2012 Client Seminar Australian Financial Services Licence No. 237 435.
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Transcript of 2012 Client Seminar Australian Financial Services Licence No. 237 435.
2012 Client Seminar
Australian Financial Services Licence No. 237 435
2
Introduction
• Welcome
• How we manage your portfolio
• Some valuation considerations
• Owen Evans & Michael Peet – Presentation
• Using the client portal
3
The CIPL Team
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.
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
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 client’s portfolio. This is mainly because it takes four days to get the money in from date of sale (T+3)
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.
9
• Risk profile
• Request for income
• Weighting in portfolio
• Potential for capital gains
• Special situations
• Capital gains issues
Thinking behind recommendations
10
Measuring portfolio performance
11
How an IRR works
12
Other valuations - AIX
13
Other valuations - HDF
Some Thoughts on Investing ProcessesFalling Interest Rates and Retail Stocks
Owen Evans and Michael Peet11 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
Falling Interest Rates and Retail
Retail Sales Growth
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
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
Building Products
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
Approvals % on PcP
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Jun-
84
Jun-
85
Jun-
86
Jun-
87
Jun-
88
Jun-
89
Jun-
90
Jun-
91
Jun-
92
Jun-
93
Jun-
94
Jun-
95
Jun-
96
Jun-
97
Jun-
98
Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jun-
11
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
Long Term Housing Outlook
0
50
100
150
200
250
300
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011
Students 457 Other ST Permanent Total
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
What else is there?ANZ relative performance to ASX300
90
95
100
105
110
115
120
125
130
BRG relative performance to ASX300
90
110
130
150
170
190
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
Auto RetailersAHE relative performance to ASX300
90
100
110
120
130
140
150
160
170
APE relative performance to ASX300
90
110
130
150
170
190
5/09
/201
1
19/0
9/20
11
3/10
/201
1
17/1
0/20
11
31/1
0/20
11
14/1
1/20
11
28/1
1/20
11
12/1
2/20
11
26/1
2/20
11
9/01
/201
2
23/0
1/20
12
6/02
/201
2
20/0
2/20
12
5/03
/201
2
19/0
3/20
12
2/04
/201
2
16/0
4/20
12
30/0
4/20
12
14/0
5/20
12
28/0
5/20
12
11/0
6/20
12
25/0
6/20
12
9/07
/201
2
23/0
7/20
12
6/08
/201
2
20/0
8/20
12
3/09
/201
2
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
Auto SalesAustralian Total Vehicle Sales (ABS)
500000
600000
700000
800000
900000
1000000
1100000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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
The Boneheaded Miss
SUL relative performance to ASX300
80
90
100
110
120
130
140
5/09
/201
1
19/0
9/20
11
3/10
/201
1
17/1
0/20
11
31/1
0/20
11
14/1
1/20
11
28/1
1/20
11
12/1
2/20
11
26/1
2/20
11
9/01
/201
2
23/0
1/20
12
6/02
/201
2
20/0
2/20
12
5/03
/201
2
19/0
3/20
12
2/04
/201
2
16/0
4/20
12
30/0
4/20
12
14/0
5/20
12
28/0
5/20
12
11/0
6/20
12
25/0
6/20
12
9/07
/201
2
23/0
7/20
12
6/08
/201
2
20/0
8/20
12
3/09
/201
2
22
Questions