TOSSED by rollicking markets, investors need follow only one guide in 2015 — Uncle Sam, the epitome of the US government, to lead markets to sanity and success in the year ahead.
Fuelled by plentiful oil and gas, and a bagful of dollars, Uncle Sam’s citizens will buy the cars, build the houses and run the computers to reinvigorate the world’s economies. The US market might have run up strongly already on such thoughts, and the world still faces OPEC oil floods, an anxious Europe and a dozy Japan, but America still looks like the place to be.
At home, look for the jewels in consumer-focused stocks that will pick up on lower petrol prices, low interest rates, solid home building and an improving job market. Bold voices such as CommSec have suggested the ASX 200 index will nudge 6000 by the year’s end, while UBS suggests 5700.
The Weekend Australian has canvassed its staff and contributors in the quest for enlightenment on where to tread on the slippery paths of 2015. Please select according to taste and risk tolerance.
1. Iproperty (IPP)
Operators of market-leading online property portals in Southeast Asia, which corral online buyers and sellers for property listings. Appears well placed to snare property advertising that elsewhere in the world is stampeding away from newspapers towards online. Rated a buy by Morningstar.
2. Shoply (SHP)
A rare pure-play online shopping exposure, Shoply has grown since its debut in 2013 in moving from an internet advertising house to acquire related businesses Your Home Depot, Warcom and Wow.baby.com.au. Its competition includes Asia-focused iBuy (E88) and Grays eCommerce (GEG), the latter formed from the merger of Mnemnon (Deals Direct and Top Buys) and Grays. Criterion rates Shoply a spec buy.
3. Skyfii (SKF)
A consumer-data play, where shopping centre owners, advertisers and business owners see where consumers are browsing and buying in shopping centres. Compiles the data by tracking connections to digital, WiFi, e-commerce and social media sites. Trading above its November listing price, revenue generating and perhaps profits in time. Has plans for a joint venture deal in Indonesia, and is eyeing South Africa and Brazil.
4. Carnegie Wave (CWE)
The oil price slump aside, Carnegie shares have been firming in the wake of the commissioning of the wave power group unit off Garden Island near Perth. A second unit is due on stream within weeks, to deliver power to the nearby naval base in the New Year. A spec buy from Criterion.
5. NextDC (NXT)
Runs big data centres that host companies’ computer servers in the cloud, which cuts the need for businesses to invest in their own IT infrastructure. Has enjoyed strong revenue growth and is poised for profitability.
6. Praemium (PPS)
A software company that offers investment administration and financial planning technology platforms for the financial services industry. It operates in Australia, Britain, Jersey and Hong Kong.
Debt free and enjoying revenue growth of about 12 per cent a year over the past three years, one of its longstanding customers has extended its contract for a further five years with a minimum contract value of $3m a year. A retail product targeting SMSFs may be a catalyst for long-term growth, suggests Wise-owl.
7. YPB Systems (YPB)
An anti-counterfeiting business, which detects frauds through the use of tracers, covert markers and technology in the mass-dollar problem areas of food, cosmetics and clothing. A buyer can check if a grocery line is the real thing, even if it is only soap powder. A recent listing, it is already a revenue generator.
Who knows what tomorrow might bring?
8. Arena REIT (ARF)
The stable and favourable long-term outlook for the childcare and healthcare industries will underpin ARF’s long-term cashflows and sustain its distributions to security holders. While changes to government regulation and profitability of its key tenants will present risks, ARF believes that they will be able to manage these risks through active monitoring and broadening of its tenant base. Liked by Lincoln Indicators.
9. Berkeley Resources (BKY)
A growing high-grade uranium resource, outstanding management team, strong cash at bank and infrastructure-ready makes BKY’s Spanish project the standout stock in the uranium space. Liked by Argonaut Securities.
10. Metcash (MTS)
Retailing’s third force has slipped recently on failing to reach market expectations, but a new chief executive could achieve a turnaround. A spec buy from Criterion.
11. Nemex Resources (NXR)
A mining and technology company with a stake in Wavefront Biometrics Technologies (WBT), that is developing unique recognition technology using the eye’s corneal surface. Laboratory testing suggests it could be better than existing benchmarks, such as iris recognition. If it works, it could lead to licensing talks across multiple industries. Liked by Wise-owl.
12. Paringa Resources (PNL)
As the US economy hauls the world higher, one coal play could make sense. Argonaut Securities points out that this developer of the high quality Buck Creek thermal coal project in the Illinois coal basin in Kentucky is adjacent to 18 coal-fired power plants.
13. Capilano Honey (CZZ)
Has doubled in price in the past year but still has potential. Dry weather means local honey supplies have been constrained, but while Capilano is exclusively Australian, its other brands of Allowrie and Smiths have been able to import Argentinian and Chinese honey, to maintain and win market share. Rated a buy by Criterion.
14. Emerchants (EML)
A non-bank issuer and processor of prepaid plastic cards, for example when used to pay corporate expenses. Its well-regarded ability to combat fraud is liked by the corporate world, when dealing with electronic expenses, reward programs and retailer gift cards, but curiously of little interest to banks. Expanding into Britain, and appears on the cusp of profitability.
