A desire for financial independence prompted Kerrie Brown to start trading and despite her husband’s protests she plunged her little nest egg of child endowment savings into a shoe company that went bust just days after she purchased shares in it. “I didn’t do any research into the company’s financials,” she groans.
The upside was one pair of high quality leopard print stilettos – the reason she decided to buy shares in the company in the first place – that are still standing strong, and the resolve to learn about the market and never be in that position again.
But the catalyst to attain financial independence was a friend’s messy divorce. “Many women subjugate their responsibility to money when they get married,” says Brown. “It’s a big mistake because a lot of them don’t have the fairytale ending”.
The former science teacher opted for the sharemarket because investing in real estate would have entailed borrowing a swag of money. She embarked on a regime that included a number of courses, which she says did little to inspire or educate her. “The most I got out of the TAFE course was the underlying message, find yourself a good broker and let him do it for you. I thought, if they’re so good why are they advising me and not skiing in Aspen,” she declares.
Brown now runs her own self-managed super fund and three other portfolios and is comfortable investing $10,000 to $50,000 at a time into any one of them.
Frustrated with dealing with broking houses with vested interests and brokers whose credentials were sometimes less than impressive, 12 years ago she set up an investment club, Ladies Investment Portfolio Syndicate (LIPS), through which she gained the confidence to create strategies that work well for her.
While essentially a fundamental investor, Brown is beginning to take an interest in charts. But she only intends to use charting to tell her when to buy, not what to buy.
When pinpointing a stock to buy, Brown seeks out companies with increasing earnings, sales and return on equity – choosing companies that have a return on equity greater than 15%. “At the moment I like the price/earnings ratio (P/E) to be lower than its five-year average and I would want the price to be closer to its year low than its year high,” she says.
Her method is to begin with CommSec’s filters (CommSec -> Research -> Company Research – in the drop down tab, Advanced Search Tool provides the facility to run a query and filter out stocks in accordance with designated criteria).
She then progresses to an inexpensive program that analyses fundamentals (Investor’s Toolkit 5), which she bought years ago from the US group, National Association of Investors.
Warren Buffett’s idea of a solid company that delivers strong cash flows, has conservative people at the helm, limited debt and each year increases its earnings and sales, appeals to Brown. She chooses stocks that she can retain in her in her portfolio for on average, 10 years.
“I’m just starting to gain the confidence to look at trading strategies,” she says. “I am looking at the relative strength index, which might be a trigger to buy something I already think is a good company if it’s below around 30.”
She has also started utilising Bollinger band squeezers but has no interest in trading triggers such as stop losses.
Her theory being “if you buy a share you think is good and you want to keep it in your portfolio it doesn’t matter what the price does in the short term because eventually it will go up”.
“A stop loss means the price has dropped so what are you going to do, sell it low and then wait until it goes up again and buy it high? It occurs to me that this is not a very good strategy.”
Fifteen percent of Brown’s income comes from investing. During the correction in January her portfolios dropped close to $400,000 in value.
“They’ll go up again,” she says philosophically. “I’ve learned to be patient and not panic.”
Her biggest win was purchasing a sizeable number of stocks in a little Queensland chemical company, Campbell Brothers (CPB), at about $1.50 a share. They are currently trading at $26.
Her biggest debacle was recommending to her LIPS group a company that was stgeloping “blue carnations”.
Needless to say, they’ve never let her forget it.