What % of your portfolio does it hold Beagle ? Surprised you are still buying. I got the extra I needed at 75c....even a wee bit more than I needed. And am content with that.
May lighten up to hold it around 6-8% should the price go up.
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More than I would normally hold in any one company but these are very unusual times mate and its incredibly difficult to find companies that will weather this Covid and economic crisis in a robust way and that have excellent prospects going forward. The metrics are really compelling for this sector. Very cheap forward FY21 PE of less than 10 by my estimate and yield of 5%.
Yeah I got a lot in the low 70's and sort of surprised myself I was keen for more at $1. I am buying at $1 because I am taking a 5 year view that these are highly likely to double in that timeframe, or more and the yield is safe as its a needs based business and is more than double what I can get on term deposit. That is what's driving me to take an outsized position.
To be honest I am having a lot of difficulty finding stocks that I am comfortable holding as we enter the early stages of what is probably a deep recession so I am adapting my investment strategy to suit.
Understood....and you are not yet retired.
So far I think my well diversified portfolio has served us pretty well. While some dividends have gone, many have continued. And our income from dividends remains pretty spread from a number of stocks.
This may not be over yet. While it looks like a V....I am not discounting a W. If I could I would have made the middle mountain half height.
Mark Lister of Craigs the other day saying the average yield of NZX50 shares is presently just 3.6%. I want to retire in the next few years mate but can't do it on that sort of return or on 2% term deposits in the bank. 5% works for me though or stated more correctly 7% at my average buy price :)
Question for your expertise Beagle, if we are to have a W recovery so potentially another deep crash, do you have any trigger points at which you would pull your holding, allow the stock to drop down to near what it was (.40 - .50) and buy back in? I don’t believe OCA should drop as much the next time around but it just seemed to get a hammering last time and I think a lot out of pure fear of Covid, but I suspect the next time could just be out of fear of not having cash on hand going into a deep recession. Would expect to see a lot of our new investors from the likes of sharesies jump ship at any cost. So back to my question, do you think this could happen and do you have any triggers?
I know no news is good news in these turbulent times but i for one would certainly appreciate a post level 4 announcement to how we have faired and are now tracking with life seemingly returning to relative normalcy.
Just saying Earl
Thanks for your question mate. The short answer is I don't have any plans to execute a stop loss strategy on OCA.
Apart from the compelling metrics I mentioned above there are real differences between this and for the sake of clearly differentiating the sector, MET.
MET are primarily about independent living units and OCA are predominantly about care. I believe most people buy into an OCA unit for the care which is a needs based thing as opposed to a lifestyle choice one makes at MET. If you have a need for late stage care or a perceived need in the near future it doesn't really matter if we're in recession or not. I have just over 20 times the number of shares in OCA as I do MET. (Needs based is vastly more robust than lifestyle based decisions, notwithstanding the compelling valuation of MET and the possibility of a takeover).
If we're going into a W type economic situation that drives that response on the market then the whole market will be significantly impacted but those who are providing needs based services should see materially less impact. Don't forget though that the Govt has another $20 billion up its sleeve, unallocated from the budget to fight the economic fallout from this virus. Despite that, I remain concerned about the level of the market generally so am very cautious with my overall level of exposure to equities which still sits at less than 50%, (but I do have significant ability to lift this further through possibly exercising warrants down the track detailed below).
I think the very deep dive, (under 60 cents for just 7 trading days) was a really huge fear response. I felt it and I know many others did too. Late March was very dark days of concern for what might happen. Hopefully now that OCA have demonstrated very good risk management procedures around virus risk control, as have the Government for that matter, the market will act rationally from here.
In terms of managing market risk, (W or L shaped recovery) I have a three pronged approach.
1. Stick only to companies that are needs based and who should trade well, or quite well in a recession and have robust cash flows and a good strong balance sheet.
2. Maintain a high cash position.
3. Maintain upside exposure to the market through the use of warrants. Warrants confer the right to subscribe to shares at a future date at a fixed price but not the obligation. I have significant stakes in Kingfish warrants (KFLWF) N.Z. market possible exercise March 2021 and Marlin Warrants U.S. market possible exercise November 2020 (MLNWD).
some people selling ... waiting at a 1.0 ...
Briefly dipped to $1.00 intraday and managed to hoover up a few more...8300 or so. Happy with that. Still front of queue for a some more at that price.