15. Skilled Group (SKE)
Providers of staff to healthcare, manufacturing and resources industries have been heavily marked down on the busting of the mineral boom. But since only a quarter of Skilled Group’s revenue comes from mining, it could be worth a look in these tougher times. So too might be Programmed Group (PRG). Liked by Criterion and Morningstar.
Ready to run
16. Calzada (CZD)
With the acquisition of PolyNovo, it acquired the burns treatment Novosorb, a biodegradable polymer or plastic sheeting. Has also had access to controversial fat-busting and muscle-building drug AOD 9604, taken by football players, but recently said it is divesting itself of that business, Metabolic Pharmaceuticals. Worth a look.
17. Colorpak (CKL)
Designs and makes cardboard cartons for all sorts of industries, from cosmetics and pharmaceuticals to food, beverages and wine. It also does paper cups and lids, blister and lidding foils, self-adhesive labels and laminates and point of sale displays and other packaging across Australia and New Zealand. Colorpak operates three sites, two in Australia and one in New Zealand, and competes with Orara, the Amcor spin off.
18. Greencross Vets (GXL)
A listed veterinarian play, it is a rapidly-expanding chain of veterinary practices now boasting a broader pet care business, with the $330m purchase of the Petbarn network. All up it has more than 120 stores and 100 vet clinics across Australia and New Zealand. Still worth a buy.
19. Nearmap (NEA)
An aerial mapping specialist, with an income cash flow from subscribers. Not cheap, but marked back lately. Customers include transport authorities, local government and power and water utilities. Has entered the big US market, with coverage of larger population centres on the east and west coasts.
20. OzForex (OFX)
An online financial payments and foreign exchange provider that offers customers price and speed benefits. Now profitable in the US, the business is scalable with bigger volumes reducing unit costs. With counterpart banks reportedly more selective in providing dealing facilities, the climate is hard for new entrants. A meaningful share price recovery will depend on better client numbers and success in signing additional white-label partnerships. Time to accumulate, say Morningstar and Lincoln Indicators.
21. STW Communications (STW)
If you think the world is going to be doing a lot more talking soon, then maybe the place to be is across the advertising and marketing world. This company has tentacles everywhere through its 80-odd operating companies here and in New Zealand, which offers diversification is a fiercely competitive industry that has witnessed great writedowns in this past year. The dividend yield has been nice. A case of market overreaction, that could be redressed this year? Morningstar has a buy on it.
22. Retail Food Group (RFG)
A Brisbane-based chain of cafe franchises and coffee roasters that has just acquired the specialty coffee roaster Di Bella, to add to its swag of names, which includes Gloria Jeans, Donut King, Michel’s Patisserie, Brumby’s Bakery, Esquires Coffee, Pizza Capers Gourmet Kitchen, Crust Gourmet Pizza Bars, The Coffee Guy and bb’s cafe franchise systems. A caffeine-lead expansion perhaps? Its price has run up, but maybe worth a look.
Gleaming in the gloom
23. Gold Road (GOR)
A new gold project developer based at its Gruyere discovery on the Yamarna Greenstone Belt in the far east of Western Australia. It is still a couple of years away from commissioning what looks like being a 170,000 ounce a year project with an initial 12- to 15-year mine life and plenty of exploration and development potential at the deposit and regionally. Liked by StockAnalysis.
Ready to rise
24. Independence Group (IGO)
A low-cost gold producer, via its 30 per cent interest in the Tropicana project 300km north east of Kalgoorlie. The company is a serious nickel producer at Long Mine, and has zinc and copper production at Jaguar. A strong balance sheet with positive cash flows at current prices across all three commodities. Outside of the majors, it is one of the better defensive miners due to its diversified and quality assets. Liked by PCF Securities, StockAnalysis and Argonaut Securities.
25. Northern Star Resources (NST)
The rising star of pure gold companies with moderate operating costs and excellent exploration appeal around its existing four mining camps. Has hit the ground running with solid mine performance generating good cash flow. Exploration results showing potential mine life extensions have started to flow from the $50m drilling budget. Now the largest ASX-listed gold pure play below Newcrest. Liked by Argonaut, Hartleys, PCF Securities and StockAnalysis.
26. Doray Minerals (DRM)
WA-based junior gold producer with the Andy Well gold mine producing about 80,000 ounces a year. Output is likely to double to 160,000 ounces equivalent with gold and copper production from the Deflector deposit following the merger with Mutiny Gold. The merger diversifies operational risk and revenue streams, with both assets having potential for exploration success and mine life extension. Liked by Argonaut and PCF Securities
27. Rox Resources (RXL)
A junior explorer and developer with three quality assets in Bonya (copper, NT), Mount Fisher (nickel sulfides, NT) and the large Teena deposit Joint Venture with Teck (Zinc, NT). Good exploration results have continued to increase the size of all three deposits. A better than average bet given three quality projects all with good development potential. Liked by PCF Securities.
