The golden rules for equities

Elio D’Amato, chief executive of shares researcher Lincoln Indicators, has a warning to investors such as those buying shares for their self-managed superannuation funds. And that is not to buy shares in companies because they are cheap without regard to a company’s financial health. D’Amato has been around long enough to have seen several of the greed and fear cycles of Australian shares. It has confirmed to him that companies in sound financial health are much better to withstand shocks like credit squeezes and changes in government policies than those in poor health.
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“Focusing on fundamentals can also help investors block out the noise and avoid being seduced by the latest investing theme or fad,” D’Amato says.

Lincoln’s financial health model assesses accounting ratios such as profitability, cash-flow, liabilities and assets. It gives a score to each company and highlights those in financial distress. If a company’s fundamentals are sound, investors should be rewarded with good long-term performance almost regardless of the industry sector it is in, he says.

A company with good fundamentals can still perform well in a struggling industry sector. He says investors should let the sector allocation be determined by the companies that have been selected on fundamentals.

Diversification is still important, as it is about the only free lunch in investing. But it “should be a diversified portfolio of the best companies on the market”, D’Amato says.

Of course, the prices paid for the shares are also very important. Most of the companies in the best financial health have shares that are fully priced. But that does not mean that such companies should be bypassed. The company may be paying very good, fully franked dividends. There may be well-founded expectations of continuing profit growth, such as with the big banks, for example.

In D’Amato’s opinion, companies with a “strong” or “satisfactory” score have acceptable levels of risk for investors and should, therefore, make up the bulk of an investment portfolio.

Companies with an “early warning”, “marginal” or “distress” score carry escalating degrees of risk and should be avoided by risk-averse investors, he says.

According to Lincoln’s analysis, only a quarter of the 2000 companies listed on the Australian sharemarket are in good financial health. The percentage of companies in good financial health rises greatly among the biggest companies. Eighteen of the 20 biggest companies by market capitalisation score a “strong” rating.

Of the top 20, only Macquarie Group has an “early warning” rating and oil and gas explorer and producer Santos has a “satisfactory” rating. An early warning rating is where a company may suffer financial stress unless measures are taken to rectify its financial health standing. In the case of Macquarie, the company is in a “transition period” after Macquarie split off a number of its investment trusts, D’Amato says. Santos has been marked-down because of its heavy capital expenditure.

So what are D’Amato’s top tips? He likes three stocks in particular – blood products maker CSL, Amcom Telecommunications and electronics retailer JB Hi-Fi. Each has a “strong” financial health rating.

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Would you invest $5000 in a parcel tag?

One 1939 parcel tag sold at a recent auction for $1980.Yes, that is a cardboard tag from an old parcel, and yes, it’s worth about $5000.
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That value is largely based on the rarity of the stamps stuck on it, but also because of its use.

These tags, and similar items described as parcel labels, are now considered an important part of postal history. They are sought after by increasing numbers of philatelists.

Prices paid for these started to rise about 15 years ago, peaking in about 2007 before the global financial crisis came along and slammed on the brakes.

On March 29, the largest collection to appear in recent times was listed at a Melbourne sale by Phoenix Auctions. That $5000 tag (pictured bottom) was passed in but the majority of the others, 21 out of 28 listed, sold for around their estimates.

The best price paid was $1980 (including buyer’s premium) for a 1939 tag featuring a rare £2 grey-black and crimson Kangaroo and map stamp (a tiny printing flaw adding to its value), along with three lesser Kangaroos and three other stamps on the bottom row.

According to the catalogue, “the tag is believed to have paid postage for a 27lb 9oz gold bullion shipment from Melbourne probably to California for refining …”.

A few minor blemishes affected its total value. The estimate was $2000.

“These appear from time to time,” says David Wood, Phoenix’s managing director. “They were selling for more two or three years ago, but are still trending upwards. The number of people collecting them has definitely increased.”

For Kangaroo stamp collectors, also increasing in numbers, this is a way to buy the larger denominations in a compact format.

Use is another determining factor. Tags are colourful and quirky items that ooze history. The one used for sending gold to California is one example.

Another label sold recently by Phoenix was from a parcel sent to the local council containing the scalps of wild dogs.

The rarest of all are official post office labels for mailing queen bees in special containers made of edible wax. Only two examples are known to survive.

Back in 2007, I visited the luxurious Sydney home of Kevin Nelson, a former regional manager at ANZ bank who, in retirement, has become a kind of international stamp superstar.

