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2012 Client Seminar Australian Financial Services Licence No. 237 435.

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Presentation on theme: "2012 Client Seminar Australian Financial Services Licence No. 237 435."— Presentation transcript:

1 2012 Client Seminar Australian Financial Services Licence No. 237 435

2 Introduction 2 Welcome How we manage your portfolio Some valuation considerations Owen Evans & Michael Peet – Presentation Using the client portal

3 The CIPL Team 3

4 How we manage your portfolio Recommendations Request from Advisor or client to review portfolio Lachlan reviews portfolio and makes suggestions Advisor provides feedback and requests changes Lachlan produces Authority To Proceed (ATP) and Advisor prompted to confirm When confirmed ATP is posted/emailed and then confirmed online. 4

5 5 Execution Client accepts/declines recommendation (sometimes quick, sometimes slow) Signed/authorised ATP printed, recorded against existing holdings before going to administration for verification/checking against cash balances, shareholdings, other parameters Administrator advises Bob to execute the trade. How we manage your portfolio

6 6 Settlement Contract note issued after trade Kathy transfers funds to settle trade Trades matched on CHESS Kathy allocates trade (recorded in Portfolio Administration System - PAS) – All data/background information is stored electronically How we manage your portfolio

7 Things for clients to note Each of these steps are in place to protect our clients The process can take some time – there are a lot of portfolios that have to be reviewed – History shows it is worth taking the time as this reduces errors & improves performance It takes about a week for a trade to be recommended before it shows up in a clients portfolio. This is mainly because it takes four days to get the money in from date of sale (T+3) 7

8 Continued Sometimes we might recommend a buy or a sell to many clients at once. Telstra was a good recent example – We do this because we want to execute quickly – May not have a corresponding buy or sell recommendation – We will get around to it! (each portfolio must be considered separately) Using the web based client portal helps speed things up. 8

9 Risk profile Request for income Weighting in portfolio Potential for capital gains Special situations Capital gains issues 9 Thinking behind recommendations

10 10 Measuring portfolio performance

11 11 How an IRR works

12 12 Other valuations - AIX

13 13 Other valuations - HDF

14 Some Thoughts on Investing Processes Falling Interest Rates and Retail Stocks Owen Evans and Michael Peet 11 September 2012

15 Falling rates are usually a signal to buy consumer and housing related equities This is typically a building products or retail stock Retail sales growth has been in decline for a decade, diminishing the attraction of apparel and durables retailers In addition the internet is having an impact on volume growth and margin across many parts of retail, particularly apparel Conventional retail was not that appealing 15 Falling Interest Rates and Retail

16 Building products businesses if anything were less attractive Housing approvals are the best lead indicator and even now are showing no signs of improvement (top graph) In addition the lagged impact of social building during the GFC was still working its way through the economy (bottom graph) We saw no reasonable upturn in housing activity until mid 2013 16 Building Products

17 We were also somewhat cautious regarding the conventional wisdom that there is a shortage of housing in Australia Births (rolled forward 25 years) are not suggestive of a coming surge in demand (top graph) Net migration is also skewed towards students and miners, users of non conventional housing (bottom graph) We took the view that apparel and building products were simply not overly attractive and we needed to look elsewhere 17 Long Term Housing Outlook

18 The obvious other places to look were fixed income, auto retailing and high end consumer durables We prefer banks to hybrids or utilities due to the operational leverage. We chose ANZ for a variety of customer service reasons. All the banks performed extremely well as rates fell For high end consumer durables the local market is limited. We did not want a furniture retailer (too much exposure to new housing), so chose Breville (BRG) a design/manufacturer of high end kitchen appliances Both worked well but we sold BRG way too early 18 What else is there?

19 Historically this has been an industry globally dominated by small local entrepreneurs The two largest domestic players have 5% market share There are considerable scale economies (marketing, real estate, financing, service) Lower tariffs/strong A$ supportive of volumes It is virtually impossible to import and take delivery over the internet We bought AHE over APE due to valuation. Both have performed well 19 Auto Retailers

20 Volumes have increased by roughly 50% over the past 15 years, driven to a large extent by falling real prices (tariffs, A$) With the exception of the GFC year they are surprisingly stable As most consumers finance car purchases they are susceptible to movements in rates and availability of finance 20 Auto Sales

21 Supercheap (SUL) sells car parts, camping gear (BCF) and now sporting goods (Rebel) The stock was hammered due to the Rebel acquisition, creating a great opportunity The company is well managed, very service focussed and is positioned to compete with internet based retailers Unfortunately we were overly cautious regarding Rebel and missed this opportunity 21 The Boneheaded Miss

22 Questions 22

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