28. Crusader Resources (CAS)
Brazil-focused miner and explorer. Cash flow from its small scale Posse iron ore mine is being used to progress its high-grade Juruena gold project. Brazilian iron ore prices haven’t been hit as much as Australian, with Posse still washing its face. Drilling at Juruena has commenced and should return high-grade gold results indicating good potential for mine development. Liked by PCF Securities.
29. Duketon Mining (DKM)
Up and running quickly following the recent IPO with outstanding nickel sulfide drill results from its maiden drill program at its namesake Duketon project in WA. The high grades from its Nariz discovery have the potential to supplement the larger low-grade nickel mineralisation at its nearby Rosie deposit. Based on early-stage results to date, Nariz and Rosie have the makings of a sizeable and economic nickel system. Liked by PCF Securities and Hartleys..
30. Western Areas (WSA)
The highest quality nickel sulfide producer due to high grades and long mine life. The default nickel pure play if looking for lowest risk. A history of good production and exploration success. Liked by Patersons.
31. Cassini Resources (CZI)
CZI acquired the West Musgrave project from BHP in May, which included the large Nebo-Babel nickel-copper deposit. It has since discovered the large scale Succoth copper deposit only 13km from Nebo-Babel. While remote, the project is large scale and potentially world class. CZI has sizeable exploration upside as well as potential corporate appeal. Liked by PCF Securities and Hartleys.
32. Sirius Resources (SIR)
The Nova nickel project remains one of the best undeveloped nickel sulfide projects globally, with very low forecast costs of about $3.20/lb of nickel, with the first ore in due early in 2016. Debt financing has been secured, while offtake and final permits are in process. Liked by Hartleys.
33. AWE (AWE)
Holding interests in the lower-cost Eagle Ford Shale light tight oil project in Texas, AWE should survive a year or two of low oil prices according to StockAnalysis. “It is largely a gas-driven company in Australia where prices are rising. Its involvement in the Bass, Otway and Perth Basins provides growth opportunities, especially following its surprise discovery of conventional gas at Waitsia just north of Perth. Keep an eye on the outcome of testing of Waitsia north of Perth in early 2015, production upgrades from BassGas by mid 2015 and development of its 50 per cent held AAL project in Indonesia during 2016. Morningstar rates it a buy, as does Argonaut Securities.
Worth a punt
34. Ainsworth Games Technology (AGI)
An electronics gaming machine maker, with a fistful of licences to sell into various jurisdictions, recently buffeted by profit guidance downgrades. Yet the company is led by a pioneer of the industry in executive chairman Len Ainsworth. One of the top three players in the mature domestic market, it is chasing opportunities offshore where earnings are surging and more licences are being secured. Rated a Morningstar buy.
Fuelled to fly
35. Treasury Group (TRG)
Its boutique financial partners have performed well and continue to grow funds under management. Its merger with US-based Northern Lights Capital Group should deliver more scale, geographic and product diversification, as well as enhanced global distribution capabilities. This deal will also allow TRG to leverage new relationships with BNP Paribas Capital Partners and Laird Norton, as well as help attract quality new boutique partners. Liked by Lincoln Indicators.
Lower petrol prices leaves more to spend
36. Carsales.com (CRZ)
Another solid full year result with top-line growth across all segments and better operating margins, that management says is continuing. Morningstar says the recent Stratton Finance and Tyresales acquisitions will boost earnings growth in FY15, while the core business continues to perform well. The company also has long-term growth opportunities internationally through investments in Webmotors (Brazil), Skencarsales (South Korea) and iCar Asia (South East Asia). Also liked by Lincoln Indicators.
37. Thorn Group (TGA)
Doing well in its Radio Rentals business and the Thorn Financial Services division. Lincoln Indicators expects a number of key drivers to propel the business in future periods, including a shift in the core Radio Rentals business towards longer-term contracts, growth in receivables as well as acquisitive growth. Growth in future earnings will support both cash flow and dividend growth, giving investors an attractive income stream.
Energised to move
38. Alumina (AWC)
A low-cost alumina producer, with much high-quality bauxite resources and access to long-term gas from the North West Shelf. With the alumina industry loss-making, and Alumina’s enterprise value less than half the replacement cost of alumina capacity, value is compelling. The move from long-term-contract to spot alumina pricing, coupled with more balanced supply, should see improved prices and returns, potentially helping the market price of shares converge with our estimate of intrinsic value over time. Morningstar says accumulate.
39. BHP Billiton (BHP)
Highly diversified, from iron ore to potash and oil and gas, with a healthy share of low-cost mines. Has lifted iron ore production by half in the past three years, though pricing is fluid. Rated a buy by Morningstar for its dividends alone.
OIL AND GAS
Prices have plunged, but have they hit bottom?
