Trading Portfolio
The Vivid Trading Portfolio is an aggressive strategy designed to produce returns by implementing a range of short term trades. To discuss if this may be an appropriate addition to your investment portfolio please contact your Adviser.
Many trades are restricted to investors who qualify as Sophisticated Investors, as defined under Australian Corporations Law, this limits the distribution of particular opportunities to qualifying investors.
Security NAB - National Australia Bank Limited
Entry 16-Jun-10
Exit Open
Return Open
We have initiated a position in NAB based on attractive fundamental valuations suggesting strong medium term opportunity at current prices. The share price is experiencing some short term uncertainty as it awaits the ACCC decision on its bid for AXA and is trading at a significant discount to its fellow big four competitors. This discount appears to be unjustified so we are hoping to capitalise on any upside as this disparity converges.
Security QBE - QBE Insurance Group Limited
Entry 4-Jun-10
Exit Open
Return Open
We have opened a position in major insurance company QBE, which has been out of favour in recent times. The company has significant international earnings that are subject to currency fluctuations, which have been adversely impacted by the recent decline in the Australian dollar exchange rate with both the US Dollar and UK Pound. However the market’s major concern was the company’s exposure to the oil spill in the Gulf of Mexico.
Yesterday the company announced that their exposure was well within current provisions, allaying some of the market’s fears, and we have also seen an improvement in the Aussie dollar from recent lows. Management is very highly regarded and we expect to book a profit on a short term bounce in QBE.
Security TCL - Transurban Group
Entry 4-Jun-10
Exit Open
Return Open
Today we have established a trade in Transurban, as we think the shares look particularly good value at current levels. After a rejected takeover attempt from one of the major shareholders who subsequently sold out of their position, TCL has traded from above $5 to a low of $4.13 towards the end of May. The company owns irreplaceable monopoly assets that are valued well below replacement cost at current prices and we expect to see the share price trading above $5 in the near future.
Security MGX - Mount Gibson Iron
Entry 24-Mar-10
Exit 14-Apr-10
Return 8.03%
See AGO below
13th Apr 10: Our trailing stop loss was breached and we have exited our position for a healthy gain of approximately 8%.
Security AGO - Atlas iron Limited
Entry 24-Mar-10
Exit 15-Apr-10
Return 18.19%
As part of a play on increased demand for iron ore as the global economy recovers we have opened half positions in two related companies. Both AGO and MGX are involved in the exploration, development and mining of iron ore in Western Australia and are of roughly the same market capitalization ($1-1.2B).
9th April 10: Both these positions have triggered trailing stop losses which means we have pushed well into positive territory and will definitely book a profit. We look forward to some more momentum from these to continue our positive run.
15th April 10: Our trailing stop loss was breached and we have exited our position for a significant 18% gain.
Security BOW - Bow Energy Limited
Entry 3-Mar-10
Exit 9-Mar-10
Return 18.96%
BOW Energy Limited is an exploration company focused on the discovery of commercial oil and gas fields in several of Australia's producing Basins. Based on some promising fundamentals and technical indicators we have attempted to open a half position in BOW. Unfortunately the price ran away from us before we were able to get filled at our desired entry price, only buying 30% of the volume we wanted. However, the positive news is that we are sitting on a healthy gain for the small position that we managed to open (as of 8-Mar-2010).
9th Mar 10: Our trailing stop loss was triggered today and we exited our position for a 18.96% return.
Security ARU - Arafura Resources NL
Entry 17-Feb-10
Exit 5-May-10
Return -19.52%
Arafura Resources is a unique Australian company specializing in mineral exploration for rare earth metals. The global demand outlook for rare earth resources looks set to increase and ARU's current Nolan's project is well poised to participate in this opportunity (especially with little competition in the the supply of rare earth metals outside of China). We have participated in a placement at a generous discount to the current share price. We look forward to a positive result.
5th May 10: Our stop loss was breached, exiting the position for a 19.52% loss.
Security CEY - Centennial Coal Company Limited
Entry 12-Feb-10
Exit 9-Mar-10
Return 5.81%
Centennial Coal is a coal mining and marketing company which exports about 50% of its output. We have opened up a half position in CEY as part of a play on recovery in Asia for energy demand.
9th Mar 10: Our trailing stop loss was triggered today and we exited our position for a 5.81% return.
