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Gary on SKY News YMYC – 15th September 2011

Together with co-guest Jeremy Hook from TMS Capital, Gary discussed the recent turmoil and volatility in world financial markets, the buying zone for the ASX and All Ords as well as the recent bounce off support levels for our local markets.

The panel also discussed the importance of portfolio weighting, diversification, and caution in the current uncertain market along with the following stocks.

Ironbark Zinc (IBG) (a current SWS entry), MHM Metals (MHM), AWE Limited (AWE), Central Asia Resources CVR, Sipa Resources (SRI), Billabong (BBG), Transurban (TCL), Growthpoint Properties Australia (GOZ), Decmil Group (DCG), Macquarie Group (MQG). OBJ Limited (OBJ), Paperlinx (PPX), Bathurst (BTU), and of course Lynas Corporation (LYC), which is a favourites from callers whenever Gary is on the show.

The panel also discussed the importance of portfolio weighting, diversification, and caution in the current uncertain market.

Gary’s next appearance will be on the 1st of November when he and his members return from their SWS retreat in Hawaii.

Double click inside the box or click PLAY below to view the footage.

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  • Paul Robinson says:

    Just wondering why our (Australian) banks will be ‘whacked’ in the event of a Eurozone bank meltdown?

    And good advice on OBJ – it needs to have some substance rather than empty promises to justify even its current price.

    • Gary Stone says:

      Response to Comment by Paul:

      Banks: Major banks’ share prices around the world are down large %ages over the last 8 – 10 weeks. For example, BAC (Bank of America) down over 40% since early July and > 65% since early 2010; DB (Deutche Bank) down > 50% since 1 July and around 65% since early 2010; UniCredit down 60% since April 2011, Paribas down 50% since early July; Barclays down 45% since early July, plus many others.

      In comparison, Australian banks are down as follows: ANZ down 15% since July 2011 and 25% since early 2010; CBA down 15% and 27% since July 2011 & early 2010, respectively; WBC down 15% and 33%, respectively; NAB down 18% and 27% respectively. This is measured to their recent lowest low within the last month or so.

      It would be true to say that Australian Banks, whilst down, are outperforming their offshore counterparts. Certainly from a technical viewpoint and maybe even from a fundamental veiwpoint (I haven’t done the fundamental comparisons).

      Australian banks are all hovering above major technical support levels whereas most international banks have broken well below their previous support levels.

      At the moment it is perceived that Australian banks are somewhat immune to the issues in Europe and the United States. If that perception remains in tact that the Australian banks share prices might hold or even rise. However, if that perception changes then there might just be some catching up to do on the downside.

      At the end of the day Austrlian banks are just as leveraged on their loan books as any other commercial bank around the world and if credit dries up again as per 2008 then it is unlikely that they will remain immune.

      OBJ: Nothing to add to the response provided on Sky News. Consider this stock too illiquid to trade.

      Trust that this helps.


  • Jeff Walters says:

    Interesting reply on the banks – I must admit the fundamentals of CBA and ANZ are doing my head in. From my very limited investing experience CBA is showing around 7-7.5% divs plus franking credits plus any capital growth. When you consider you can borrow at around 7% it’s hard to see how borrowing to buy this bank how you could go wrong. Sure the price may drop – the div may even be cut – but hey – let’s looking forward 3-5 years – it’s the CBA. Seriously what am I missing here.

    • Gary Stone says:

      Response to Comment by Jeff:

      You hit the nail on the head with “let’s looking forward 3-5 years”. The issue is what investing horizon one has.

      With a 3 – 5 year horizon, or even longer, there shouldn’t be fundamental problems with a business such as CBA, but remember, “anything can happen”. Perceived “blue chip” businesses have failed altogether – there have been numerous casualties over the last 3 years in the USA and Australia: ABC Learning, Babcock & Brown, Allco, Lehmans. I only put that forward to get you thinking that “anything can happen” not to imply in anyway whatsoever that this may happen with CBA or any of the Australian commercial banks.

      If you have a long term investing horizon and believe (due to fundamentals or whatever) that a company’s share price will recover over the long term then you MUST stick with that horizon and not get sucked into selling at the bottom or when the share price is super deflated (if that eventuates), provided the criteria for holding right now are still in place when the share price is well down – there are many variables that can influence stock prices outside of just their own business fundamentals.

      However, if one has a shorter investing horizon then criteria should be put in place to cut out of a stock to avoid the risk of being a forced seller at much lower prices and hence resulting in a large loss trade in a portfolio. This is one of the main drivers behind being a medium term active investor. Another is getting access to compounding of profits.

      Lastly, dividend yield should not be used on its own as a criteria for owning a stock. Allco had a dividend yield of over 5% when it announced its last dividend and that yield more than doubled while its share price plummeted all within 6 months of its previous Ex-Div date. ABC Learning had a Div Yield of over 11% on its final Ex Div announcement date and that yield also more than doubled over the next 3 months. They were both delisted and shareholders lost their entire investment. Fundamental investors also need to look at Debt to Equity, Return on Shareholders Equity and rolling trailing 3, 5 & 10 year EPS and DPS growth and even forecast EPS and DPS growth if you can get access to the numbers. Whilst these will typically show issues with a business before a fatality it is not always the case.


  • david cohen says:

    I hold IBG heared your comenets on YMYC few thing i like to bring to ur notice with this stock

    – twiggy , bill paterson , glencore, nyrstar r top 20 shareholders

    – Nyrstar in all its presentation has always included IBG has it next big growth project

    – Both Nyrstar and glencore paid premium to get the shares

    – top 20 hold close to 85% of the stock

    – minmetals resources has just signed MOU for off-take agreement via NFC nyrstar did the same kind off take agreement

    – three of world biggest zinc player all want a share in IBG

    anyway it great to hear abt IBG from u guys there has hardly been any coverage

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