40. Carnarvon Petroleum (CVN)
At the speculative end yet well-funded, Carnarvon Petroleum will enjoy the proceeds of the sale of its 20 per cent interest in the Phoenix South prospect in offshore Thailand. This should allow more exploration on the NW Shelf and to test the Roc prospect in mid-2015, which holds promise for discovery of up to 80 million barrels of recoverable oil to add to an estimated 50-60 million barrels at Phoenix South. Worth a punt says StockAnalysis.
41. Otto Energy (OEL)
Otto agreed to sell its 33 per cent interest in the Galoc oilfield before the oil price tumbled, locking in net cash of about 11.2c per share for the company, which now trades at a discount to its expected cash backing. The company has 12 months to arrange farm-out funding and drill its exciting Hawkeye prospect in offshore Philippines, says StockAnalysis. “Otto holds attractive leverage to success in The Philippines where several follow-up prospects beckon and also in its 50 per cent-held Tanzanian permits, where seismic surveys have outlined interesting prospects with potential for over 100 mmbbls of recoverable oil.”
42. AWE (AWE)
With interests in the Eagle Ford Shale oil project in Texas, with its low costs, AWE should survive a year or two of low oil prices according to StockAnalysis. “It is largely a gas-driven company in Australia where prices are rising. Its involvement in the Bass, Otway and Perth Basins provides growth opportunities, especially following its surprise discovery of conventional gas at Waitsia just north of Perth. Keep an eye on the outcome of testing of Waitsia north of Perth in early 2015, production upgrades from BassGas by mid 2015 and development of its 50 per cent held AAL project in Indonesia during 2016. Morningstar rates it a buy, as does Argonauts.
43. Woodside Petroleum (WPL)
Woodside is now almost debt free, it has large resources of oil and gas, awaiting project approvals, solid exploration appeal and now, it has the ability to pick off the best assets or companies from a field of projects and assets that will be weakened by current oil and equity current market conditions.
A buy, says Hartleys and StockAnalysis, while Morningstar and Patersons say accumulate.
44. Origin Energy (ORG)
In the punched-up world of oil, the broker UBS has declared the energy retailer and producer a bargain, that could rise as high as $20 by 2017 as it draws revenue from its share of the Australia Pacific LNG export project in Queensland. Clearly much depends on the timing of an oil price bounce.
Yum yum at these prices
45. Bellamy’s Australia (BAL)
Tasmanian-based maker of baby food that is beginning to win good business in China, backed by Australian sales through pharmacies, Costco and Big W. Already on a price-to-earnings ratio of 25, but Criterion rates it a long-term buy.
46. Wesfarmers (WES)
A strong performance by Coles and Bunnings in the first half of this financial year was slightly offset by underperformance in coal, Target and liquor. Hartleys says the key will be early in the new year when the important Christmas season results are released. Still, there’s potential to benefit from redirected petrol savings. Liked by Hartleys.
Wired to win
47. Infomedia (IFM)
Auto-focused software developer and car parts catalogue provider, Infomedia has reiterated guidance for “another year of strong performance” in the wake of a share price rise of more than 50 per cent this year. The company will look to consolidate on pilot program success and Superservice module penetration, while receiving currency benefits from offshore earnings. Liked by Lincoln Indicators and Baillieu Holst.
48. TPG Telecom (TPM)
TPG has produced another strong year and with recent regulatory wins on its “fibre to the basement” strategy, remains in a strong position to continue on its trajectory. Outside of the FTTB strategy, which is not without further regulatory risk, Lincoln Indicators expect growth to come from net subscriber gains and a higher-margin product mix. Moreover, the company stands to benefit from continuing synergy gains and scale uplift from its AAPT acquisition, which added a significant new corporate segment to the business.
Will keep well
49. CSL (CSL)
A strong product pipeline including the impending launch of a new haemophilia drug and the successful integration of Novartis global influenza vaccine business will support CSL’s continued growth. Recent investments in additional capacity will place the company favourably to take advantage of rising demand for its products. The announcement of an extension of a further $950m on market buyback will also be supportive. Liked by Lincoln Indicators
50. Ramsay Health Care (RHC)
Contributions from the new facilities in Australia, Generale de Sante and Medipsy in France and the continued strong admission in British hospitals will support its growth. The integration of Generale de Sante will present the risk of a lower return on assets and an elevated debt level in FY15, this will be mitigated by the strong earnings growth. Ramsay has announced a foray into China, to become the first big international hospital operator to establish operations in China, where it should benefit from the large population and growing demand for better healthcare for an emerging middle class. Liked by Lincoln Indicators.
Drowning in love
51. Medibank Private (MPL)
Retail investors are smiling in early trading that has pushed up the price. Hartleys is one to expect more buying strength as managed funds seek to balance their portfolios. Argonaut Securities suggests the absence of any debt will produce solid long-term earnings growth as the federal government comes to rely more on the sector to partially fund escalating healthcare costs.
52. Telstra (TLS)
With a revamped access agreement to the NBN now under its belt, the big telco has risen in a bleak market and may well have more to come, in the eyes of many. It will have a big role in the government’s rollout plans, with much mutual benefit. And it is still a good dividend payer in the portfolio.
