The year in review
‘According to the data,' said the lead to The New Yorker's year-end wrap, readers ‘like to read about Trump and his family, as well as sex, death, music, and food.'
Intelligent Investor members, again according to the data, subsist on a less bacchanalian diet of buy recommendations. If you own Woolies' shares, there's your food. For death, sex and music I'm afraid you'll have to look elsewhere.
Key Points
-
Buy recommendations popular as ever
-
Don't forget to check out Sells
-
Back on 5 January
Which is not to say this year has been dull. On 24 June, 64 million Poms, including expats James Carlisle and myself, woke to Brexit. Politics has frequently induced in me anger and frustration but never tears, as it did that day.
The only upsides were the fleeting opportunities, published in our most read story of the year, the Brext buy list by research director James Carlisle. Rising early on a Sunday, members appreciated his timely response.
Its popularity was also satisfying, demonstrating a readership that understands the profit-making possibilities of confusion and fear (which is good because next year we're likely to get plenty of that). Although with some of the stocks mentioned still underwater, I hope that another lesson intrinsic to the success of investing – patience – is as well understood.
The popularity of new Buys is a point well made by Table 1. This is our bread and butter, the key to our long-term outperformance since we began our Growth and Equity Income portfolios 15 years ago.
Article | Publication Date/ Recommendation | Price @ 20/12/16 |
---|---|---|
Brexit buy list | 26 Jun 16 (N/A) | N/A |
PM Capital backs foreign banks | 19 Jan 16 (Buy – $0.91) | $0.99 |
Counting dollars at Macquarie | 10 Feb 16 (Buy – $59.72) | $87.25 |
South32 gets popular | 21 Apr 16 (Buy – $1.75) | $2.62 |
Computershare: Interim result | 12 Feb 16 (Buy – $9.28) | $12.32 |
Unlocking value in Amaysim | 24 Mar 16 (Spec Buy – $1.90) | $1.86 |
Time to hang up on Vocus | 2 May 16 (Sell – $8.93) | $3.73 |
Woolworths axes Masters | 19 Jan 16 (Buy – $23.65) | $23.65 |
South32 Crapco no more | 14 Jul 16 (Hold – $1.91) | $2.61 |
Opportunity calls at TPG | 17 Nov 16 (Buy – $7.01) | $6.61 |
It's satisfying to see a Sell on the list, too. Avoiding as many wealth-destroying investments as one can – avoiding them all is impossible – is essential. Vocus was undoubtedly a good call, having since fallen 58%, so whilst the Sell List gets less traffic than our Buy List, please don't neglect it.
New features
What staff members call Company Pages – featuring an overview of the business, share price chart, recent reviews, financial data, dividends and announcements etc – are also popular, with South32, Woolworths, Telstra, ANZ Bank and BHP the top five most visited.
This year, we've added a few features to make them more useful. You can now select a timeframe (the blue shaded area below the chart) and view all our recommendations on a particular stock, plus dividends paid over the period. Hover over any of the recommendations and in the top right you'll see the price and date it was made (click and you'll go to the review). Here's an example - the chart for Macquarie Bank since Jun 2011.
Such are the benefits of being part of a bigger company with a dedicated IT team able to bring to fruition good ideas like this. Still, I know some members are a little confused by InvestSMART's purchase of Intelligent Investor 18 months ago and the more recent purchase of Eureka Report.
Naturally, there have been a few changes but in my opinion most have been beneficial, with the company page functionality a good example. We have also invested in an expanded research team, which now numbers 10, allowing us to cover more smaller companies (ETFs and a small companies fund are coming soon) and have launched investible portfolios that mirror our Growth and Equity Income portfolios for members that like what we do but don't want the hassle of buying and selling themselves.
Deputy head of research Gaurav Sodhi's Star Trek obsession also featured in the naming of our new video features, and next year we'll have more interviews with CEOs and interesting fund managers. Such are the benefits of a better-resourced business.
