Sunday 10 October 2004
table of contents . . .
summary of recommendations
summary of recommendations
1
Stock
Recommendation Current Price Target
Stop Loss
Time Frame
how to use this newsletter
1
KRS
Buy
63 cents
$1.00
45 cents
12 months
sample page
2
LAF
Buy
12.5 cents
25 cents
8 cents
12 months
ANZ
Trade Dividend
$19.17
See pg 7
See pg 7
2-4 weeks
LLC
Trading BUY
$11.65
See pg 11
See pg 11
1 week
BHP
Lock in Profits
$14.82
See pg 12
See pg 12
1 month
STOCK ON THE MOVE
kresta holdings limited
3
lafayette mining limited
3
portfolio management
4
stock on the move distributions
13
INSTALMENT INVESTOR
how instalment warrants work
7
anz banking group limited
The quick guide on how to use the Investment Wise newsletter.
There are 2 categories, the novice stock market trader (please follow steps on
the left hand column) and the advanced stock market trader (please follow steps
on the right hand column).
OPTION/WARRANT TRADING
technical analysis
10
lend lease corporation limited
11
WRITING COVERED CALLS
bhp billiton limited
DISCLAIMER
HOW to use this newsletter
novice trader
advanced trader
step 1
step 1
Read the sample page – How to
interpret our Stock on the Move
picks on page 2
Read pages 7 to 12. These are
relevant to your level of trading
12
16
step 2
step 2
Read pages 2 to 6. These are relevant
to your level of trading
Read the Disclaimer on page 16
step 3
Read the Disclaimer on page 16
A Publication of PPS Investments Pty Ltd A.C.N 097 446 369
ASIC Investment Advisers Licence no: 213788 © Copyright 2002
1
Investment Wise
The Stockmarket Edge
HOW to interpret our Stock on the Move picks
Investing in Small-Mid Cap Stocks to achieve Big Returns
Expected Knowledge:
Level of Difficulty:
None
All Levels (i.e. Beginner, Intermediate and Advanced)
Every week emerging stocks that are about to make a big move are highlighted
with a suggested investment strategy. Even in the worst Stock Market conditions,
there are always stocks that will appreciate in value. Traditionally, this has been
the aim of Fund Managers around the World – To Find Market
Outperformers. Now, you too can access recommendations that have a proven
record of success. The sample shown on the right is the typical format of a
“Stock on the Move” recommendation. Refer to the explanations below on how
to interpret the information provided.
SAMPLE Stock on the Move Recommendation
Peptech Limited
Stock Exchange Code
PTD
Recommendation
BUY
First Recommended
05-01-2001
Current Share Price
$1.87
A unique code used by the Australian Stock
Exchange to identify listed companies
12 Month Price Target
$3.50
Suggested Stop Loss
$1.54
Intended investment advice placed on a
particular stock
Earnings per Share (cents)
21.20
Market Capitalisation ($)
278.6 M
Date at which the stock is/was first
recommended as a “BUY”
How many shares do I buy ?
Current Share Price
Price that the stock last traded at the time of
writing
Trade
Size
12 Month Price Target
The expected level of that the stock is
expected to reach within the next 12 months
Stock Exchange Code
Recommendation
First Recommended
Suggested Stop Loss
Amount ($) you are prepared to lose
=
Market Price − $1.53
PTD
3.0
Price at which investors should sell their
shares if the stock trades below indicated level
2.5
2.0
Earnings per Share (cents)
Market Capitalisation ($)
How many shares do I buy ?
Measures the earnings that are attributed to
each equivalent ordinary share over a 12
month period
The total number of shares on issue multiplied
by their market price. This can be applied to
work out the market value of one company
Decide the dollar amount you are prepared to
lose if the stock trades below the Suggested
Stop Loss (typically 2-3% of the total amount
of money you have to invest). If you can
afford to lose $350, then the maximum
number of shares which should be purchased
is:
$350 ÷ (Market Price − Stop Loss Sell Price)
1.5
1.0
0.5
1994
1995
1996
1997
1998
1999
2000
2
Peptech (PTD) researches, develops, produces and
markets peptides, antibodies and related products for
the pharmaceutical, veterinary and agricultural
industries. The Company's peptide-based products are
used for the treatment of diseases in the areas of
cancer, inflammation and infection in humans and the
management of animal health and fertility.
