Kick goals in your portfolio
Follow this advice for a grand final-winning strategy for your share holdings
IT’S football finals time, when we watch in awe as the best teams in the AFL and the NRL battle it out for the 2018 premiership titles.
It’s the end of a long season, which can become a war of attrition. Teams and players have to battle setbacks but keep a focus on the strategy that got them to the finals and success.
In fact, it’s not too different to managing your own share portfolio.
A winning strategy is all about balance: having the right mix of stocks which deliver as a group, no matter the obstacles that are thrown up.
Once you have the right strategy and coaching support, team selection is critical.
We formed a match committee comprising sharemarket experts Julia Lee from Bell Direct and Elio D’Amato from Lincoln Indicators to come up with selections.
But, please, seek out your own individual independent advice before buying any shares.
The following is purely an exercise to show you how to build a portfolio, AFL style.
IN AFL the backline is that last line of defence to protect your goals when the play is moving against you. When it comes to share investing, defensive stocks play a similar role.
They are the quality companies which provide stability when momentum has changed, and the rest of the market looks a bit uncertain or soft.
They are your long-term defensive foundations. According to our match committee, the backline selections are:
● Cochlear Limited (COH): A global leader in the design and production of hearing implants which help individuals around the world with a profound hearing loss. It spends
10-15 per cent of revenue on research and development.
With a strong sales pipeline and investment into a new production facility in China, the future looks strong.
● Sydney Airports (SYD): With international passenger numbers at a high and stable cashflows, this stock should be around for generations.
● Transurban (TCL): Dominating toll roads in Sydney and with a portfolio that is active in the US, its returns should keep pace with inflation or better.
● ResMed (RMD): Has products primarily in the area of obstructive sleep apnoea. Strong growth is likely to continue. Healthcare products like this are considered defensive because people need to sleep in bad or good times.
THE AFL midfield boasts the
fast, nippy players who can ignite a team. They play a pacy high-risk game which can lift a team when they’re “on song” but can cause problems when they’re out of form.
In the sharemarket game, these are the companies which provide the flair – the stocks which can give a portfolio some real momentum. Here the match committee selected:
● Appen (APX): Provides language technology data and services such as speech recognition and content relevance in internet search engines to government and corporate enterprises. Recent acquisitions and massive spending into artificial intelligence technologies have been a boon.
● Jumbo Interactive (JIN): An innovative platform which powers Ozlotteries.com and enables it to have exclusive distribution agreements with leading lottery companies delivering games including Powerball, TattsLotto and Oz Lotto lotteries. Tabcorp owns 12 per cent.
● Mayne Pharma (MYX): Its core business is the production of generic medicines, which recorded revenue growth of 26 per cent. New products are potentially being launched in the current financial year, further adding revenue streams.
● a2 Milk (A2M): Is transformin g from an Australia/ New Zealand dairy company into a global one. With expansion into Asia, Europe and the US, growth is strong, with more to come.
The forwards have to be consistent performers but there needs to be a mix. The monster which provides the target surrounded by a group of small forwards who provide the flair and run off the big guy. It’s the same in a share portfolio.
● BHP Billiton (BHP): A resource giant offering a diverse focus on coal, copper, petroleum and iron ore. It has a geographically diverse highquality asset base, while top line sales are supported by demand, especially in China.
● CSL Limited (CSL): Manufactures biopharmaceutical products mostly derived from a component of blood plasma, and has a strong global competitive advantage.
● Macquarie Group (MQG): Diversified global financial services company with significant exposure to overseas income and pays an attractive dividend yield.
Substitutes in AFL are used to replace a player who is injured or out of form. They’re meant to plug a hole.
● IDP Education (IEL): isa provider of international student placement services and a leader in the delivery of English language proficiency testing required to gain entry into Australian universities. The company is 50 per cent owned by 38 Australian universities.
● Northern Star Resources (NST): Mining stocks are not ordinarily defensive, but NST is Australia’s premier gold producer. Gold is a good hedge against the threat of rising global inflation and uncertainty, plus a declining Aussie dollar benefits them.
● Lovisa Holdings (LOV): Retail fashion/dress jewellery with a focus on meeting the fashion accessory needs of the market at speed. Its platform will underpin a rollout of stores in new territories, such as the UK, Spain, France and US.
● Nanasonics (NAN): has a product called Trophon which is used to disinfect sensitive medical instruments.
● Woodside Petroleum (WPL): With world class oil and gas assets, this stock will benefit from global growth.