TheBull talks to industry experts for insights on how they make money – and lots of it.

Brendan fits the definition of a diversified investor. He estimates his personal assets of shares, property and part ownership in a transport business to be collectively worth about $2.5 million. Shares in his self-managed super fund include Westpac, Commonwealth Bank, National Australia Bank, QBE Insurance Group, Rio Tinto, Woodside Petroleum and Newcrest Mining. As a stockbroker Brendan says blue chip stocks provide a mix of capital growth and income that match his definition of superannuation as a long-term investment.

“For super, I invest in proven companies appearing to offer a bright long-term future,” Brendan, 32, says. “I want lower risk stocks in super as they are easier to manage. Speculative stocks require regular scrutiny and they can quickly go bust.”

But Brendan  is much more aggressive trading his own personal portfolio that includes companies such as Coretrack, Jameson Resources, Aquila Resources, Dragon Mountain Gold and Meridian Minerals. He says buying speculative stocks provides greater leverage to invested capital. “Buying a stock for 10c and selling it for 15c offers a much bigger percentage return than buying a blue chip for $30 and selling it for $35,” Brendan says.

“After doing the research, I only need one speculative stock to rise and I can do pretty well.” Brendan says he bought 400,000 shares of Coretrack, a junior technology company, between 9c and 10c a share in September 2008. On May 15, 2009, the shares closed at 34c. Brendan continues to hold the stock, saying the share price should rise if its latest tests in the oil and gas sector are successful, and the technology is commercialised. “But the stock is speculative and carries technology risk,” he warns.


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But Brendan also looks to buy over-sold blue chips and Macquarie Group provided a tidy $28,000 windfall in a single day. When Macquarie fell to $26 a share in September last year, following the collapse of Lehman Brothers, Brendan bought the shares. The next day, Brendan sold the shares for $33. “The company had been clearly over-sold as a result of panic,” Brendan says “Had Macquarie’s share price fallen after buying it, I would have held the stock and waited for a recovery. After all, it was Macquarie – a blue chip company with a solid earnings history.  I bought Westpac at $22 and bought more when it fell to $14.75. I’m confident it will rebound.”

Brendan has also done well from investing in property. He built a four-bedroom house on a block of land at Karratha in Western Australia and made a $320,000 profit in less than two years. Brendan says: “The block was going cheap and there’s a shortage of quality housing in this busy diversified resources region. Letting the property fetched $1800 a week on a three-year lease.” Brendan’s major property exposure is his debt-free home in south Perth valued at $1.6 million.

Opportunity knocked and Brendan bought a quarter share in a transport business that buses workers to mine sites and ports at Dampier, 12 km from Karratha. Brendan says his transport company generates a solid cash flow from servicing the busy WA towns.

Finance planner Laurie Hellier delayed his retirement after the global financial crisis punished shares in his self-managed super fund. But the 61-year-old says he expects his super portfolio to recover because he is holding quality companies. Stocks in his super fund include ANZ, Commonwealth and Westpac banks, BHP Billiton, Toll Holdings, Perpetual, Wesfarmers, Boom Logistics and Woodside Petroleum.

Hellier, who recently joined CPW Financial Planning and is also a chartered accountant, doesn’t have a separate personal share portfolio because he says, at his age, the super fund is the most tax-effective vehicle. Hellier says he participated in recent company capital raisings because they provided a good opportunity to top up holdings at a steep discount. He believes the Australian sharemarket has bottomed, and demand for companies with little or no debt will drive up their share prices. “You don’t have to look outside the proven blue chips to find good value, particularly when confidence returns,” Hellier says.

Hellier’s property portfolio consists of a family home, and he lets two units in Melbourne where there’s strong demand for rental accommodation. He says rental properties are an attractive investment as demand pushes up income, and the interest paid on mortgages is tax deductible.

Stockbroker Richard Batt’s personal share portfolio includes ANZ and Westpac banks, BHP Billiton, Woodside Petroleum, Wesfarmers, Billabong International, Blackmores, Leighton Holdings, Sonic Healthcare, Tatts Group and Toll Holdings.  “As far as the banks are concerned, I like Westpac’s conservative balance sheet and ANZ’s growth strategy into Asia,” Batt says. “I bought Westpac at $20.30 in June 2008 and watched it fall to $15 this year. If I was happy to buy it at $20, it made sense to buy more at $15. Westpac has a strong funds management arm and is well managed.”

Batt, of stockbroking company Shadforths, says Woodside Petroleum should be part of any balanced portfolio as Australia’s biggest listed oil and gas producer with vast LNG reserves and exposure to rising crude oil prices in an improving global economy. Batt says he had no hesitation in buying Wesfarmers in the retail capital raising at $13.50 a share in February. “Wesfarmers presented a terrific investment opportunity for a diversified company with multiple earnings streams from resources and retailing,” Batt says. “The Coles turnaround should be a major revenue winner in future. I like stocks with recurring revenue, and I subscribe to the buy and hold strategy.” Wesfarmers shares closed at $22.39 on May 15.

Batt, 32, says his wrap-style super fund includes much of the same blue chips held in his personal portfolio. Batt and his partner Elizabeth recently bought a house in Hobart, but there are no plans for investment properties. “The sharemarket is where I invest,” Batt says.


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