Three services in one
As part of your subscription, you also get complimentary access to Eureka Report, covering wealth and advice issues, with a newly introduced section called Super Advice. It's a timely addition, with the rules around superannuation and pensions set for their biggest overall in 30 years (see our special report: Your Super in 2017 for details. Members also have access to InvestSMART's portfolio manager, which proved a hit on our recent roadshow. Just use your Intelligent Investor login to access these additional, free services.
Five Best Buys for 2017 |
Top 5 Small Caps for 2017 |
Your Super in 2017 |
Still, the merging of these three businesses has caused some angst. It's also true that we haven't done a great job at explaining how these business work together, nor addressed concerns about what the future may hold for them. So, let me do that now.
Intelligent Investor features the same analysts, using the same investment philosophy, delivering the same high-quality research, as it always has. That will not change. Our reputation has been carefully nurtured over 18 years, a fact appreciated by InvestSMART chief executive Ron Hodge. That's why we're investing in an expanded team and, bit by bit, improving our website.
As to how the businesses interlock, it's a response to the needs of self-directed investors. Intelligent Investor delivers stock research, Eureka Report wealth management and personal finance advice across multiple asset classes, and InvestSMART a range of tools and products to make managing your portfolio easier. There really isn't much overlap, but together it's a compelling package. (If you still have concerns, please email us at info@intelligentinvestor.com.au.)
The year ahead
With the housekeeping out of the way, a few thoughts on the year ahead.
The pontification and grand pronouncements made around this time last year didn't count for much did they? The same is likely to be the case in 2017.
Even so, the market reaction to Trump's election victory as staggering. Initially, stocks fell rapidly as the prospect of a Trump win increased. When the result became clear, a reversal took place which has since continued. New highs in the S&P 500 have been more frequent than a Trump tweet. For investors yet to be convinced of the irrationality of markets, this was wonderful evidence.
The promise of the end of cheap money, fiscal stimulus and massive corporate tax cuts has produced a reaction, at least in the US, that seems to imply future economic growth of 4% or more, despite recent experience of rates less than half that.
This prospect seems less certain than markets are pricing in. Trump will be constrained by a Republican Party against increasing deficits, the natural consequence of corporate tax cuts and fiscal stimulus. It is no small irony that lefty Europeans doggedly resist fiscal stimulus when they so clearly need it while a Republican US President-elect promises stimulus when it's one of the few Western nations growing at a respectable clip.
Tomorrow, the Federal Reserve is likely to announce a 25-point increase in interest rates, only the second in a decade. This is likely to confirm the ‘normalisation' narrative and that, phew, everything's returning to normal so we can all buy stocks.
I'm unconvinced. Australia is now more troubled than it was a year ago, with the recent wage growth figures a particular cause for concern along with a growing budget deficit.
Back on 5 January
Moreover, our economy is wedged between an increasingly belligerent US and a debt-ridden China suffering capital outflows, which is likely to reduce demand for our commodities. Against that backdrop, stocks don't look particularly cheap. With the All Ordinaries Accumulation Index up 10% since the beginning of the year and investors perhaps underestimating the chance of the RBA cutting rates, recent optimism seems overdone.
Here, I'll return to last year's end of year wrap: ‘As Australia struggles to make the transition away from digging stuff up to something more sophisticated, the recession threat remains. That doesn't change the fundamental task of an intelligent investor one bit. Just like last year, 2015 was all about stock picking. Next year will be the same again.' And so will 2017. Stocks will again be our focus, not trying to predict what may or may not happen.
Aside from enthusiastic blog contributors, this will be the last you'll hear of us this year. We'll be back on the 5 January with an update on how Sydney Airport is dealing with the prospect of a new airport in the city's west, followed the next day by the 2016 research highlights and lessons, as nominated by the team.
Thank you once again for your support this year, enjoy the break and we'll see you, fatter and refreshed, in a few weeks.