Rudi’s View: Proudly Independent, 4x Questions Answered

rudi-views
Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Nov 25 2020

This story features TECHNOLOGYONE LIMITED. For more info SHARE ANALYSIS: TNE

FNArena regularly receives questions about its service, content, policies, tools & data, and even about its corporate independence. The Editor shares four responses that likely carry broader interest among investors and subscribers.

It goes without saying, none of this consists of providing financial advice. It's all about sharing experience and insights with subscribers and investors.

Question #1

Question:

I am interested in subscribing to your publication. Can you please tell me your policies on:

1. Privacy

2. Licensing with the regulator in Australia

3. Investment by you or your staff in the stocks you recommend

4. Your investment interest in any organisation related to your business, for example funds managers.

Response:

I'll start off with the most important characteristic of FNArena: totally independent. The company is owned by the journalists (some of them, not all) and has no affiliation with any financial services provider.

We never on-sell or pass on details of our database, which is also communicated on our website. We don't keep details about your payments as our payment processing is outsourced, currently to PayPal. That also answers any questions about security. We are preparing to integrate another fintech for payment processing.

We have been in business for 18 years, and counting.

FNArena is officially headquartered in the UK, but we operate within the laws and regulations of both the UK and Australia as an online media company. That latter part is important as it means we do not have a license to provide financial advice, and as a media company we don't provide financial advice.

We are agnostic towards our audience and subscribers buying and selling securities and other financial instruments. If any of the staff members owns shares in a given company, this is disclosed in stories written and published.

There is no danger of front running from within, as we don't provide any service that would accommodate this. Note: we do not give Buy/Hold/Sell recommendations ourselves. Our aim is to inform and to educate. Apart from daily news stories and data updates, we have developed proprietary tools and applications that support investors who self-manage and conduct their own research.

As the Editor of FNArena, I have developed my own research focus in the Australian share market which I have labelled 'All-Weather Performers'. It is the culmination of a change in appreciation post-GFC of the fact that beyond short-term, day-to-day share price movements and volatility, the importance of corporate quality is paramount for investment strategies with a long-term focus.

We are currently in the process of adding significantly more data to our website, as well as additional content and services.

My research into All-Weather Performers has led to the birth of the All-Weather Model Portfolio which is based upon my research and underscores the importance and validity of my research and share market analysis. This Model Portfolio runs independently from the FNArena service on the website. I communicate regularly about its progress and about changes made and investment considerations.

Paid subscribers (6 and 12 months) have access to a dedicated section on the website, which also includes eBooklets and Special Reports and slides of webinars and on-stage presentations (pre-covid). My research functions as an add-on information source on top of all the data and insights provided via the FNArena website.

If we do assist in the promotion of financial products or services, it is usually done through advertising on the website or via commercial emails, but we make it abundantly clear we are solely participating as a distribution channel. No endorsements have ever been given.

Probably the most practical piece of evidence to showcase the independence under which we operate is the fact that The Australian Broker Call Report, which is one of the popular features on our website, reports on key updates and changes communicated through stockbroker research reports every morning irrespective of whether those brokers like it or not.

We think of our service as keeping the market transparent. When we think of our audience and subscribers, we think 'informed investors'.

Question #2

Question:  I am wondering where TechnologyOne ((TNE)) fits. Is it an income stock or a growth stock?

Response:

To use a company like TechnologyOne for income/dividend purposes one must have patience and let time do its magic. Assuming TechnologyOne can grow its dividends at the same pace as it has done over the past three years, which is a healthy 17% per annum, today's paltry looking 1.7% yield will become 3% in five years' time.

That's how growth combines with dividends/income and becomes a wealth & income generator for investors who can let stocks grow instead of needing instant gratification. Of course, we don't know whether 17% growth will repeat itself, but it's the principle that applies.

If you are not aware as yet, we have a dividend calculator in Stock Analysis on the website. It'll show you exactly what I have just explained. You should try it out if you intend to use growth stocks for your dividend and income planning.

Question #3 (has previously been included in Weekly Insights)
 

Question: FNArena receives regularly questions about the lists FNArena subscribers have access to as part of my research into All-Weather Stocks on the ASX. There appears to be some confusion about the selection of All-Weathers and related sub-selections. Below is my response to such questions last week.

Response:

I have identified exactly 20 All-Weather Stocks listed on the ASX. That selection doesn't change often, but what I do, sometimes, is shifting stocks from "Potential All-Weather" to "All-Weather" or to "All-Weather with a question mark".

That latter selection is simply me making investors aware there are some issues that might temporarily impede on this company's performance, but I am keeping it as an All-Weather. The latter is important as it indicates that whatever is creating the question mark might be temporary, or we yet have to find out whether it might be more permanent.

In the case of Ramsay Health Care, the private hospital sector has become increasingly caught out by governments not wanting to spend money, and this is squeezing the sector in many countries, including in Australia, the UK and France; all countries in which this company operates.

