1. Copyright © Colin Nicholson
How to select safe stocks most likely to outperform the market Colin Nicholson Trading and Investing Expo Brisbane 2 June 2013
Copyright © Colin Nicholson

2. Colin Nicholson 02 9439 9724 colin@bwts.com.au
This presentation and the slides for it are copyright to Colin Nicholson
If you wish to transmit any part of this file to another person, please obtain my permission before doing so
Thank you
Colin Nicholson
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3. I am not a licensed investment adviser
The views expressed today are intended only for discussion and education
They are neither intended to be, nor are they suitable to be, acted upon as investment advice
It is advisable to obtain investment advice from a licensed adviser before making any investment decisions based on my presentation
I am not a licensed investment adviser
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4. Copyright © Colin Nicholson
Seven things to look for in a stock that will keep you safe
Investment grade
Rising in price
Growing earnings and dividends
Moderate price earnings ratio
Relatively high franked dividend yield
Appropriately low debt to equity ratio
Return on Equity above cost of capital (trend important).
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5. Copyright © Colin Nicholson
Selecting safe stocks to outperform
Filter the market for stocks meeting ALL of these criteria:
Market cap > $99 million
PER > 0
DY > 0
52-week high in last week
I ran a scan as of the close Wednesday 29 May
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Total
32 stocks
of interest
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8. Copyright © Colin Nicholson
Example
Thorn Group
(As of 29 May 2013)
Disclosure
I owned Thorn Group when I prepared this presentation. To check my stock holdings at any time go to and click on the Portfolio Disclosure link at the bottom of the home page.
Important
Thorn Group may not be a suitable investment for you at this or any other time.
You need to assess its relevance to your investment plan, seeking advice from a licensed adviser if you are not able to make such an assessment for yourself.
I am using Thorn Group here only as an example to teach investment analysis. In doing so, I am not making or implying any recommendation for anyone to invest in this stock.
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9. Thorn Group long term monthly chart
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10. Thorn Group medium term weekly chart
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11. Thorn Group short term daily chart
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12. Earnings and dividend growth
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13. Return on equity above the cost of capital
Assume cost of capital
12%
Thorn Group
18%
Trend is also important...
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Return on Equity
(level and trend)
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15. Moderate price earnings ratio
For value stocks (cyclical)
Significantly below All Ordinaries average PER
All Ordinaries average PER
17.54
Thorn Group PER
10.92.
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16. Relatively high dividend yield*
For value stocks (cyclical)
Significantly above All Ordinaries average yield
All Ordinaries average yield
3.94%
Thorn Group yield
4.82%.
*Franking: Thorn Group dividend fully franked
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17. Appropriately* low debt to equity ratio
For cyclical stocks
40%
Thorn Group
18.6%.
*Appropriate:
Nature of the business
Your risk tolerance and experience
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18. Copyright © Colin Nicholson
Fix a stop-loss level
Stop-loss at $1.93
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19. Calculate position size
Meaningful stake,
but provides
diversification
Actual risk to capital
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20. Copyright © Colin Nicholson
We are now at the point
of making a decision
Do you want to invest in
Thorn Group?
Why?
Why not?
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21. Copyright © Colin Nicholson
Seven things to look for in a stock that will keep you safe
Investment grade (safety)
Rising in price (performance)
Growing earnings and dividends (performance)
Moderate price earnings ratio (performance)
Relatively high franked dividend yield (performance)
Appropriately low debt to equity ratio (safety)
Return on Equity above cost of capital (performance).
Copyright © Colin Nicholson

22. Copyright © Colin Nicholson
My complete
investment plan
New Make better
investment decisions
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