Security BLY - Boart Longyear Limited
Entry 12-Feb-10
Exit 20-May-10
Return -18% (TBC)
Boart Longyear is an integrated drilling services provider and products manufacturer for the mining industry. We have previously held a trading position in BLY that provided a positive result and believe the outlook is again promising for another win this time around. A half position has been opened with BLY.
20th May 10: Our position was caught up in the severe market downturn this past two weeks and we have been unfortunately stopped out for an approximate 18% loss (TBC).
Security AUN - Austar United Communications Limited
Entry 12-Feb-10
Exit 20-May-10
Return -17% (TBC)
Austar United Communications is a provider of subscription television services in Australia, offering primarily digital satellite services to customers in regional and rural areas. Supported by positive analyst sentiment we project good growth opportunities and have opened up a half position.
20th May 10: Our position was caught up in the severe market downturn this past two weeks and we have been unfortunately stopped out for an approximate 17% loss (TBC).
Security CEU - ConnectEast Group
Entry 14-Jan-10
Exit Open
Return Open
CEU is a single purpose entity responsible for the EastLink tollway project that provides key north/south links through east metropolitan Melbourne. We believe there exists positive outlook for growth with CEU with promising traffic figures and broker sentiment.
Security OZL - OZ Minerals Ltd
Entry 14-Jan-10
Exit 27-Jan-10
Return -10.01%
As part of a play on copper we have opened up positions in both OZ Minerals Ltd and Cudeco Ltd in equal volumes (1/2 our regular position in each). With current expectations of general economic recovery coupled with ideas of a potential global copper supply deficit we are hopeful of gaining some momentum from this position.
27th Jan 10: Unfortunately OZL was not able to hold on and we had to exit our position for a 10% loss.
Security CDU - Cudeco Ltd
Entry 14-Jan-10
Exit 20-Jan-10
Return -10.15%
As part of a play on copper we have opened up positions in both OZ Minerals Ltd and Cudeco Ltd in equal volumes (1/2 our regular position in each). With current expectations of general economic recovery coupled with ideas of a potential global copper supply deficit we are hopeful of gaining some momentum from this position.
20th Jan 10: We were unfortunately stopped out of our position as a result of general market momentum on the downside. OZL is still holding on and with its recent positive earnings results we are hoping it will be able to claw back the disappointing CDU result.
Security MQG - Macquarie Group Ltd
Entry 07-Dec-09
Exit 22-Jan-10
Return 4.75%
A position has been opened in the home grown investment bank Macquarie Group with positive looking fundamental and technical conditions. There is strong broker sentiment pricing in moderate upside potential (around 16% on average) which we are hoping to capture.
22 Jan 10: Our trailing stop loss was triggered today amongst significant negative sentiment across the market locking in a return of 4.75%.
Security SGM - Sims Metal Management Ltd
Entry 27-Nov-09
Exit 15-Jan-10
Return 16.05%
Sims Metal Management Limited has worldwide operations focusing on recycling metals and a wide range of other materials.
A placement was made to raise $400M at a price of $21 (5.3% discount to the last traded price) to help fund acquisitions and further capital expenditure.
(Sophisticated Investors Only)
15th Jan 10: We've exited our position in SGM today for a healthy return of approximately 16%.
Security AMC - Amcor Ltd
Entry 18-Nov-09
Exit 21-Jan-10
Return 7.14%
A position in global packaging company Amcor has been added based on both technical and fundamental analysis. All major brokers have a buy recommendation on the company and the average of their price targets are a little under $6.50, compared with our entry point of $5.56. This looks to be undervalued and we are hopeful of another positive result in the portfolio from Amcor.
21st Jan 10: We've exited our position in AMC today for a return of 7.14%.
Security KMD - Kathmandu Holdings
Entry 13-Nov-09
Exit 05-Jan-10
Return -10%
Kathmandu Holdings had a successful debut for its Initial Public Offering. New shares were issued to investors at $1.70 and they have subsequently traded as high as $1.82, however only briefly. We are sitting on an unrealised profit, and expect that this sector will receive more support after stronger than expected results for major retailers in the US.
5th Jan 10: Despite the positive start from the float KMD has traded rather miserably since. Today we were stopped out of our position and have managed to exit at our target stop loss.