In Australia, Ramsay is facing the additional challenge of private health policies shrinking in total numbers, as younger people refuse to pay for older people’s costly care, creating a dog fight between health care providers and private health insurers about who will get the dirty end of the proverbial stick.

We have yet to find out whether this year’s pandemic will fundamentally change industry dynamics, as a lot will come down to government priorities post-2020.

I shouldn’t be telling you anything new about Ramsay Health Care; the above is exactly what has been reflected in the share price that hasn’t gone anywhere but sideways over the past four years. I think the outlook looks uncertain, but positive for the next, say, two years.

However, if by that time industry dynamics haven’t changed, I might remove this company from the list of All-Weather Stocks, with or without a question mark. For now, however, I am focused on the trajectory that should be ‘up’ for the foreseeable future.

There are cases where the question mark disappears and I move stocks back to All-Weather (without a question mark). One such example is Coles, together with Woolworths. Both have been listed as All-Weathers with a question mark for a while, but are now firmly back on the list of All-Weathers (no question mark).

That question mark related to Kaufland, the German discounter, who was preparing for a major expansion in Australia. This, I believed, would prove a major challenge to all grocery operators in Australia. As it turned out, Kaufland abandoned its intention and won’t be back anytime soon.

The Kaufland decision, in my view, marks a major turning point in the outlook and good fortunes of both Coles and Woolworths. Both are therefore back as an All-Weather Stock, no question mark. Instead, I have moved Wesfarmers, now without Coles, to the list of “All-Weathers with question mark”.

At the end of the day, whether any of this matters or not is completely up to the investors who pay attention to my research and my lists. And this includes myself. The FNArena-Vested Equities All-Weather Model Portfolio owns all of Ramsay Health Care, Coles and Woolworths, but not Wesfarmers.

To a large degree, this is due to personal insights and preferences. I am sure investors who own Wesfarmers shares are pretty happy about it. What counts is that no portfolio can own all the stocks listed on my selected lists. It’s about making educated and well-thought of choices.

My research into All-Weather Stocks has identified that some businesses are far more resilient than others, and this shows up during tough times and over longer periods of time. That’s the essence of my research. The selections I share through my writings and on the website are merely there as a broad guide for investors looking to build a better, more resilient portfolio. It’s there so that everyone can pick and choose at their own volition and in line with their own goals and strategy.

This is also why I don’t provide Buy recommendations, entry or exit levels, or recommended portfolio weightings. The aim is not to provide financial advice (which I am not allowed to), but to assist investors with understanding shares, the market, and the importance of portfolio construction.

The same base principles also apply to the sub-selections I included, like “Prime Growth Stories”, “Emerging New Business Models” and “Dividend Champions”. These selections are all an attempt to identify those businesses that have that little bit of “special” attached to them, which should show up, again, during tougher times and over a longer period of time.

At the risk of blowing my own trumpet, I do think share price performances for the selected stocks have, in general terms, vindicated the view that embedded business quality counts, for a lot, though not necessarily always and in the immediate moment.

I try my best communicating any updates and changes through my writings, usually as Weekly Insights. I guess the message for me to take away from your question, and other questions I receive, is that I need to update regularly, and explain my approach through 4 baskets, as well as the various lists on the website.

FNArena recently published the transcript of an interview, which I think explains it well. You can access this story via Rudi’s Views on the website: “Rudi Interviewed: Four Baskets For Equities Portfolio”.

Direct link: https://www.fnarena.com/index.php/2020/11/06/rudi-interviewed-four-baskets-for-equities-portfolio/

I hope this explains it well.

Question #4 ((has previously been included in Weekly Insights)

Question: Can you explain to me the significance of the 200 day moving average line in charting and the other lines involved. Which is considered the most important?

Response:

Investors and traders treat the 200 days moving average as a longer-term trend line, to give them that extra handle on what the possible outlook is for a given stock.

And continuing on that path, the 60 days or 50 days moving averages are used to gauge short term direction/sentiment/funds flows.

Here at FNArena, we long ago decided to opt for the 60 days instead of the more broadly used 50 days. Often, the difference between the two is pretty small, but at that time we took guidance from a number of experienced traders who preferred the 60 days proclaiming it was the superior trend line of the two.

Whatever your focus or preference, we only display these trend lines on price charts as a broad and general indicator for price action.

As an investor myself, I do not much pay attention to such technical tools. I find they are often as misleading as they are useful, also because I am not necessarily interested in what is happening with the share price in the immediate future.

You might want to take into account my long-term observation that technical analysis works best for low quality, small cap minnows that often lack any fundamental underpinnings. It most often fails when you’re dealing with high quality, large cap stocks.

I am sure you can draw your own conclusions from this.

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi's View stories. Go to My Alerts (top bar of the website) and tick the box in front of 'Rudi's View'. You will receive an email alert every time a new Rudi's View story has been published on the website. 

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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