Peter Switzer: Perpetually Into Shares: My Thoughts From The Road

This story features TELSTRA GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TLS

By Peter Switzer, Switzer Super Report

22nd March 2012

I’ve been hanging out with the A-team from Perpetual this week because I’m the MC for their roadshow briefing with the country’s financial advisers. And if these guys are right, I might have been a little too bullish being cautiously optimistic about stocks this year, but this is not to say that you won’t have a good year with stocks!

“Que?” as Manuel from Fawlty Towers might have inquired.

Yep, Matt Williams, the Head of Equities at Perpetual thinks it is a “mug’s game” trying to pick where the index might go, and he is not alone because there are many variables that can hit and hurt an index. However, he is still bullish on shares.

Get picky

Williams argues now is the time for stock picking, and that’s his, as well as Perpetual’s, long suit. On a 10-year basis, a number of their funds have been in the ‘best of breed’ category and while it doesn’t mean the fund management team is faultless, it does mean you should take into account their learned, professional views.

Williams believes there are a number of structural challenges affecting the overall stock market, including the high dollar, infrastructure bottlenecks, credit problems, regulatory red tape and the dominance of mining companies powered by China, which in turn has created an accentuated two-speed economy. And this has created a Reserve-Bank policy approach that aims to kill future inflation linked to mining investment and exports, which means the rest of the economy simply has to adjust until the dollar along with China goes off the boil.

It is this structural change that explains why the US stock market is up over 100% since 9 March 2009 while we are lucky to be up 40%!

Okay, this might be a little too negative for me, but it could end up being realistic. That said, the A-team still has stocks it likes.

Good stocks

Williams says the stocks fall into two categories: dividend payers and growth stocks; but best of all there are companies he wants to keep, at least for now. The stock picker can be a buy-and-hold player, but they also can be in and out depending on their price targets for their chosen companies.

In the dividend-paying space Williams likes Telstra ((TLS)) (who doesn’t nowadays?), Tatts Group ((TTS)), Crown ((CWN)), IAG ((IAG)), Orica ((ORI)), ASX ((ASX)) and Westpac ((WBC)).

On the latter, I asked his colleague, Charlie Lanchester why this bank was singled out and he basically admitted that all the big four banks are good dividend plays but Westpac is simply nicely priced at the moment.

Perpetual’s energy analyst, Andy Blakely, is quietly confident that the China story is, and will be, HUGE and he likes the companies in the LNG space, which he argues has enormous growth projections. Here he likes Oil Search ((OSH)), QR National ((QRN)) and Santos ((STO)).

Two ways for SMSFs to invest

I have always argued that there are two standout ways to run an SMSF portfolio. The first is a buy, set and forget strategy where you get great dividend payers and only occasionally change when you think management is changing the game or where the game has actually changed – David Jones ((DJS)) is a case in point.

On the other hand, you can adopt an active manager stance and here you become an amateur copycat of a professional fund manager.

In such a case, you might be a buyer of David Jones, though you could wait for more declines in its share price. Or you might take the position that DJs will eventually get its online strategy right. They might close some stores, sell some real estate and buy some online rivals, which could do a lot for its share price. This kind of thing takes courage, but that’s what fund managers have to do daily.

By the way, Matt Williams did admit he is not always right, so his call on the index might not be right – but I bet his calls on most of these stocks will be pretty good.
 

Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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