC report found that nine out of ten self-managed super funds recieve poor financial advice from their advisors … So start educating yourself in financial matters … become your own advisor!

Productivity Commission has Cunning Plan for Super

The Productivity Commission have a plan worthy of Blackadder – Image may be subject to copyright

The Draft Report of the Productivity Commission (PC) into superannuation was discussed last post. The report identifies four main problems with Australia’s superannuation model that adversely impact the final payout. Underperformance, Multiple Accounts; High fees; and Expensive insurance. Slack Investor will look at a couple of the recommendations of the PC.

Not all funds … is good funds!

The PC found that nearly 5 million accounts are in underperforming funds. They defined a low benchmark (BP2) which was the average performance of all MySuper accounts and the chart shows the cluster of purple retail funds at the in the poor returns of the bottom left (Plus a few laggard industry funds … Shame!)

The performance of a fund was found to be the most critical factor in determining your compulsory super payout. You could potentially save $375 000 by getting this right. The PC came up with a cunning plan to counteract the disengagement of younger members of the workforce. The Productivity Commission propose that the default super choice for when you first start work is one of the 10 best performing funds – Cunning but Brilliant!- You automatically get put into one of the historically best performing funds at a time when you are likely not that skilled in picking a fund yourself.

… members should be placed into a default fund once and that fund would be derived from a ‘best in show’ list of high‑performing funds identified by an independent and expert panel.

I would hope that all workers retain the right to eventually move to a fund of their choice – but it is a fine first step to put new workers into one of the funds with an established good record. To Slack Investor, this panel sounds like a cushy job – If my application to be Reserve Bank governator is rejected, I would be like to be on that panel!

One Super account for life …. How Bout that!

… one third of accounts, … are unintended multiple accounts that are costing members $2.6 million a year in fees and insurance premiums.

A structural fault with our current system is that new superannuation accounts are usually created with each new job or new union award – if you are not proactive it is easy to accumulate a handful of super funds before you are 30. The inefficiency of this structure just leaks money out of your retirement accounts in a myriad of fees that profit the funds .

What to do … Now!

In the meantime, not advice, but this is what I would do. Don’t wait for the PC final report … or the politicians … Get Engaged (Part 1, Part 2) and immediately get online and check on the performance stats of your current super fund(s). If you are more than 5 years from retirement, I would be in a high growth option of your super fund. You usually do have choice!

Look at the table below assembled from data on the most excellent site Selecting Super and compare it with your current fund performance. Those wanting a more interactive experience should try the Stockspot site. If your fund’s performance results look bad (i.e. 5-yr less than 10%; 10-yr less than 5.6%) then lose your love for that fund and move on!

In what can only be described as a blatant display of my skills to get on the “best in show” panel, I have made my own “best in show” list and ranked the growth super funds according to their 5-year performance. I have only included the funds that are open to everyone, and … in over-achieving style, have listed the top 20 … yes 20! Followers of Slack Investor will find it no surprise that Retail Funds did not perform well enough to be in the top 20.

Fund	1-year	3-year	5-year	7-year	10-year
Intrust Core Super – Growth	12.40%	9.00%	12.00%	10.00%	6.10%
VicSuper FutureSaver – Equity Growth	11.90%	8.30%	11.90%	7.10%
StatewideSuper – High Growth	11.50%	9.40%	11.70%
Cbus Industry Super – High Growth	11.60%	9.30%	11.60%	10.60%	7.00%
AustSafe Super Industry – Super Growth	13.40%	8.80%	11.60%	10.10%	6.20%
HOSTPLUS – Shares Plus	12.50%	9.50%	11.30%	10.00%	7.10%
AustralianSuper – High Growth	10.30%	8.50%	11.10%	9.90%	6.50%
LegalSuper – High Growth	10.50%	8.30%	11.10%	9.80%	6.00%
Prime Super (Prime Division) – Managed Growth	10.40%	9.50%	11.00%	9.50%	4.00%
Catholic Super – Aggressive	10.60%	8.90%	11.00%	9.90%	7.30%
Club Plus Industry Division – High Growth	13.00%	9.40%	10.80%	9.60%	5.90%
Rest Super – High Growth	9.60%	7.70%	10.80%	10.00%	7.30%
HOSTPLUS – Balanced	11.00%	8.70%	10.60%	9.70%	6.70%
CareSuper – Growth	9.90%	8.10%	10.60%	9.70%	7.20%
First State Super Employer – High Growth	10.80%	7.70%	10.60%	9.90%	7.10%
TWUSUPER – Equity Plus Option	10.30%	7.90%	10.50%	9.40%	5.90%
Energy Super – Growth	9.20%	8.10%	10.40%	9.40%	7.10%
Media Super – High Growth	9.80%	7.80%	10.40%	9.20%	6.20%
HESTA – Shares Plus	10.70%	7.70%	10.30%	9.40%	6.90%
MTAA Super – Growth	9.30%	8.20%	10.20%	8.00%	3.50%