D I S C L A I M E R : This report was produced by PPS Investments Pty Ltd (ACN 097 446 369), trading as Investment Wise, which is an Australian financial services licensee (Licence no. 246670). PPS Investments Pty Ltd has
made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the
information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, PPS Investments Pty Ltd does not accept any liability, including for negligence,
for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any
securities. W A R N I N G : This report is intended to provide general financial product advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or
needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and
consider the product disclosure statement for that product (if any) before making any decision. D I S C L O S U R E : PPS Investments Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction
upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, PPS Investments Pty Ltd may have, within the previous
twelve months, provided advice or financial services to the companies mentioned in this report. This report may not be reproduced, distributed or published for any purpose, unless the person or entity seeking to do so is expressly
authorised in writing by PPS Investments Pty Ltd.
Sunday 10 October 2004
© Copyright 2001-2004
2
Investment Wise
The Stockmarket Edge
Stock on the Move
Lafayette Mining Limited
Kresta Holdings Limited
Stock Exchange Code
KRS
Stock Exchange Code
LAF
Recommendation
BUY
Recommendation
BUY
First Recommended
17-12-2002
First Recommended
10-10-2004
Current Share Price
63 cents
Current Share Price
12.5 cents
12 Month Price Target
$1.00
12 Month Price Target
25 cents
Suggested Stop Loss
45 cents
Suggested Stop Loss
8 cents
Earnings per Share (cents)
5.16
Earnings per Share (cents)
-0.88
Market Capitalisation ($)
83.8 M
Market Capitalisation ($)
50.0 M
How many shares do I buy ?
Trade Size
=
How many shares do I buy ?
Amount ($) you are prepared to lose
Trade Size
Market Price − 44.5 cents
Note. Amount ($) you are prepared to lose is typically 2-3%
of the total amount of money you have to invest
=
Amount ($) you are prepared to lose
Market Price − 7.9 cents
Note. Amount ($) you are prepared to lose is typically 2-3%
of the total amount of money you have to invest
KRS
1999
2000
2001
2002
LAF
2003
0.75
0.25
0.60
0.20
0.45
0.15
0.30
0.10
0.15
0.05
2004
1999
Kresta Holdings Ltd (KRS) specialise on the retailing,
manufacturing and wholesaling of blinds, curtains, furnishings
and retailing of window treatments. Having first identified KRS
as a ‘turn around’ story for members on the 15-12-2002 at 22c,
members were recommended to lock in profits at 33.5c on the
12/2/03 which represented a potential 52.3% return. Since that
period KRS have been able to prove that they have the ability to
continue and grow earnings at similar levels, posting a net
profit after tax of $6.92m for the financial year 2003/04. They
have been rewarded by an impressive institutional register
(recently CBA) and a stronger share price. KRS continues to
focus on its growth strategy via the roll out of its new stores
and refurbishments, with minimum capital requirements. At
current prices, KRS have a strong balance sheet and an
attractive yield to warrant a ‘buy’ recommendation.
Sunday 10 October 2004
2000
2001
2002
2003
2004
Lafayette Mining Ltd (LAF) is an exploration and development
company that is primarily focused on the Rapu Rapu Project in
the Philippines. With construction of the project underway, the
mine will produce copper, gold, silver and zinc to a forecast
value of US$350m over a six year mine life. LAF have been
successful at dramatically reducing the risk of the project via
securing a US$32m fixed price contract for the plant
construction from Leighton and sourcing US$35m of project
finance facilities from an impressive banking consortium
including Rothschild, ANZ, ABN Amro, Investec and Korea
First Bank. The project is highly leveraged to the price of
metals which are all outperforming with production forecast to
commence in early 2005. LAF deserves a market re-rating at
current prices as it moves from explorer to producer and is
recommended as a ‘speculative buy’.