Security NXS - Nexus Energy Limited
Entry 13-Nov-09
Exit 27-Nov-09
Return -10.4%
Nexus Energy Limited is involved in the exploration and development of oil and gas. The decision was made to open a position on the basis of a combination of both fundamental and technical analysis. Unfortunately our downside exit was triggered on the 27th Nov (when the market experienced a large fall across the board).
Security BLY - Boart Longyear
Entry 05-Nov-09
Exit 16-Nov-09
Return +11.37%
Boart Longyear is an integrated drilling services provider and products manufacturer for the mining industry. Having recently completed a capital raising, which was assessed as lowering the capital risks by at least one analyst, the company has received a number of rating upgrades.
Strong volumes in the BLY trading have seen us able to book a win on this transaction, in fact adding better than our anticipated 10% return.
Security MYR - Myer Group
Entry 02-Nov-09
Exit 27-Nov-09
Return -10.4%
A highly anticipated Initial Public Offering of the well known retailer was unfortunately listed in quite a weak short term environment. Having received a scale back on the amount for which we bid, we averaged down the entry price by topping up the shortfall on market when MYR listed. From an issue price of $4.10, we now have an average cost of $4.00 per share.
There are signs of support for MYR and with inclusion in major indices likely to trigger institutional buying we are still expecting a positive outcome on this trade.
27-Nov: A disappointing result for the first large IPO in a long time, which listed in a period of general weakness. Our position got caught up in the general market fall on Friday and we exited when the downside trigger was reached, capping losses on the trade at approximately 10%.
Security MIG - Macquarie Infrastructure Group
Entry 23-Oct-2009
Exit 13-Jan-2010
Return 2.82%
There has been some significant activity in the toll road sector of late, and MIG is one of the largest developers and owners of toll roads in the world, with a portfolio made up of 10 toll roads across seven countries. A major shareholder offered a line of shares in MIG for sale at $1.40, which is well below current price targets of analysts which are closer to $2. This trade remains open, and we are expecting a good return on this transaction. (Sophisticated Investors Only)
13-Jan-10: Our trailing stop loss was hit today locking in a modest profit of 2.82%
Security SRV - Servcorp Ltd
Entry 26-Oct-09
Exit 26-Nov-09
Return -11.2%
A placement from Servcorp raised $80 million to fund expansion of their serviced office business, known as their Virtual Office model. The funds raised are to be used to secure expansion of these facilities, with the intention of taking advantage of the distressed commercial real estate market to secure attractive deals on leased premises.
26-Nov-09: Shares in SRV traded sharply lower today and unfortunately our downside exit was triggered. We are managing the exit from this position, with approximately two thirds of the selling completed today.
01-Dec-09: Selling completed exiting for a -11.2% return
Security PDN - Paladin Energy
Entry 09-Oct-09
Exit 29-Oct-09
Return -12.48%
Paladin Energy is a uranium exploration and mining company with projects currently in Australia and two operating mines in Africa. The company has been supported as interest in uranium as an alternative energy source gains momentum. The share price suffered when September Quarter production was lower than expectations and unfortunately we exited having posted a loss on this trade.
Security PGA - Photon Group
Entry 19-Aug-09
Exit 09-Oct-09
Return +8.15%
Photon Group (PGA) is a marketing services company specialising in direct marketing, public relations, design, advertising, retail marketing & merchandising & email marketing. The company raised money via a placement, with the new shares also eligible to participate in a subsequent rights issue, resulting in a somewhat complicated trade. (Sophisticated Investors Only)
Fortunately the upshot of the various rights and conversions was a positive return, with portfolios pleasingly booking a solid return.
Security QBE - QBE Insurance Group
Entry 16-Sep-09
Exit 03-Nov-09
Return -10.0%
Analysis of the charts for QBE suggested reason for some optimism, however despite recording early gains the share price subsequently settled back and eventually our downside exit was triggered. With a significant portion of revenues derived offshore, a stronger A$ hurts QBE's performance.
Security VBA - Virgin Blue Holdings
Entry 09-Oct-09
Exit 29-Oct-09
Return -11.56%
Virgin Blue Holdings has established international operations under Pacific Blue and its three airlines provide domestic air services to 29 Australian cities and centres and 12 international destinations, as well as holiday packages under Blue holidays.
We have had some successes in the past adding positions in the Trading Portfolio in companies that have recently raised capital, however unfortunately this was not one of them. The share price was caught up in the correction in the broader market of late October, and we sold the position when our downside exit was reached.