Once you have made your choice, and opened up a fund that you are happy with (if required, contact fund and get account number first) now consolidate all accounts to your one favoured fund using My Gov ATO Portal. Let your employer know of your new choice for future contributions.

If you are 21, according to the Productivity Commission, you might have just saved yourself up to $426 000 in retirement funds. If you are 55, you could save $55 000. – Still, that’s not a bad days work!

May 2018 – End of Month Update … and the Productivity Commission creates new Hero

Slack Investor remains IN for US, UK and Australian index shares.

The Australian Index (+0.5%) has been a bit of a laggard with the banks still generating bad news and signs of the Australian property market starting to slow. The UK Index (+2.3%) and the US index (+2.2%) have continued to have solid growth.

The good news on the Australian Index (ASX 200) is the opportunity for Slack Investor to crinch up his stop loss from 5629 to 5724. A small movement upwards, but I always like doing this as it means that the Index has now set a new “higher low” The explanation for this technical stuff can be found here. A new “low” (or minimum) has been established at 5724 and this is my new stop loss on the monthly chart

Monthly chart for the ASX 200 – From Incredible Charts

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Productivity Commission gives the Super Industry a bit of a “Ginger Up”

I have been a fan of Australia’s Productivity Commission (PC) ever since I read their 2010 report into the sorry state of Gambling in Australia. The report is full of thought provoking and shameful material like- Australia is the world leader in number of poker (slot) machines per capita and Australia leads the world in gambling losses per person – but I digress…

The “Ginger Up” refers to an ancient horse racing practice that I wont elaborate on here – but it does make me squirm! The PC have just delivered their draft report on the state of Superannuation in Australia. God bless them .. they have put in “black and white” the rorts that exist in Australia’s good but not great superannuation system – and they have created a new Slack Investor hero.

The lead author in the report is the Productivity Commission deputy chair Karen Chester who has delighted Slack Investor with the following refreshing quote. Ms Chester’s attitude was like a snowball in the face after the my last depressing post on the mostly self interested world of banks and financial advisers.

Karen Chester – Photo from Quentin Jones

“the only thing I care about is member outcomes” from source

The Productivity Commission identifies two structural problems with Australia’s super model. The unintended creation of multiple accounts and the entrenched underperformance of some of the super funds that are allocated to the employee.

From Productivity Commission Superannuation report.

“Members are really lost in the weeds of product proliferation with 40,000 products. They’re bamboozled by poor disclosure and … poor advice.” Karen Chester from source

I am hoping that Ms Chester will get the final report out with haste. Slack Investor loves the smell of the draft report. The Federal Government would do well to take up her recommendations. The info graphic above puts some real world figures on what might happen if the PC recommended changes to Australia’s superannuation model are adopted.

It is a promising sign that the current Finance minister seems to recognize the problem.

“Super has become worse than a honey pot; it’s a trough.” – Financial Services Minister Kelly O’Dwyer source

Slack investor will look at the “trough” and PC draft recommendations in the next post. There are things you can do right now to protect your super.

The Royal Commission into Finance … Yes Please!

David Rowe cartoon From the Australian Financial Review – May be subject to Copyright

The incomparable David Rowe has a daily habit of drawing great cartoons. This image describes the current situation with the excrement covered big 4 Australian bank pigs dragging the Australian Treasurer and the Minister for Revenue and Financial Services along for the ride in front of the Royal Commission.