His special interest is in displaying stamps on the international exhibitions circuit. He then sells the award-winning displays to finance new projects. He likes to describe himself as an investor/exhibitor.

As a former banker he is well aware of the investment value of stamps. His 2007 exhibition, Australian Postal History (1901 – 1940), was based on the kind of parcel tags and labels shown here, many never before seen in public. “It will raise a lot of eyebrows,” he predicted then. And it did.

Nelson is seen by David Wood as the man most responsible for popularising this niche in the philatelic market.

As Nelson said at the time, millions of these tags would have been thrown away. But according to the logic that if anything exists it will be collected by somebody, a small number was kept. Many of the stamps were soaked off and placed in albums, but the few that were kept intact are now rare and valuable.

The most expensive in Nelson’s collection was a rare two-shilling ”first watermark” stamp on a label, plus details to show that the parcel was sent from Tasmania to Switzerland in 1913. In 2007, its value was estimated at $10,000 plus.

Much can be gathered from the scattered pieces of information stuck on a parcel.

”Deceased Kits” labels indicate the package contained the final possessions of a soldier killed in battle in World War I. These are now very rare. Nelson had one of these plus one of the two bee labels known to survive. This bee flew from Toowoomba to Melbourne in 1938 – by air mail, of course.

Seven years ago, Nelson estimated the auction value of both these treasures at $1000 each. Those prices would have at least doubled or tripled during the past seven years.

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Pack your bags, Queensland campaign combats the Ita effect

Queensland Tourism Minister Jann Stuckey, Queensland Tourism Industry Council chief executive Daniel Gschwind and Tourism and Events Queensland chief exectutive Leanne Coddington at the launch of the ‘Pack your bags, Queensland’ campaign Photo: Cameron AtfieldThe Queensland government has launched a new campaign to encourage tourists back into the state, following a wave of publicity dominated by tropical cyclone Ita.
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But Tourism Minister Jann Stuckey’s office would not disclose the cost to taxpayers of the “Pack your bags, Queensland” campaign, which would be run on radio, online and through social media, due to it being “commercial-in-confidence” with campaign partner Wotif南京夜网.

Launching the campaign at Queensland University of Technology on Tuesday, Ms Stuckey said many people would take advantage of the back-to-back Easter and Anzac Day long weekends.

“There’s always concerns when you have bad weather reports going around about Queensland, but we want people to know that we are ready to welcome people and that our destinations in our tourism areas are certainly looking their very best,” she said.

“May I please say though that our heart does go out to those who have suffered damage from the recent storm, but I think we’d all agree that Ita spared our tourism destinations for the most part and that is why we’re encouraging everybody to pack their bags.”

Queensland Tourism Industry Council chief executive Daniel Gschwind said the campaign was well timed.

“It’s unfortunately a very common scenario when we have a seasonal weather event, a tropical event, in Queensland,” he said.

“Unfortunately for the tourism industry, it ends up dominating the front pages of the national media giving the impression that the whole state has shut down and that’s clearly not the case.

“As an industry, not only do we have to deal with the effects of weather, which in this case has been absolutely minimal, but we have to deal with the far more severe impact of the perception we have really been put out of business for a while.”

Mr Gschwind said it was “very difficult” to put a dollar value on Ita’s impact on the tourism sector.

“But tourism operators are concerned and they are looking forward to the holiday season over Easter and the Anzac Day long weekend following,” he said.

“They’re looking for a strong season and obviously that is put in jeopardy when the message is too distorted in terms of the damage that’s been cause by this cyclone.”

Ita’s effect going into next week could still be felt through cheaper prices for holiday-goers, Mr Gschwind said.

“There’s always value to be had,” he said.

“You don’t want to see prices slashed unnecessarily. You want value delivered and I think that’s what you get in Queensland.”

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Canberra Capital Carley Mijovic drafted by WNBA side Washington

Call up: Retired Australian professional basketball player Luc Longley coaches Carley Mijovic of the Canberra Capitals. Photo: Katherine GriffithsCanberra Capital Carley Mijovic faces the toughest decision of her young career after she was taken by Washington with the 30th pick in the third round in Tuesday’s WNBA draft.
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But it remains unclear whether she will play in the upcoming WNBA season. The 19-year-old also attracted strong interest from cashed-up European clubs and the Capitals.

Mijovic is in camp with the Australian Opals squad on the Gold Coast, and is an outside chance for selection for the world cup in Turkey later this year.

She is committed to playing for the Opals, and said whether she remained in the selection frame would be a major factor in her  decision.