53. National Australia Bank (NAB)
Could deliver earnings per share growth of more than 27 per cent compared to last year, according to Hartleys, especially if the RBA drops interest rates and demand ticks up for new home, and bank-provided finance. A fully-franked dividend yield of more than 6 per cent is nice too, says Hartleys.
54. AMP Capital Global Infrastructure Fund
Invests in listed companies globally, in developed and emerging economies, with an eye on stable and predictable cash flows. Also touts a high-dividend yield. One-year returns are tracking 27 per cent and three year returns at 22 per cent a year. Managed by an experienced team with a well-structured investment process. Rates a “recommended” from Zenith.
55. Arrowstreet Global Equity Fund
Gives access to a diversified portfolio of global equities of between 150 to 500 companies, ranging over developed and emerging markets, and large and small companies. It’s available through the Macquarie Professional Series. Based in Boston, Arrowstreet combines investment intuition with quantitative research and methods to seek outperformance on a benchmark. The fund returned 26.6 per cent a year (after fees and expenses) over 3 years to November. Ticks all the boxes on people, process and performance, to earn Zenith’s “highly recommended” tick.
56. Blackrock Global Allocation
Offers a diversified strategy, shrewd people and a robust process that seeks beaten-down asset classes then waits for recognition of the value. “An excellent long-term savings vehicle”, according to Morningstar, that bestows its top gold rating. A 12.5 per cent performance fee on any positive returns can make the fund expensive but the meagre 0.20 per cent annual management fee compensates in part. Over the five years to August 2014, the fund has returned 11.2 per cent a year.
57. Platinum International
Still one of the best global equities strategies out there, according to Morningstar, which rates it gold. Zenith gives it a highly recommended. In May 2014, manager and main decision-maker Kerr Neilson handed off more of his portfolio management responsibilities, which triggered concerns that he might be on his way out, but he continues to run the lion’s share of this fund. It has distinct features, including substantial underweights to large developed markets and meaningful stakes in emerging markets. It often has 5 to 10 per cent in small caps, below-average exposure to giant multinationals and sector tilts.
58. Wingate Global Equity Fund
A high conviction, long-only international equities manager with a value bias and an implementation process that uses options. Specifically, the fund sells put options in order to acquire its long-holdings at a later stage. The result is a buffer against market downturns and a higher income (sourced from option premiums and not dividends, and therefore more likely to be sustainable), at the cost of underperformance in fast rising markets. Liked by InvestSense.
Global Emerging Markets
59. Colonial First State Global Emerging Markets
A cut above the rest, as Morningstar puts it, as a longstanding management searches for well-priced companies with strong management and corporate governance. Developed market listings can be included so long as half the revenue comes from an emerging market.
Global Listed Property
60. UBS Clarion Global Property Securities
A superb option for global real estate investment trust (G-REIT) exposure, according to Morningstar. “A stable parent, long-tenured team, investment research that is second to none and a track record of excellence,” says Morningstar, which rates it gold. “We’ve always liked the shrewd blend of top-down and bottom-up inputs to Clarion’s property process, which remains in place — it’s an active approach with no rigid style bias.”
Australian listed property
61. Blackrock Indexed Australian Listed Property
Simple is often best and that’s true for BlackRock Indexed Australian Listed Property, according to Morningstar, which applauds this fund as it mirrors the index as “a low-cost, capable provider”.
Its ultra-low fee of 0.20 per cent a year makes this one of the lowest cost property funds on offer.
Turnover is low at no more than 5 per cent a year. As a passive index tracker, it will wax and wane with the market.
62. BT Property Investment
A top-notch option for the Australian listed property sector according to Morningstar, which likes its “exceptionally strong” management team that has outranked its passively-managed rivals by nearly two percentage points a year on average. Its gold ranking arises from compounding small wins and protecting better in down markets, and having a low fee. The fund holds 15 to 30 names and can have as much as 15 per cent in overseas listed property investments.
63. BT Smaller Companies
A tried and tested formula makes it Morningstar’s premier small-cap option, of gold ranking. A four man small-caps team can tap into the firm’s well-regarded broader Australian equities personnel for stock, sector and macro-economic insights. “An extremely experienced and competent team that works well together’’, echoed by index-beating performance in all market conditions.
Has an annualised 12.32 per cent return over the past 10 years, almost 8 percentage points each year above the index and well ahead of most like-minded peers.
64. Fairview Equity Partners Emerging Companies Fund
The fund aims to provide long-term capital growth and some income by investing primarily in a diverse portfolio of smaller companies listed, or expected to be, on the ASX. Has returned 9.5 per cent a year over three years. Highly recommended by Lonsec and Zenith, and has silver status from Morningstar.
65. NovaPort Wholesale Smaller Companies Fund
NovaPort is a three-person team and led by Alex Milton and Sinclair Currie. The fund gives investors a diversified portfolio of smaller Australian companies that aims to outperform its benchmark over rolling three-year periods. It has delivered 6.4 per cent for the year to October and 18.48 per cent over the past 3 years, net of fees. Recommended by Zenith and Lonsec.