Lets start again with the astounding ASIC revelation

ASIC found that in 75% of the advice files reviewed the advisers did not demonstrate compliance with the duty to act in the best interests of their clients. Further, 10% of the advice reviewed was likely to leave the customer in a significantly worse financial position.

Lets get this straight … I rock up to to a financial planner and I only have a 1 in 4 chance to get some advice in my best interests …. and, I have a one in ten chance of ending up in a significantly worse situation … What is going on !!!! – these are the people who many depend upon for sound financial advice.

The sad case of Sam Henderson

Sam Henderson outside the Royal Commission from news.com.au

Slack Investor writes about Sam only because he is still gobsmacked with the evidence presented to the Royal Commission on 24/04/18.

A bit of background … Sam Henderson is the very public and enthusiastic face of Henderson Maxwell, a financial advice and accounting firm. Sam has been everywhere in the Australian financial media for the past few years with his own weekly TV show and newspaper columns. Slack Investor admits to being a great fan of Sam’s podcasts Sky News “Your Money Your Call” presented weekly on Thursdays. In these podcasts Sam, and others, dispense generally good advice about retirement issues and superannuation.

I have found their program to be extremely informative. They have talked a lot about Self Managed Super Funds (SMSF’s), retirement strategies and taxation – Advice that Slack Investor has found very helpful.

However, Sam has fallen foul of the Royal Commission. Henderson Maxwell charged $4950 up front to give advice to a client that would have been to her detriment – to the value of at least $500 000. It appears that Sam’s firm has acted in their own self interest rather than the clients. Specifically, Mr Henderson urged his client to establish a SMSF and remove her super investments from a generous public sector deferred benefit fund to invest in Henderson Maxwell products, which would have earned him ongoing fees.

The fees proposed by Sam Henderson’s advice would have annually amounted to $19,000 while the client’s existing strategy was costing her $2768.

Although, through this public shaming, Sam has carried a lot of the heat for the widespread malpractice by the banks and financial planners. This case represents the huge problem with the financial industry in Australia and the reason why Slack Investor has educated himself in the dark art of finance rather than rely on a financial advisor to dictate strategy for him.

One of the most galling things about this case is that Henderson Maxwell is considered to be one of the leading firms for giving financial advice. They are the winner of the 2016 Australian Association of Financial Advisers (AFA) award for practice of the year. The AFA advertise their advisers as “Trusted, Knowledgeable, Reputable, Respected”

Slack Investor admits to being a flawed human – but he would hope that he would act ethically even as the financial system drapes its lucrative reward tentacles tantalizingly in front of him. In the case before the Commission, Sam Henderson responded to financial incentive.

What is wrong with the Financial Advice Industry?

Charlie Munger -Source

“Show me the incentives and I will show you the outcome” –

Charlie is vice- Chairman of Berkshire Hathaway and dispenser of financial common sense – another Slack Investor Official Hero

This sums things up. At the moment most financial advisors are given incentives to sell their own products – there is no incentive to represent the best interests of their clients. The regulator ASIC has done a review of the quality of financial advice that had been provided to SMSF’s, and found that

90% of cases had failed to be in clients’ best interests.

It is hoped that the Royal Commission will accelerate change. The Financial Review reported that four years ago the head of the Financial Planning Association (FPA) called on financial planners to unite and push for the separation of product from advice. In the meantime, the vertically integrated financial planning money machine with its fees and trailing commissions has kept on rolling on …

The Hayne Train should address these issues before finally pulling up to the station – While we are waiting, if you really need a financial planner, only use a truly independent advisor registered with IFAAA – No affiliations with product, no commissions and no asset fees . There will be an upfront fee for the advisor’s service – but this fee should be small in comparison to the ongoing costs associated with the lifetime tenure of an affiliated advisor.

April 2018 – End of Month Update … and the Hayne Train

Slack Investor remains IN for US, UK and Australian index shares.

