Technicals | Jan 19 2016
By Michael Gable
With share markets taking a tumble over the last couple of weeks, the first thing we need to do is remind everyone how unrepresentative the S&P/ASX 200 Index is of the broader market and the broader economy. This is because the top 20 stocks account for half of the index – and 30 per cent of the market downturn of the last several months can be attributed to only BHP.
To further put it all in perspective, Warren Buffett in his recent letter to shareholders wrote about the difference between volatility and risk. He goes on to say:
"Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments — far riskier investments — than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions."
Our stocks are moving around a lot but beyond the prism of a few weeks, we don't see them at risk, we view them as great investments. The majority of our stock picks are holding up well compared to the market. The recent market weakness has led us to add another stock to our portfolios.
We are getting back into Village Roadshow ((VRL)) which has fallen into our laps as the market decided to get sold off. Last year saw more than 1 million Chinese visitors to Australia for the first time, and whatever the top 20 will want to do to the ASX200 index in the short term won't change that.
Our previous charting commentary on VRL was on 15 December when it was at $6.50. We suggested a move back up towards $7.30. It managed to hit $7.50 only two weeks later for a quick 15% return. It has now eased back again to those original levels because of the broader market sell-off. You will notice that it is right on the uptrend line established a year ago, so these levels are a second chance to purchase VRL. By resuming the uptrend, VRL should make a "higher high" which implies levels beyond last year's high of $7.68.
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Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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Disclaimer
Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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