David Koch, the host of Sunrise and President of the Port Adelaide Football Club, recently published an article for News Limited where he showed that building a successful share portfolio is not too dissimilar to building a successful football (sports) team. For those who love their football yet find the share market somewhat confusing, this was a great article.
NOTE: those shares highlighted in the article below should not be construed as being a recommendation; they are for illustrative purposes only.
BUDDY UP TO TOP SHARE PICKS
- by: By David & Libby Koch
- From: News Limited Network
- September 08, 2013
BUILDING a long-term share portfolio is a lot like coaching an AFL footy team.
Stock selection is all about the right companies, playing the right roles and in the right positions.
A lot of people have trouble knowing how to build a strong portfolio of shares and we often explain it using the AFL analogy. The penny seems to drop and it becomes a lot clearer.
So with footy finals now under way, we rang four investment analysts and asked them for suggestions for our All Australian Share Portfolio, keeping to the principles of AFL and the key positions.
Everyone is an individual and you must seek out your own independent advice before buying shares. This 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.
Defensive stocks play a similar role. They are the quality companies that provide stability when momentum has changed and the rest of the market looks a bit uncertain or soft. They are your longer-term defensive foundations.
The backline selections are:
*Telstra, which has strong cash flows and market dominance, and will be a major beneficiary of the mobile data boom from the growing use of smartphones and tablet devices.
*QBE, a reasonably priced insurer that should do better over the next 12-24 months.
*Wesfarmers, a solid industrial company that owns businesses from Coles and Bunnings through to coal mines and fertiliser. It’s chief executive, Richard Goyder, also happens to be an AFL Commissioner.
*Woolworths, as no matter how bad an economy gets people still eat and drink.
AFL midfielders are the fast nippy blokes who can ignite a team. They can lift a team when they’re “on song” but can be problematic when in a slump.
The selections are:
*Amcom, a rapidly growing IT telecommunications company. Our team of selectors tip rapid growth this financialyear.
*Corporate Travel Management, a leader in the corporate travel space with big growth potential.
*Aurora, a mid-sized oil and gas company that is just inside the ASX 100. As a company it tends to fly under the radar as it’s too small to be seen as a large-cap company but too big to attract coverage as small cap. The selectors reckon this lack of interest has kept it undervalued.
*Newcrest Mining, which is Australia’s biggest gold miner and has had a horror year with lower production, falling gold price and massive writedowns of overseas operations. Our selectors expect it to come back into form.
*Commonwealth Bank, a giant in the ruck to strengthen the midfield and one of the best-performing banking stocks in the world. But it is expensive at the moment on a global scale.
The forwards have to be consistent performers but there needs to be a mix. There is the monster that 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.
*Coca Cola Amatil is the monster (think of Hawthorn’s Buddy Franklin, pictured). It’s a peerless flagship brand that’s leveraged to a growing Indonesian market, with diverse products – flavoured milk, SPC foods, alcohol – to smooth ups and downs.
*21st Century Fox, which was recently spun off from the News Corp. A quality content creator with broad distribution platforms: movie studios, cable and satellite TV, digital sales. The selectors see it as a media company that will continue to outperform. A second monster in the forward line.
*CSL , a former government business that now operates across 27 countries and develops a range of blood plasma products and vaccines.
*Cochlear is the bionic ear manufacturer that sells products around the world.