Security WDS - WDS Limited
Entry 27-Oct-09
Exit 29-Oct-09
Return -7.80%
WDS provides services to the mining industry and had just announced that some of their expected revenue would now not be received in the current financial year, as several projects had been delayed but would still continue. The share price took a steep dive on the news which we deemed to be an excessive reaction, and added a position in the Trading Portfolio at $1.81, down from it's open that day of $2.
Unfortunately, the downside continued for the next two days and we had to sell this position when the downside exit was triggered.
Security SIP - Sigma Pharmaceuticals Limited
Entry 25-Sep-09
Exit 19-Oct-09
Return -9.4%
Another trade added to the portfolio after a very successful bookbuild that provided funds for an acquisition and reduced debt. The market support for the capital raising was very strong, and most analysts have a positive view and target prices significantly above our $1.07 entry price.
Sigma Pharmaceuticals is a leading Australian manufacturer of pharmaceuticals. It is also our most efficient pharmaceutical wholesaler. The company has in the past impressed on a number of fronts, displaying a capacity to grow both organically and by acquisition.
19-Oct: Sigma was unfortunately dragged by down with the overall market during October, and we exited this position when the downside trigger was reached at 98c.
Security ANZ - ANZ Group
Entry 01-Sep-09
Exit 28-Sep-09
Return +10.15%
ANZ provided an update to the market and one of the main criticisms by analysts was that they may now be over capitalised, a remarkable comment given the environment of just a few months ago. We expect that the bank will continue on the acquisition path, having recently agreed terms on the Asian assets of the Royal Bank of Scotland. Notwithstanding a market that has rallied strongly we are backing management's ability to deploy their war chest wisely.
28-Sep: A successful exit, with a gain of 10% achieved in four weeks.
Security ROC - Roc Oil
Entry 18-Aug-09
Exit 08-Sep-09
Return -8.9%
The company has recently raised money from both institutional and retail investors, with the former paying 78c per share and the latter paying 71c per share. After a couple of days of weakness in the oil price we have started adding a position in the Trading Portfolio at approximately 71c, with approximately 70% of buying completed on August 18 at an average price of just under 72c.
01-Sep: Our downside exit was triggered today, and we have commenced selling the holding, although we do hope to achieve better than the -10% downside cap.
08-Sep: The share price did not recover unfortunately and we have registered a loss of 9% on this investment.
Security SGP - Stockland Group
Entry 13-Aug-09
Exit 28-Aug-09
Return +9.8%
The addition of Stockland to the Trading Portfolio was based on a combination of fundamental and technical analysis. Recent price action suggested that momentum was gaining behind the stock, and the results announcement was made the day before adding the position. Whilst the headline result was a large loss, this was on the basis of reduced valuations on property assets which was expected. The operational result was actually fairly strong, and commentary suggested that the worst of the valuation reductions is now behind the company.
28-Aug: A successful exit, with a gain of approximately 10% achieved in around two weeks.
Security TEN - Ten Network Holdings
Entry 11-Aug-09
Exit 11-Aug-09
Return +10.45%
Television station Ten Network raised $138m from a placement of new shares at a price of $1.15 per new share issued. This was another vey quick turnaround position for the Trading Portfolio, with the position exited on the day new shares commenced trading on the ASX, having realised a profit of better than 10%. (Sophisticated Investors Only.)
Security LNC - Linc Energy
Entry 10-Aug-09
Exit 17-Sep-09
Return +10.53%
The company has been in negotiations with Chinese buyers for some of their assets but encountered some problems obtaining regulatory approval in China. Whilst these discussions continue they have raised money via a share placement at $1.40 per share. The company is favoured as it has innovative alternative energy technology that we believe will provide support in the medium term. (Sophisticated Investors Only)
17-Sep: Our price target was reached and we exited the position for slightly better than the 10% gain sought.
Security WHC - Whitehaven Coal
Entry 06-Aug-09
Exit 18-Aug-09
Return +10.9%
The company operates coal mines in New South Wales and is another to raise fresh capital via issuing new shares. In this case the issue was completed at $3.05 per share, the upper end of the suggested range as there was again very strong demand. In this case the discount to the last traded price before the raising was comparatively small at just 5%, however a couple of positive announcements have been supportive post the raising. As at close on 11 August the shares finished at $3.47 representing an unrealised gain of approximately 13.5%.