Mijovic holds a dual-passport through her Serbian heritage, making her an attractive proposition for European clubs who have to pay more for import players.

The 196cm forward is part of Basketball Australia’s Centre of Excellence program, based at the Australian Institute of Sport in Canberra.

She averaged 9.4 points and four rebounds a game in her first WNBL season with the Capitals.

“It’s all a bit of a surprise, I actually found out on Twitter,” Mijovic told Fairfax Media this afternoon.

“I’m still not too sure what I want to do yet.

“I’m not 100 per cent sure if I want to go this year, but we’ll wait and see once I talk to the right people.

“I’ve just got to weigh up my options and see if I’m ready to go yet.”

The slightly-built Mijovic is working hard on adding extra weight to her frame, which would come in handy against the bigger WNBA bodies.

She’s confident she can use her athleticism and perimeter shooting to offset her lack of size.

“I think wherever I go girls are going to have stronger bodies than me, I’m that kind of build,” she said.

“I guess I have to start to learn to use what I have got, and how I can use my strengths against them.”

Mijovic recently had a one-on-one session with former NBA championship winner Longley, and hopes to use those the tips she learnt to convince Opals coach Brendan Joyce to gamble on her for the tournament at Turkey in September.

Australian Boomers assistant coach Longley, who won three NBA rings with the Chicago Bulls, said the makings of an international star were there.

“What I saw was a girl who was going to be quite frail and weak, but she hit the bag really hard and surprised me, and was not afraid to give me an elbow on her way through,” Longley said.

“I like her length, she’s quite athletic and deceptively strong.

“She could get more down low grunt strength if she’s going to be a post player but she’s slippery, she moves quick and has decent feet.

“I like her.”

Mijovic said Longley had helped her defensively, something she is working hard to improve to counter the bigger girls in the post.

“He was teaching me back-to-basket stuff,” she said.

“I’m usually a front-to-basket player because I don’t like contact and he’s trying to draw me to that.

“Strength is always something I work hard on, because I don’t have the body frame of some of them.

“It’s exciting to be in the Opals. It’s been my goal since I’ve been really young and it’s motivation.

“There’s so many great players and Olympians at these camps. I have to prove I can hold my ground against those better players.”

Mijovic said she is yet to begin with discussions with Capitals management on whether she will re-sign for the 2014-15 season.

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Cats wait on hamstrung Mackie

Geelong has not ruled Andrew Mackie out of the Easter Monday clash with Hawthorn but coach Chris Scott says no risks will be taken with the experienced and creative defender.
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Mackie broke into a jog at training on Tuesday and Scott said the nine-day break between games meant the club did not have to rush a decision on the half-back’s fitness. He was subbed out during the third quarter of Saturday night’s match against West Coast with hamstring tightness and has since had scans, but Scott was vague about the results.

We haven’t ruled him (Mackie) out, but he’s not a certainty either,” Scott said before training.

“The nine-day break is a little bit of a luxury. We’d probably have to be further along in our decision-making if we were playing on Saturday. But given it’s a Monday game, he’s got a bit more time and we’ll delay the decision as well.

“These things are normally quite definitive: you’ve either got a strain or you haven’t. This one’s not as definitive.

“If he takes the field he is right to go because we don’t take risks with injured players, but the advice that we’ve got at this stage is that it’s possible that he will play.”

Mackie was among the Cats’ best against West Coast before he left the field, part of a miserly defence that kept West Coast goalless after quarter time. The Hawks have a plethora of scoring options – Jarryd Roughead and Jack Gunston kicked nine between them against Gold Coast and there were 12 goalkickers in all – but Scott backed his team’s defence with or without Mackie. “We’d love to have him but if we don’t we won’t give up,” he said.

If Mackie does not recover in time to resume his part in the engrossing rivalry between two undefeated sides, Mitch Brown could slot into defence. Scott said Brown was “in the mix” to return, having missed the Eagles game with an injured ankle.

The Cats have discovered that a seemingly minor leg injury to Billie Smedts is actually more serious; the quick utility has a crack in a non-weight-bearing bone” in his leg, and he is likely to miss another three or four weeks.

“Billie’s situation was a little bit hard to come to grips with early on,” Scott said.

“What we didn’t know is that there was a small crack in there that has come to light in recent times… The good news is that he’s halfway through that rehab process.”

Steven Motlop is expected to return to the VFL in the coming weeks, having stepped up his return from back surgery by joining the main group at training.

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