66. UBS Microcap Fund
Recently launched but already running ahead of benchmark, this fund targets the tiddlers that can be overlooked elsewhere. Investible stocks are defined as those with a market cap of no more than $250m at portfolio entry. Minimum investment is $20,000 and the funds capacity is $150m, to remain “uniquely small to suitably exploit the opportunities in the microcap investment universe.”
Large Cap Australian Equities
67. Fidelity Australian Equities
Consistently shows why it is seen as among the best, according to Morningstar, which gives it a gold ranking. Under portfolio manager Paul Taylor, it has found new winners, even in a strongly rising market such as 2013, and excelled through a resources boom, the global financial crisis and the patchy unwinding of commodity demand. “Testament to strong stock selection and well-balanced portfolio construction,” says Morningstar. “Along with reasonable fees and well-aligned incentives, these characteristics suggest it will be a top-notch choice for years to come.”
68. Greencape Broadcap Australian Shares
One of the best all-cap Australian equity strategies in the market, run by what Morningstar describes co-founders David Pace and Matthew Ryland as among the best stock-pickers in the domestic market. One upshot is a higher-than-average end cost, especially if the performance fee is triggered. “You would be hard-pressed to find a more engaged and focused Australian equities team,” says Morningstar, which rates it gold. A minimum investment is $10,000.
69. Perpetual Australian Shares
“A superb core holding”, says Morningstar, which rates it gold, in recognition of the fund’s long and illustrious life that has hardly missed a beat in stability and performance. Under portfolio manager Matt Williams as head of equities, it runs a simple, proven approach to seek out quality companies trading at cheap valuations, a strategy which keeps it out of trouble in falling markets yet can lead to lagging in bull markets. Retail fees can be pricey at nearly 2 per cent a year.
70. Schroders Australian Equity
Sits comfortably alongside a small group of elite large-cap Australian strategies. Key decision makers and a time-tested process inspire confidence and deliver a suitably balanced portfolio, says Morningstar, which rates it gold. “Turnover of about 20 per cent a year bears witness to the patient approach and shows conviction in the research,” it says. The fee is in line with the average, making it a reasonably priced option.
71. WaveStone Capital Absolute Return Fund
A boutique Australian equities fund manager whose founding principals Ian Harding, Graeme Burke and Catherine Allfrey have worked together for nearly 20 years. The fund aims to provide returns that exceed those available from comparable investments. It has delivered 6.49 per cent for the year to October and 16.16 per cent over the past 3 years, net of fees. A minimum investment is $10,000.
72. PIMCO Australian Bond
Morningstar’s favoured core for Australian bonds, with performance as expected in line with the benchmark UBS Australian Composite Bond index. The fund can invest up to 30 per cent offshore, 30 per cent in high yield, and adjust duration from 2 to 5 years, capitalising on PIMCO’s global intelligence and sector allocation skills. The loss of global co-chief investment officers in Mohamed El-Erian and Bill Gross in 2014 was a blow, but unlikely to have much effect on an Australian-dominated portfolio. “All up, PIMCO Australian Bond still has the ingredients that make it our number one pick for Australian bond exposure,” says Morningstar.
73. AMP Capital Corporate Bond Fund
A specialist credit-oriented fixed interest fund designed to give investors a regular monthly income stream. Considered moderate to high risk with the fixed interest asset class, one-year returns are around 6 per cent and three-year returns 7 per cent a year. Zenith rates it ‘highly recommended’.
EXCHANGE TRADED FUNDS
74. Vanguard Australian Property Securities ETF (VAP)
A low-cost way to invest in a portfolio of between 20 and 30 Australian real estate investment trusts (A-REITs) listed on the Australian Securities Exchange, across the retail, office, industrial, tourism, and infrastructure sectors. The buy and hold strategy of this fund takes advantage of capital gains discounts and the deferral of capital gains liabilities, which may result in better after-tax returns. Rated gold by Morningstar, while an alternative — SPDR® S&P/ASX 200 Listed Property (SLF) — is rated silver.
75. iShares Composite Bond (IAF) and Vanguard Australian Fixed Interest ETF (VAF)
Medium-term investors wanting a high-yielding income stream such as retirees or those nearing retirement, and even SMSF trustees, may be interested in these ETFs, that mainly in invests in as many as 360 securities (bonds) issued by the Commonwealth Government of Australia, state government authorities and treasury corporations, as well as investment-grade corporate issuers with a credit rating of BBB- or higher. Both are rated silver by Morningstar.
76. State Street Global Advisors SPDR S&P 500 ETF (SPY)
With access to a portfolio of more than 500 US companies including Apple, Exxon Mobil and Microsoft, the SPDR S&P 500 ETF, the world’s largest and most traded ETF, provides investors with simple, reliable and cost-effective access to investment opportunities in the US. SPY, which became available to Australian investors through the ASX in October, seeks to provide investment results corresponding to the price and yield performance of the S&P 500 Index.