After all the doom in March, the Australian Index (+3.9%) has had a great April. The UK Index (+3.4% since our buy IN in the middle of the month) has also bounced back. The US index (+0.3%) has been steady – but Slack Investor is still on high alert – considering high company valuations in the US at the moment.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

The Hayne Train – Financial Royal Commission

Slack Investor is always looking for a new hero and it just might be the Honourable Kenneth Madison Hayne AC QC.

The driver of the Hayne Train and new Slack Investor Hero Hon. Kenneth Hayne. – from source

The driver of the Hayne Train is in charge of the new Royal Commission into Australian Financial Services. Commissioner Hayne is very ably assisted by a crack team of lawyers. Kenneth Hayne seems appalled by some of the practices in banking and the financial industry that his commission is exposing. Slack Investor also has a very poor opinion of the bulk of the financial advice industry and is heartened by recent goings on at the Royal Commission. Perhaps the state of financial advice in Australia is best summed up by the seemingly toothless industry watchdog ASIC (Australian Securities & Investments Commission) in a report in January 2018.

ASIC found that in 75% of the advice files reviewed – the advisers did not demonstrate compliance with the duty to act in the best interests of their clients – from ASIC Report 18-019MR 24 January 2018

Wow! … this is a real scandal! Our Australian government regulator that has oversight for financial services and consumer credit has found that three out of four people who go to see a financial advisor receive advice that is not in their best interests!!!

The ASIC report received relatively little press on its release in January and it has taken Kenneth Hayne’s team to forensically go through some astoundingly bad practices of banks and financial advisors for this issue to finally gain some traction with our government, press, and the Australian public – Things have to change!

Power to you Kenneth – you Slack Investor Official Hero (Calling it Early!) … keep exposing and I will present some more of your most excellent initial findings in the next post.

IMF … Not as cool as the IMF! … and BREXIN

From Source – Image may be subject to copywrite.

IMF The “Impossible Missions Force” made famous by the Mission Impossible Franchise and Ethan Hunt is a bit better known than the “International Monetary Fund” IMF which has the drier and more impressive mission to

… ensure the stability of the international monetary system

Some would say that this mission is as equally impossible as Ethan Hunt’s escapades but, like Ethan, they have had their successes. If you are one of the 189 membership countries you share your economic data with the IMF and they monitor and provide assistance with each countries’ economy – this may be with advice – or even to help out with a loan … and they also come up with projections for world economies. These are represented by the dotted lines on the chart below. As you can see, for 2018 and beyond, the boring IMF is quite optimistic on the overall world and emerging economies (China +6.4%, India +7.8%, Indonesia +5.5%, Philippines +5.8%) but less so for the advanced economies (US +2.7%, UK +1.5%, Germany +2.0%, Australia +3.1%). The percentages represent IMF Real GDP growth forecasts for each country in 2019.

In fact, they have lifted their world growth forecasts for 2018 and 2019 to 3.9%, Now these are just projections based upon a forecast of buoyant trade and investment ( as well as recent US tax reforms). These projections are not set in stone and subject to world events – Yes I’m talking to you Donald! – but they are reasons for optimism. I am glad to be diversifying my risk by being a holder of the Vanguard Asia (Ex Japan) ETF – VAE.

Long live the IMF – impossible mission accepted!

Brexin

FTSE 100 (UK Index Weekly chart – From Incredible Charts

In a whirlwind cycle … within 2 weeks of getting out of the UK Index, I’m back in! – this is just part of the way that markets move sometimes. Although Slack Investor prides himself on the minimization of decisions, through looking at historical data on the ASX over 40 years, he has found that it is advantageous to act on weekly signals to get into the stockmarket and stick with monthly decisions on getting out of the market. As a result, the weekend reading of the FTSE 100 chart has given me a buy signal at 7264 and a new stop loss of 6866. More detail on the UK Index page.

March 2018 – End of Month Update … and Slack Brexit

Slack Investor remains IN for US, and Australian index shares.

However, it is time to temporarily leave our cousins in England – I am OUT for the FTSE 100.

… a tricky month for investors with all markets declining. The Australian Index (-4.3%) and the US index (-2.7%) had solid falls but managed to stay above monthly stop losses. The UK index (-2.4%) has just had its third monthly fall in a row and finishes the month below its stop loss – Slack Investor must sell his FTSE100 ETF.