17-Aug: We have partially sold out of the position as the stock started to retrace a little. The average price of shares sold is a little more than $3.42, compared with the entry price of $3.05 per share.
25-Aug: The remainder of the holding was sold and overall a gain of nearly 11% was achieved.
Security NAB - National Australia Bank
Entry 30-Jul-09
Exit 31-Jul-09
Return +8.2%
Like so many before the, the bank raised money by issuing new shares to investors at a price of $21.50. We were again scaled back on our bid due to strong demand, but nevertheless received a reasonable allocation. The allocation in NAB shares was sold over two days and realised an average price of $23.73 providing a good return in just a two day holding period.
Security RIO - RIO Tinto
Entry 18-Jun-09
Exit 06-Jul-09
Return -9.5%
The company has recently abandoned plans to sell a large stake to the Chinese firm Chinalco, opting instead to raise money from existing shareholders via a placement. The share price dropped yesterday, as expected, as the shares began trading ex the entitlement to participate in the capital raising.
We added a position in the Trading Portfolios as the price dipped, and expect that continued news that the global economy is stabilising will be supportive of commodity prices and a rebound in the RIO share price.
06-Jul: Unfortunately we have exited this position as our stop loss trigger was hit at $48.56. The overall index is down nearly 5% since June 30, and RIO has dropped about 7% in the same period. The trading rules whereby we exit at -10% or +10% can be either friend or foe, only time will tell. To complete a successful trade we need not only a good idea, but also good timing. In this case, we think the idea was sound, but clearly the timing could have been better.
Security AIO - Asciano Group
Entry 17-Jun-09
Exit 23-Jul-09 & 24-Jul-09
Return +8.5%
Another trade entered after a company raises money and hence increase balance sheet strength. The market support for the capital raising was very strong, and most analysts have a positive view and target prices significantly above our $1.30 entry price.
24-Jul: The position was sold progressively netting an average exit price of $1.4266 and achieving a good return in the space of a little over one month.
Security AIO - Asciano Group
Entry Tranche I 01-Jul-09
Tranche II 27-Jul-09
Exit Tranche I 27-Jul-09
Tranche II 30-Jul-09
Return Tranche I +25.9%
Tranche II +34.4%
Sophisticated Investors participated in an institutional placement that was conducted in two parts. Legislation requires that where new shares are to be issued that represent greater than 15% of issued capital, that the approval of shareholders be sought at an Extraordinary General Meeting. This approval was received, and both tranches of this placement have subsequently provided very pleasing returns to investors.
Security PXS - Pharmaxis
Entry 03-Jun-09
Exit 11-Jun-09
Return +9.9%
Pharmaxis is a pharmaceutical company that develops therapies to treat respiratory diseases such as cystic fibrosis and asthma. The company joined the list of those raising money, however rather than just using the funds to pay down debt, the proceeds will help the launch of their product Bronchitol in both Europe and the United States. The share placement closed oversubscribed, which as usual meant there was a scale back on allocations, however another quick profit was achieved. Sophisticated Investors Only.
Security ANZ - ANZ Banking Group
Entry 28-May-09
Exit 29-May-09
Return +9.6%
At last a capital raising from a company that had a stated intention for the funds other than to strengthen their balance sheet and manage their debt position. ANZ is bidding for the Asian assets of Royal Bank of Scotland, which covers China and India as well as a number of other Asian countries. New shares were issued at $14.40 each, which we were able to sell today at $15.95 for a quick profit. Sophisticated Investors Only.
Security ORG - Origin Energy
Entry 22-May-09
Exit 08-Jul-09
Return -10.0%
We completed a successful trade between early April and early May in Origin Energy, entering the position at $15.08 and selling at $16.74 in the space of a month. Since that time the price of Origin has retraced to below $15, and we have entered another trade in this security.
Origin remains the highest rated stock by consensus of the major broking houses. Recent strength in commodities and in particular oil has been on the back of supply constraints, if stabilisation in demand is added to the scenario then we could see significant price appreciation.
08-Jul: Our stop loss was triggered today and we have therefore sold the position for a loss. This was a relatively long holding period for the Trading Portfolio, however despite showing some relative strength ORG eventually fell in line with the market and particular the resources and energy sectors, both of which are down by more than 9% in July alone.