© Copyright 2001-2004
3
Investment Wise
The Stockmarket Edge
Portfolio Management
How to manage recommendations from Stock on the Move like the Professionals
The key to successful trading is cutting losses quickly and holding
onto winning trades. Very often investors sell out of winning
trades, only to see the stock trade a lot higher. However, it is more
disturbing to see an unrealised profit of 60% turn into a losing
trade. It is very difficult to pick market tops and bottoms. We use
“Profit Stops” to help investors manage their investments. Profit
Stops are like Safety Nets that protect unrealised profits. The
chart on the right demonstrates our use of Profit Stops. The Initial
Stop Loss is raised as the stock trades higher to lock in profits.
Notice that as the stock trades higher, the Profit Stop is revised to
a higher level. Finally, as the stock trades below the Revised Profit
Stop, we sell the stock to realise a profit of 16%.
This Portfolio Management section is how we help you manage
your investments in Stock on the Move. New Stock on the Move
picks featured this week have also been included and updated Stop
Loss and Profit Stops are highlighted. The Profit Stop always
starts off as the Initial Stop Loss. We recommend that investors
sell the stock should the share price trade below the Stop Loss or
Profit Stop indicated in the table below.
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
06-06-03
ALZ
1,600
$1.650
−
$1.770
$2.000
$1.800
+$240.00
+9.09%
20-06-03
MGI
2,500
$1.630
−
$1.780
$2.000
$1.810
+$450.00
+11.04%
04-07-03
ARQ
3,500
$0.690
−
$0.980
$1.300
$1.140
+$1,575.00
+65.22%
11-07-03
NLX
4,100
$0.340
$0.265
−
$0.750
$0.360
+$82.00
+5.88%
15-08-03
CTO
7,500
$0.165
$0.130
−
$0.350
$0.160
-$37.50
-3.03%
15-08-03
PRG
1,200
$2.380
−
$2.700
$3.250
$3.290
+$1,092.00
+38.24%
22-08-03
LCL
2,200
$0.890
$0.720
−
$1.500
$0.800
-$198.00
-10.11%
29-08-03
BTC
2,400
$0.530
$0.330
−
$0.900
$0.385
-$348.00
-27.36%
12-09-03
MAH
4,100
$0.270
−
$0.360
$0.600
$0.415
+$594.50
+53.70%
19-09-03
CPB
1,100
$5.690
−
$7.000
$7.500
$7.740
+$2,255.00
+36.03%
17-10-03
SOL
610
$6.650
−
$8.390
$9.000
$9.100
+$1,494.50
+33.16%
31-10-03
HIG
3,300
$0.365
−
$0.435
$0.900
$0.540
+$577.50
+47.93%
14-11-03
DOW
400
$3.800
$3.200
−
$6.000
$4.100
+$120.00
+7.89%
14-11-03
TEN
1,000
$2.780
−
$3.240
$4.000
$3.450
+$670.00
+24.10%
21-11-03
LNN
740
$5.860
−
$7.090
$6.800
$7.390
+$1,132.20
+26.11%
05-12-03
MCW
2,600
$1.760
−
$1.900
$1.900
$1.980
+$572.00
+12.50%
12-12-03
SGS
1,600
$1.250
$0.950
−
$2.500
$1.220
-$48.00
-2.40%
Sunday 10 October 2004
© Copyright 2001-2004
4
Investment Wise