UK INDEX FTSE100 Monthly Chart Trade Cycle 29 Jul 16 – 29 Mar 18 – Click for better resolution – From Incredible Charts

As always, there is a time of reflection when I sell – I like owning a share of these UK companies – it is much more satisfying than owning cash. Slack Investor bought the UK index at the end of July 2016 and, after 20 months, is looking at a profit of 4.9%. Not a fantastic profit – but this is the fourth Slack Investor profitable trade in a row for the UK market (31.7%, 27.1%, 17.6%, 4.9%). For simplicity, dividends are not included in these calculations.

The Downside of being Slack

FTSE100 Daily Chart -Click for better resolution – From Incredible Charts

As I wrote about the upside of being slack last month, it is only right that I illuminate the downside. At times, there is a cost to being a monthly trader. If I was a daily trader that used stop losses, I would have unloaded the FTSE 100 on Feb 8, 2018 at 7170 when the closing price first fell below the stop loss. Slack Investor sold at 7056 a discount of 1.6% to the daily exit – but as mentioned many times, the piece of mind found in monthly decisions makes this a small price for me to pay.

All Index pages and charts have been updated to reflect the monthly changes – (ASX, UK, US).

Chance would be a fine thing

One of the great things about England is the turn of phrase that the locals enjoy. “Chance would be a fine thing” is a good example of language that is perplexing to the new arrivals. It is the sort of saying that sometimes crops up in the UK that has a meaning that is not entirely obvious.

In context, someone in England would utter this phrase in response to a comment from another that sets up a desirable scenario – but the retort “Chance would be a fine thing” is said to indicate that it is not likely to happen! Further context can be found in the great tribute by David Mitchell to insecure managers in the short but very fine Peep Show “Chance” sketch at this link. Youtube Autoplay will reward the brave with another great character from the show -“Alan Johnson”, the crude and aggressive management guru in the following Youtube clip – But Language Warning with Alan – I Digress! (… but still giggling!)

I like the “chance” phrase, it reminds me of the enormous part that luck plays in the building of a share portfolio – but it is the very opposite of how I think when I buy a stock! I do not buy stocks often and a buy is usually at the end of some good research where I have convinced myself that the stock is growing and is just about to take off when the rest of the market catches up to my brilliant thinking. Bitter experience and keeping good records over 25 years has shown my abilities in picking winners at around the 55 -60 % mark.

At first glance this looks a pretty poor record of stock judgement – However, by keeping my losses relatively small (through monthly stop losses), owning a diverse range of companies (see Portfolio Page), and letting my rising shares rise, and luck, the Slack Investor has done alright – Five year compounded average growth rate (CAGR) for my audited SMSF portfolio of 16.9% p.a..

The luck of stock selection has always been acknowledged by Slack Investor, but it was brought home to me when my son asked, in December 2017, for advice on where to put $5000 in the share market. You would think that this would be an easy thing for Slack Investor who has spent almost 30 years studying the vagaries of the market. 15 months ago I went into a lather and researched very hard and came up with two growth stocks that I thought were not overpriced and had reasonable growth prospects – but I still had a bit of trepidation as, he is my son, and this was his hard earned savings from a part time job -and, I wanted him to continue with the allusion that his Dad knew what he was talking about!

With the usual combination of research and luck, the two stocks that I presented him with were stocks that I already owned – Fisher and Paykel Healthcare (FPH) and Altium (ALU). I gave him the choice after a brief overview of each company (… spread the risk … give him ownership!). The former are world leaders in surgical instrumentation and pumps. and Altium has something to do with printed circuit board design and the “internet of things”. With the wisdom of youth, he picked Altium to put his savings into. I am relieved to say that both stocks have done extremely well in the past 15 months but the weekly charts tell a story – with my son’s choice, ALU, the clear winner (+177%).

Fisher and Paykel Healthcare (FPH) Weekly Chart – From Incredible Charts

Altium (ALU) Weekly Chart – From Incredible Charts

Do you think Slack Investor could come up with another Altium as a choice for share investment the next time my son asks me for advice?

Chance would be a fine thing!