Security NUF - Nufarm Ltd
Entry 18-May-09
Exit 19-May-09
Return +9.8%
Whilst we achieved a successful outcome on this placement, the demand was such that we were scaled back to just 10% of the amount which we were seeking. As a result the transaction is a small one, but nevertheless another one with a positive outcome. Sophisticated Investors Only.
Security STO - Santos Ltd
Entry 13-May-09
Exit 14-May-09
Return -9.0%
The company completed a very successful capital raising adding $1.75 billion to their war chest amidst rumours of a possible deal with Origin Energy. We added a position in the trading portfolios at a little over $15 on the expectation that like many before them, removing any questions about access to capital will provide some positive momentum to the share price. Any short term weakness in oil prices will work against this position, but we believe the balance of probabilities favours a positive outcome.
Sophisticated Investors: Strong support for the raising saw significant scale backs on our bid, we did however secure an allocation through the institutional placement at $12.50, and retain the position at this time.
14-May: Unfortunately this trade was made on the cusp of a couple of days that saw a sharp pull back and we quickly reached the downside sell price. Allocations to Sophisticated Investors remain in place.
29-May: Recent strength in both oil and gas prices has provided the opportunity to sell the shares issued to Sophisticated Investors for $12.50. We exited the position today $14.50 per share, showing a gain of +14.7%.
Security MQG - Macquarie Group
Entry 04-May-09
Exit 05-May-09
Return +11.7%
Macquarie's update to the market was keenly anticipated, and not surprisingly there was a sharp decline from last year's profit position, however the company was still profitable to the tune of $870 million, unlike many of their international counterparts. Also announced was that the company would be raising a little over $500m. Whilst we bid to participate in the placement of new shares we unfortunately did not receive an allocation this time, we have however added a position in the Trading Portfolio at $31.30. Our expectation is that the market will look favourably upon the strengthened balance sheet, and continued positive momentum will realise a profit in the near term.
05-May: A strong lead from the US meant the momentum was maintained in MQG share price and we were able to book the gain above 10% having held the stock for less than one trading day. Sophisticated Investors Only.
Security OST - OneSteel Ltd
Entry 20-Apr-09
Exit 20-Apr-09
Return +23.6%
Demand for shares issued under a new placement from OneSteel was strong, which meant we were allocated about 20% of the amount for which we bid. So whilst this was a smaller transaction than usual it was nevertheless a profitable one. We have sold the shares on the day we received the allocation to lock in a gain of just under 25%. (Sophisticated Investors Only)
Security CSL - CSL Ltd
Entry 04-Apr-09
Exit 29-May-09
Return -10.9%
The healthcare sector has been a relative outperformer during the bear market of the last 18 months. Companies including CSL have been sought after for their defensive characteristics during the market upheaval. The rally we have enjoyed during March saw this scenario turn around as the companies that had previously been the worst performers led the rally.
CSL had been trading above $38 at the end of February and retreated to around $30 towards the end of March. We added a 10% position in the portfolio on 03-Apr and expect we will see a 10% return in a relatively short time frame.
The company's share price suffered from news that the Federal Trade Commission in the United States will attempt to block the purchase of Talecris. Whilst we have in this case adhered to the trading rules for this portfolio and exited the position when the -10% trigger was reached, a similar number of shares has been purchased in non trading account portfolios.
We have strong conviction that at current prices the shares are oversold, backed up by the average target price of six analysts being $37.81, or some 30% higher than the re-entry price. This value gap may take some time to be closed, but we believe a profitable result will be achieved in time.
Security ORG - Origin Energy
Entry 03-Apr-09
Exit 04-May-09
Return +9.8%
The decision to add a position in ORG was influenced by a number of technical indicators that led us to believe recent positive outperformance is likely to continue. Combined with a view that the rally is gaining some momentum on the back of increasing investor confidence and signs that the freefall in global economic activity has abated, we are confident of a positive outcome for this trade.
04-May: The solid momentum in ORG continued throughout April and allowed us to exit this trade having made a 10% profit after transactions costs as anticipated.
Security FBU - Fletcher Building Limited
Entry 02-Apr-09
Exit 02-Apr-09
Return +8.7%
New Zealand based company Fletcher Building, which is also listed on the ASX, successfully completed a capital raising from an institutional placement of new shares and will follow up with a rights issue to existing shareholders. The company is using the funds to manage their debt positions and to provide balance sheet strength.