The Stockmarket Edge
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
19-12-03
CCL
890
$6.150
$5.600
−
$7.500
$6.910
+$676.40
+12.36%
09-01-04
IRE
1,300
$2.650
−
$3.310
$4.500
$3.460
+$1,053.00
+30.57%
09-01-04
MCC
1,500
$1.420
−
$2.740
$2.500
$3.550
+$3,195.00
+150.00%
16-01-04
MPI
8,700
$0.120
$0.064
−
$0.250
$0.135
+$130.50
+12.50%
23-01-04
VPE
38,000
$0.025
−
$0.037
$0.050
$0.046
+$798.00
+84.00%
30-01-04
TBC
7,700
$0.220
$0.160
−
$0.400
$0.245
+$192.50
+11.36%
06-02-04
FLX
19,000
$0.072
−
$0.165
$0.150
$0.205
+$2,527.00
+184.72%
27-02-04
BBG
890
$7.430
−
$8.200
$9.500
$9.720
+$2,038.10
+30.82%
05-03-04
AMM
7,700
$0.190
$0.130
−
$0.400
$0.230
+$308.00
+21.05%
12-03-04
CIY
750
$4.450
$3.800
−
$6.500
$4.520
+$52.50
+1.57%
12-03-04
MPH
2,500
$0.670
$0.480
−
$1.200
$0.700
+$75.00
+4.48%
19-03-04
HPX
1,900
$1.620
$1.370
−
$2.300
$1.750
+$247.00
+8.02%
19-03-04
ITE
2,800
$0.330
$0.160
−
$0.800
$0.280
-$140.00
-15.15%
26-03-04
CLT
1,400
$1.260
$0.930
−
$2.500
$1.420
+$224.00
+17.20%
02-04-04
HWE
1,900
$1.000
$0.750
−
$1.800
$1.120
+$228.00
+12.00%
08-04-04
GGN
5,500
$0.295
$0.210
−
$0.550
$0.350
+$302.50
+18.64%
08-04-04
TNE
4,100
$0.550
$0.435
−
$0.850
$0.600
+$205.00
+9.09%
16-04-04
SLX
2,000
$0.910
−
$1.090
$1.600
$1.220
+$620.00
+34.07%
23-04-04
GHG
2,600
$0.710
$0.530
−
$1.100
$0.740
+$78.00
+4.23%
23-04-04
RMD
370
$6.540
$5.200
−
$9.000
$6.110
-$159.10
-6.57%
30-04-04
PRG
470
$3.050
$2.700
−
$3.750
$3.290
+$112.80
+7.87%
07-05-04
AVV
860
$2.270
$1.700
−
$3.000
$2.410
+$120.40
+6.16%
14-05-04
IRE
640
$3.000
$2.230
−
$4.500
$3.460
+$294.40
+15.33%
14-05-04
LNN
400
$6.430
−
$6.650
$6.800
$7.390
+$384.00
+14.93%
21-05-04
GAS
1,000
$2.360
$1.900
−
$3.000
$2.210
-$150.00
-6.36%
28-05-04
CLT
980
$1.430
$0.930
−
$2.500
$1.420
-$9.80
-0.70%
11-06-04
ASB
1,200
$1.150
$0.750
−
$1.800
$1.590
+$528.00
+38.26%
11-06-04
TIM
1,100
$1.480
$1.050
−
$3.000
$1.460
-$22.00
-1.35%
18-06-04
CXP
735
$5.070
$4.400
−
$6.500
$5.230
+$117.60
+3.16%
18-06-04
IBA
3,700
$0.310
−
$0.680
$0.600
$0.890
+$2,146.00
+187.10%
25-06-04
ENE
660
$2.850
$2.110
−
$5.000
$3.040
+$125.40
+6.67%
25-06-04
NXS
4,500
$0.215
−
$0.315
$0.400
$0.355
+$630.00
+65.08%
02-07-04
AUO
1,700
$0.720
$0.430
−
$1.300
$0.770
+$85.00
+6.94%
09-07-04
AAC
1,900
$1.300
$1.050
−
$2.000
$1.320
+$38.00
+1.54%
09-07-04
GDY
1,300
$1.220
$0.850
−
$2.000
$1.680
+$598.00
+37.70%
16-07-04
FXR
1,700
$0.730
$0.450
−
$1.300
$0.620
-$187.00
-15.07%
16-07-04
ILU
660
$4.540
$3.800
−
$6.000
$4.710
+$112.20
+3.74%
23-07-04
GRO
2,500
$0.820
$0.630
−
$1.500
$0.800
-$50.00
-2.44%
23-07-04
IDT
960
$2.290
$1.780
−
$3.200
$2.410
+$115.20