77. Westpac Online Investment Loan
A share trading loan that allows borrowings of up to $250,000 to invest in the top 100 ASX-listed shares, exchange traded funds (ETFs) or managed funds. Spruiked as the best value in the Australian margin loan market, because of competitive rates of 5.95 per cent for variable and 5.49 per cent for fixed rate loans. It could appeal to direct investors who want to build and diversify their portfolio using a simplified, no fuss loan facility. An alternative might by Macquarie’s Equity Lever, a low-cost solution for those wanting to build a leveraged equities portfolio. Compared to traditional limited recourse structures available to SMSFs, such as listed instalment warrants, Macquarie Equity Lever provides investors with the flexibility and tools to better manage their SMSF’s portfolio, risk and administrative requirements offering online access, consolidated tax reporting and the flexibility to choose and control the degree of leverage used.
78. Leveraged Equities’ Investment Funds Multiplier (IFX)
A borrowing vehicle to invest in approved shares, ETFs, listed investment companies and unlisted managed funds. It has a reporting tool to maintain a level of gearing investors are comfortable with, along with features such as Instalment Plus, a regular savings and investment plan. Unlike others, in the event of a margin call you can progressively reduce the loan through periodic repayments, calculated at 1 per cent of the loan balance per month until the gearing ratio is restored to an acceptable level.
79. Climate Bond
National Australia Bank has issued a “green bond” to raise $300m to help fund 14 renewable energy facilities across Australia. It complies with international Climate Bonds Standards, and provides investors the opportunity to invest in a bond with the additional benefit of being dedicated to financing climate change solutions. Power generated by the projects is the equivalent of an estimated 3.9 million tonnes of avoided greenhouse gas emissions and enough for about 730,000 average Australian households for one year.
80. MLC Inflation Plus Portfolios
The MLC Inflation Plus portfolios are real return funds which don’t just rely on the performance of investment markets to deliver returns. Instead, they’re actively managed to deliver above-inflation returns, so clients can plan for the future and retirement with more confidence. The flexible asset allocation means we can adjust the mix of assets as markets change, better positioning them to deliver returns and manage risk. Recommended by Zenith and by Lonsec.
81. Ellerston Australian Market Neutral Fund
Relative value investment process based mostly on a pairs trading strategy, where there is a pairing of long and short positions in companies in the same industry. Aims to profit from inefficiencies and mispricing opportunities that appear to be structural to the Australian share market, while avoiding equity exposure. Liked by InvestSense and recommended by Zenith.
82. Triple 3 Volatility Advantage
A “quant” absolute return fund that uses VIX commodity index options to generate long-term returns that are negatively correlated to S&P500. It should perform best when the S&P500 is falling and volatility is high. When the S&P500 is stable or rises, the fund is should generate cash like returns.
InvestSense rates it one of the better “portfolio insurance” products available to retail investors that has the ability to give downside protection at minimal cost. But remember that not all models work perfectly. Zenith calls it unique, and recommends it.
83. Bennelong Kardinia Absolute Return Fund
An Australian equity long/short fund with a nimble record in rejigging its equity and other asset allocation to suit prevailing markets. Turnover can be high, at between 200 per cent and 300 per cent. It has delivered fund and income returns of more than 9 per cent a year over the past five years. Highly recommended by Zenith.
AN ASIAN FOCUS
Asian equities can complement any domestic equities exposure
84. Aberdeen Asian Opportunities Fund
Concentrates on Asia (ex Japan), with a bottom-up process informed by 30 analysts throughout the region. Annual stock turnover is low and currency exposure is unhedged. Has returned 15 per cent a year over three years. Highly recommended by Zenith.
85. Macquarie Asia New Stars
One for those comfortable with volatile Asian small and mid-cap stocks. Avoids mature stalwarts and state-owned enterprises, with a leaning to entrepreneurial names exposed to domestic consumption and other regional growth features. Has returned 27.4 per cent a year over 3 years after fees and expenses to November but fees can be pricey. Rated bronze by Morningstar.
86. Paradice Global Small Mid Cap Fund
Offers investors bottom-up and benchmark unaware exposure to the international equities small cap sector. It looks for undervaluations, business quality, strong financial metrics and a shareholder friendly management, as if it were to be wholly-owned. Has returned more than 16 per cent over the past year. Recommended by Zenith.
87. Winton Global Alpha Fund
Distributed by Macquarie Professional Series in Australia, Winton is a quantitative trading fund that seeks to exploit technical and price signals to advantage, in rising and falling markets. Like its peers it has been knocked about in the wake of the GFC, so its three-year return has been 7.7 per cent, or half the latest one-year return. The return is 11.1 per cent since inception in 2007.
Recommended by Zenith and liked by InvestSense.
88. Antares Income Fund
The Antares Income Fund aims to generate regular income and excess returns, while providing liquidity and capital preservation, through investing in a broad range of domestic and global fixed income assets. Clients benefit from a stable and experienced team who manage in excess of $21 billion and have a strong focus on managing risk and aiming to enhance returns for investors.