Existing shareholders were given priority in the management of the placement which meant that we only received about 9% of the amount for which we bid. The shares have been sold locking in a gain of almost 9% after transaction costs, but on a disappointingly small volume. (Sophisticated Investors Only)
Security AXA - AXA Asia Pacific Holdings
Entry 17-Mar-09
Exit 25-Mar-09
Return +21.5%
A placement from AXA that was very well supported, and unfortunately meant we received a scaled back allocation compared to the amount for which we bid. Nevertheless, the market has looked favourably upon the strengthening of the balance sheet post the raising and we were able to sell for a better than 20% return in a little over a week. (Sophisticated Investors Only)
Security SUN - Suncorp Metway
Entry 11-Mar-09
Exit 20-Mar-09
Return +27.8%
The same circumstances as described below provided a similar opportunity in Suncorp Metway shares for investors with a Next Financial Instalment investment. The new shares issued that could not be used in the instalment investment were sold at $5.75 each, realising a profit of $1.25 per share, before transaction costs.
Note this is a separate transaction to the one mentioned below in Suncorp, as administrative requirements meant a delay in transferring the new shares to these accounts, and a subsequently higher exit price.
Security WES - Wesfarmers Ltd
Entry 03-Mar-09
Exit 19-Mar-09
Return +35.2%
This trade is a great example of the advantages that a Managed Account structure provides. For investors in the Next Financial Instalment investment, we were able to utilise surplus entitlements to the rights issue from Wesfarmers in individual portfolios.
The structure of the instalment investment meant that only around 10% of the entitlement to new shares under the rights issue were able to used in the instalment. Rather than the surplus being wasted, we were able to have these additional shares issued to trading portfolios at the issue price of $13.50 per share. The shares were sold on market at around $18.45, representing a very welcome profit.
Security SUN - Suncorp Metway Ltd
Entry 19-Feb-09
Exit 19-Feb-09
Return +19.9%
A tumultuous period for the company has resulted in the departure of the company's Chief Executive, and a deeply discounted capital raising. Funds are being raised by issuing new shares at $4.50 per share, which compares to the price prior to the trading halt of around $7.00.
We were able to exit the position at an average price of $5.45, which after costs meant a return of nearly 20%, one of the better results for the Trading Portfolio. (Sophisticated Investors Only)
Security WDC - Westfield Group
Entry 12-Feb-09
Exit 06-Mar-09
Return -11.0%
Another capital raising, this time to raise $2.9 billion at $10.50 per share. The offer was well supported and scale backs were significant this time. New shares commence trading tomorrow (February 12), and the trade is currently showing a gain of nearly 5%.
06-Mar: The shares issued under this placement have drifted lower since issue, along with the general market. The downside trigger of -10% was triggered and we have exited the trade for a loss. (Sophisticated Investors Only)
Security QAN - Qantas Airways Ltd
Entry 11-Feb-09
Exit 09-Apr-09
Return -0.3%
Despite already having what is considered to be a strong balance sheet, Qantas has joined the list of companies raising money by issuing new shares. In this instance the shares were issued at $1.85 and will trade under the separate code QANN as they will not be entitled to receive the upcoming dividend.
Trade in QANN commenced on 11-Feb and at time of writing the shares are trading marginally below the issue price in a down market. This trade remains open.
Update: The position was exited in two trades, on 24-Mar and 09-Apr. After holding through several months of very difficult trading conditions we were able to exit effectively without recording a loss, despite showing an unrealised loss for much of the period for which the shares were held. (Sophisticated Investors Only)
Security LLC - Lendlease Corp
Entry 11-Feb-09
Exit 11-Feb-09
Return +4.2% *
The lead from the US market overnight was very bearish as investors were dissatisfied with the latest proposals on rescue packages from the new Obama administration. Despite our market holding up relatively well, having fallen by about 1% at lunch time compared with the S&P500 which fell nearly 5%, LLC has traded around the downside exit price for this trade. New shares in this capital raising were issued at $6.05, meaning the 10% downside was triggered at $5.45.
Believing that this was an example of a quality company being impacted severely in the short term but general weakness, the positions were sold for a loss of 10% from the trading portfolios. However we took the decision to replicate the exposure within client's main portfolios, and on March 19 were able to recover the loss realised in the trading portfolio, exiting LLC at $6.10. In the interim, LLC has declared a di