HOW TO RULE THE STOCK MAR­KET

From your phone – no bro­ker nec­es­sary.

GQ (Australia) - - INSIDE -

“STOCKS ARE CHEAP... AND YOU CAN TRADE THEM ON YOUR IPHONE.”

Peter Mor­gan was 26 when he walked on to the trad­ing foor at Bankers Trust in Syd­ney and into his dream job. In his un­fulflling frst gig as an ac­coun­tant, he’d learnt to speak the lan­guage of money. As a rookie stock­bro­ker he would learn how to make it. “I got a taste for it. I loved it,” he says. And then, af­ter three months of trad­ing shares, the mar­ket crashed 25 per cent. It was Black Tues­day, Oc­to­ber 20, 1987, the big­gest sin­gle fall on any day in the his­tory of the Aus­tralian stock mar­ket. “There was car­nage ev­ery­where. I re­mem­ber the Telex, this was the day of the Telex, was 100 me­tres long with sell or­ders from over­seas. And I had th­ese two se­nior guys near me. It was in­ter­est­ing to watch them. For want of a bet­ter word, they at­tacked. When the mar­ket takes a hit overnight, the best buy­ing is the next morn­ing. You don’t panic.” The young Mor­gan mas­tered the craft of how to in­vest, be­com­ing one of Aus­tralia’s most fa­bled stock-pick­ers. Man­ag­ing $10bil­lion of other peo­ple’s money at Per­pet­ual he reg­u­larly achieved 14 per cent an­nual re­turns. Top of his tips for rul­ing the share­mar­ket: be aware of what the herd’s do­ing. “There’s a lot of psy­chol­ogy in mar­kets as there is in peo­ple. It’s hard to step away from the crowd. It’s hard to do that at times. It’s hard to be pa­tient.” Think the stock mar­ket isn’t for you? Think it’s only house prices that have boomed? Here’s some num­bers to chew over. Over the past 20 years, Aus­tralian res­i­den­tial prop­erty val­ues have grown by an av­er­age of 9.8 per cent an­nu­ally. Aus­tralian shares, mean­while, have kept pace at 9.5 per cent. And if the shares seem to foat around in a soup of uniden­ti­fa­ble acronyms – ETF, EPS, a VWAP – here’s an­other you’re more fa­mil­iar with – FOMO. “We’re see­ing a shift to­wards younger cus­tomers, in par­tic­u­lar over the last cou­ple of years,” says Ryan Dins­dale, gen­eral man­ager of cus­tomer ex­pe­ri­ence at Com­msec, Aus­tralia’s big­gest on­line bro­ker. More than half of Com­msec’s new cus­tomers are aged un­der 35, the bro­ker es­ti­mat­ing that 28 per cent of over 25 to 35 year olds – have bought their own shares. Two big fac­tors are lur­ing younger Aus­tralians into trad­ing. Smart­phone apps make buy­ing and sell­ing stocks as speedy as hail­ing an Uber and watch­ing your for­tunes rise and fall is as ad­dic­tive as Candy Crush. Se­condly, any­one can start buy­ing shares as soon as they have $500 – the min­i­mum re­quired un­der Aus­tralian Stock Ex­change rules. By con­trast, a house de­posit will set you back roughly 100 times that amount. “Stocks are cheap, you don’t need much money,” says Sam Hen­der­son, CEO of fnan­cial plan­ning frm Hen­der­son Max­ell. “They’re liq­uid, so you can move in and out and tech­nol­ogy means you can trade them on your iphone.” With banks and bro­kers in­vest­ing in state-of-the-art, easy-to-use share trad­ing apps, the chal­lenge isn’t work­ing out how to buy shares, rather it’s what to buy. Per­haps the eas­i­est way to wade in is through CMC Mar­kets Stock­broking. Its desk­top por­tal has a func­tion called the­screener, which takes moun­tains of anal­y­sis about in­di­vid­ual com­pa­nies and boils the lot down to a four star rat­ing sys­tem. Keep an eye on sud­den changes in the num­ber of stars and you’ll have a hunch of what to buy and when. It makes in­vest­ing about as sim­ple as Mar­got Rob­bie ex­plain­ing sub­prime mort­gages while drink­ing cham­pagne in a bub­ble bath in Wall Street fick, The Big Short. “There are some hardcore al­go­rithms go­ing on in the back­ground,” says Andy Rogers, head of CMC Mar­kets Stock­broking. “We in­vest a lot of time and money in us­abil­ity. Whilst there’s a lot of per­ceived com­plex­ity in fnance, in terms of the plat­form, we feel that we’ve failed in our job un­less it’s easy to use and in­tu­itive.” But if you re­ally want to rule the mar­ket, you’ll need to do more of your own re­search. When Hen­der­son is think­ing about buy­ing shares in a com­pany the frst thing he looks at is what it’s earn­ing and what peo­ple think its fu­ture earn­ings will be.

“I want to see that fore­cast is pos­i­tive,” he says. That means seek­ing out the ex­perts, typ­i­cally an­a­lysts whose re­ports into fore­cast earn­ings per share [EPS] are writ­ten up in busi­ness me­dia web­sites. But you can be an ex­pert too. “You need to ask your­self are the com­pany’s profts sus­tain­able?” says Hen­der­son. A com­pany like Wool­worths has been very proftable over a long pe­riod of time, but you have dis­rupters com­ing in like Aldi, cut­ting prices and Wool­worths are los­ing value.” Mor­gan, now 54 and a pri­vate in­vestor, agrees your own ‘shop­ping cen­tre’ anal­y­sis can be valu­able. “There’s a lot of psy­chol­ogy in mar­kets as there is in peo­ple. It’s hard to step away from the crowd and be pa­tient. But take Dick Smith,” he says of the iconic elec­tron­ics re­tailer that went un­der this year when its plug was pulled by lenders. “Any­one could work out it had prob­lems, no one was ever in there. It’s a re­ally quite sim­ple anal­y­sis but it’s also pretty ac­cu­rate. You have to ob­serve things.” Mor­gan has three big ‘Ds’ when it comes to in­vest­ing. Don’t bor­row money to get into the mar­ket, di­ver­sify and don’t bet the house. “There’s en­joy­ment in in­vest­ing,” he says. “Even when you lose, you’ve learnt some­thing.” And when you’re on to a good in­vest­ment, some­times it makes sense to just stick with it. “If you’re a surfer, you know the hard­est de­ci­sion is to stay on that wave or get off and pick an­other one. There may not be an­other wave, and there may not be an­other com­pany. It can be bet­ter to keep on it and ride it all the way to the beach.” n

PM MAL­COLM TURN­BULL AT THE LAUNCH OF ON MAR­KET BOOKBUILDS; MAR­GOT ROB­BIE IN THE BIG SHORT.

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