Recommended by Lonsec and approved by Zenith.
89. Bentham Global Income Fund
Has delivered more than 12 per cent a year over the past three years to the end of October. Offers exposure to a diversified portfolio of higher-yielding credit instruments, under a well-regarded management team. A minimum investment is $10,000. Recommended by Lonsec and Zenith.
Need an income and capital stability? Think about direct bond ownership.
90. Retail bond portfolio
Buy from a fixed-income dealer or broker, such FIIG Securities, which has bonds available from $10,000 a bond with a minimum $50,000 initial spend. Retail investors have access to 104 bonds from $10,000 each with a wide range of returns and risk.
A retail portfolio of six bonds (Dalrymple Bay Coal Terminal, Downer Group Finance, Envestra, NAB subsidiary National Wealth Management Holdings, Qantas and Sydney Airport) is expected to return 5.09 per cent a year, if you hold all to maturity. The upfront investment here is about $65,000. Projected income for next year is $2151 and over the life of the portfolio the total projected cash returned to you is about $96,000, an increase of about $31,000 over your initial investment.
91. Wholesale bond portfolio
For those with larger sums to manage, there are 264 bonds to choose from. A wholesale bond portfolio of 10 bonds (Adani Abbott Point, Cash Converters, Dampier to Bunbury Natural Gas Pipeline, Genworth, G8 Education, NAB subsidiary, National Capital Trust, Qantas, Rabobank, Sydney Airport and New Zealand insurer, CBL) at an upfront investment of about $530,000 is expected to return 5.33 per cent a year if held to maturity.
92. Qantas bonds
Qantas is recovering and if the flight path continues, FIIG Securities would expect its bond prices to move higher. Qantas has three bonds available that mature in 2020, 2021 and in 2022.
All three are good relative value and offer great returns of 5.92 per cent a year, 6.20 per cent a year, and 6.27 per cent a year respectively. The one maturing in 2020 is available to all investors while the other two are wholesale only.
Real wealth protection
93. Bendigo SmartCover
An “all in one” product that combines cover for death, total and permanent disability (TPD) and temporary disability, as well as a lump sum payments for life and living cover, trauma, fractures and total and permanent disability.
Living cover offers payments on 60 different events — far more than any other direct insurance product. Each event has a severity rating, which sets the amount paid. Unlike a Life product with attached trauma, Living cover claims do not reduce the Life cover, as the Life and Living covers are separately pooled, so the full Life benefit remains available at all times. It appears the only product that includes a psychiatric event as one of its trauma conditions.
94. CGU Padlock
CGU offers commercial property owners peace of mind with CGU Padlock, an innovative insurance solution which covers liability as well as property and loss of income. This all-in-one insurance package has been designed to provide comprehensive cover for: property; loss of income; theft; money and rent default; glass; tax audit; OH&S and legal costs; liability; and machinery/electronic equipment breakdown.
95. Macquarie Bank Flyer Home Loan
A way for borrowers to earn Qantas points through their mortgage. Besides a competitive interest rate, mortgage holders pick up 10,000 Qantas points for every $100,000 drawn down at settlement. While the loan balance remains at or above $150,000, mortgage holders receive 1000 points each month for the life of the loan and an extra 25,000 bonus points at the third and fifth year anniversary of the loan.
96. ANZ Smart Choice Super
Claims fees lower than any other Australian retail or industry super fund, offers innovative lifestage investments that adjust with your age and allows you to keep your super close with online access and several apps. Customers can also consolidate their super online without the need for paper forms.
97. Bendigo SmartStart Super
Shines as one of Australia’s super funds with the lowest fees and charges. With MySuper you can easily apply online. Comes with default life cover and the ability to tailor group life cover as well. SmartStart has been awarded a 5-star Canstar rating in all four categories. The diversified funds option has reached 3 years of strong performance and is in Morningstar’s top quartile.
Great for young people starting out, small business and the pension option is starting to grow significantly in this fund as well.
SELF-MANAGED SUPER FUNDS
Tips for trustees
98. AMP SMSF Solutions
A headache-free way to run an SMSF, with access to advice and help when needed on the tricky bits of administration and compliance. Choose from a simple package, with banking and investment tools, through to a platinum package that offers flexibility suitable for more complex investment strategies and regular share trading.
99. Macquarie Cash Management Account
Macquarie declares it is used by one in four self-managed super funds, as a cash hub that saves time on administration, provides ten years of statements online, has no monthly fees and a competitive interest rate.
All that helps towards super fund accounting, tax returns and end-of-financial-year reporting. Macquarie also offers an electronic message service to meet SuperStream reforms.
100. Commonwealth Direct Investment Account
CBA touts it as the one you need to manage a self-managed super fund’s cash, with fast balance updates on an account. It can work like a hub for investors, where funds coming in from a number of sources can be transferred to other investments.
The Weekend Australian accepts no responsibility for these product offerings. The author owns BHP shares. Some of the firms featured have or seek corporate work with several of the stocks mentioned. Readers should contact a licensed financial adviser.