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Portfolio construction: Duncan Wiech Director Thornton Group (Australia) Pty Ltd 20 October 2010 Key concepts.

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Presentation on theme: "Portfolio construction: Duncan Wiech Director Thornton Group (Australia) Pty Ltd 20 October 2010 Key concepts."— Presentation transcript:

1 Portfolio construction: Duncan Wiech Director Thornton Group (Australia) Pty Ltd 20 October 2010 Key concepts

2 2 This information has been prepared by Thornton Group (Australia) Pty Limited (ABN ) 60 Greenhill Road, Wayville, South Australia This presentation contains general information only. This presentation was produced for informative purposes only without assuming a duty of care. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice. This presentation does not take into account your particular objectives, needs or full financial situation. Before making a decision relating to this presentation you should assess whether the advice is appropriate to your objectives, needs or financial situation. You may wish to make this assessment yourself or seek the help of an adviser. No responsibility is taken for anyone acting on the information provided and anyone doing so, does so at their own risk. No part of this presentation should be used elsewhere without prior consent from the author. Should you wish to obtain personal advice regarding anything in this presentation please contact Anthony Prior on The information in this presentation is based on our interpretation of relevant laws as at the date of this presentation and is subject to change. Disclaimer

3 3 Portfolio construction RULE : one Understand what you’re trying to achieve - not all portfolios are the same 1 one

4 4 Portfolio construction RULE : two Know your investment timeframe 2 two now 1 yr 2 yrs 3 yrs 5 yrs 10 yrs

5 5 Portfolio construction RULE : three Understand the trade-off between risk and reward 3 three low risk / return high

6 6 % % chasing returns Portfolio construction % % % % % % % % % % % % % % % % Historical Sector Returns  as at 30 June of each year Chasing returns % SOURCE: Lonsec, , "Annual Investment Returns to 30 June 2010" %

7 7 ” “ Portfolio construction If past history was all there was to the game, the richest people would be librarians. Warren Buffett

8 8 Portfolio construction Chasing returns Risk Profiles  Historical characteristics for the 10 year period to 30 June 2010 SOURCE: Lonsec , “Risk Profiles: Historical Characteristics” 2010 Growth assets 60% Property: 12% International shares: 14% Australian shares: 34% Growth assets 60% Property: 12% International shares: 14% Australian shares: 34% Growth assets 80% Property: 12% International shares: 20% Australian shares: 48% Growth assets 80% Property: 12% International shares: 20% Australian shares: 48% Growth assets 100% Property: 10% International shares: 30% Australian shares: 60% Growth assets 100% Property: 10% International shares: 30% Australian shares: 60%

9 9 Portfolio construction Growth stock what is it? ” “ Stock of a company which is growing earnings and/or revenue faster than its industry or overall market. Such companies usually pay little or no dividends, preferring to use the income to finance further expansion.

10 10 Portfolio construction Property what we look for Diversified exposure achieved via: Managed funds, direct, indirect, listed, unlisted, syndicated sectors Factors considered: debt structure structure of cash flow / rental income quality of tenant & level of tenancy capital expenditure on the building green & water ratings regularity of valuations & timing of rent reviews physical location of assets

11 11 Portfolio construction International shares what we look for Diversified exposure achieved via: Managed funds Factors considered: preferred economies (mature or emerging) managers with consistent performance in selected country management of currency risk (hedged vs. unhedged) absolute return funds - no index hugging!

12 12 Portfolio construction Australian shares what we look for Australian shares what we look for 7 Know when to RUN 1 Strength of domestic & global economies 2 Appealing sectors 3 Strength of companies barriers to entry comparative advantages 4 Health of Balance Sheet 5 Reliability of cash flow & profit 6 Sector weightings variable risks & opportunities Monetary policy Media sentiment Environmental factors Legislative changes Global influences (trade policies / war)

13 13 Portfolio construction what makes our market

14 14 Portfolio construction Example portfolio what we look for example portfolio what we look for Core stocks  “long” Spreads  via listed managed funds & indices “Un-loved” Trade stocks  “short” Takeover targets Break-ups Prospective

15 15 Portfolio construction Core stocks Popular picks Core stocks  “long” AusbilAvivaFortisK2Tyndall FinancialsANZCBAANZASXANZ CBANABCBAMQGCBA MQGWBCNAB WBC Resources, materials BHP RIONCMRIOORI RIO Transport, Telecom, Media AIOTLS-AIANWS QANTLS EnergyOSHSTO- RetailWESWOW RFG- JBH Health, Biotech -CSL -- PRY Real estate---WDCLLC Other (ins, cap goods)-QBE CSR-

16 16 Portfolio construction Growth stocks what we look for CBA BHP CSL

17 17 Portfolio construction RULE : four If it seems too good to be true... it usually is! 4 four

18 18 Portfolio construction Questions ? ? ? ? ? ? ? ?


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