+5.24%
30-07-04
VOY
5,200
$0.280
$0.190
−
$0.550
$0.365
+$442.00
+30.36%
30-07-04
WOR
690
$3.300
$2.590
−
$5.500
$3.950
+$448.50
+19.70%
Sunday 10 October 2004
© Copyright 2001-2004
5
Investment Wise
The Stockmarket Edge
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
06-08-04
ADZ
1,500
$1.620
$1.300
−
$2.500
$1.500
-$180.00
-7.41%
06-08-04
MAY
1,000
$3.810
$3.350
−
$4.500
$3.990
+$180.00
+4.72%
13-08-04
SHN
7,500
$0.135
−
$0.165
$0.250
$0.190
+$412.50
+40.72%
13-08-04
UXC
2,300
$0.830
$0.630
−
$1.300
$0.840
+$23.00
+1.20%
20-08-04
AGI
2,500
$0.560
−
$0.750
$1.000
$0.850
+$725.00
+51.79%
20-08-04
SDG
2,100
$1.160
$0.940
−
$1.600
$1.350
+$399.00
+16.38%
27-08-04
FKP
1,000
$2.960
$2.480
−
$4.500
$3.070
+$110.00
+3.72%
27-08-04
PPX
470
$5.440
$4.400
−
$7.500
$5.310
-$61.10
-2.39%
03-09-04
BQT
2,600
$0.435
$0.250
−
$0.800
$0.230
-$533.00
-47.13%
03-09-04
SSX
2,000
$1.180
$0.950
−
$1.600
$1.160
-$40.00
-1.69%
10-09-04
OPL
4,300
$0.275
$0.160
−
$0.500
$0.340
+$279.50
+23.63%
10-09-04
SPT
700
$4.800
$4.100
−
$6.500
$4.660
-$98.00
-2.92%
17-09-04
ENE
530
$3.040
$2.110
−
$5.000
$3.040
$0.00
0.00%
17-09-04
HPX
1,060
$1.830
$1.370
−
$2.300
$1.750
-$84.80
-4.37%
24-09-04
MPM
1,040
$1.820
$1.350
−
$2.700
$1.870
+$52.00
+2.75%
24-09-04
PTD
1,100
$1.620
$1.200
−
$2.500
$1.490
-$143.00
-8.02%
01-10-04
IGO
1,600
$1.240
$0.950
−
$2.000
$1.250
+$16.00
+0.81%
01-10-04
SMY
1,800
$0.860
$0.600
−
$1.600
$0.880
+$36.00
+2.33%
08-10-04
KRS
2,700
$0.630
$0.450
−
$1.000
$0.630
$0.00
0.00%
08-10-04
LAF
10,800
$0.125
$0.080
−
$0.250
$0.125
$0.00
0.00%
Stop level updated
Stock has traded below stop level and will be removed from table
NOTE. The returns shown above are simulated, in that PPS Investments has not purchased an
interest in such stocks and rather the portfolio shows returns that could be achieved if the relevant
quantity of the particular stock was purchased on the "Buy Date" and held until the date of this
newsletter. Therefore, there is no guarantee that the above returns can actually be achieved.
Returns may be under-stated since dividends and other distribution income are not included in the
above calculations. Dividends and other distribution income are listed on page 13.
THIS CONCLUDES THE SECTION FOR NOVICE INVESTORS.
PLEASE READ THE DISCLAIMER ON PAGE 16.
Sunday 10 October 2004
© Copyright 2001-2004
6
Investment Wise
The Stockmarket Edge
Instalment Investor
!! WARNING !!
EXAMPLE
This section is intended for INTERMEDIATE-TOADVANCED INVESTORS ONLY. Instalment warrants are
derivative products and are extremely risky. The listed products
have been sorted in order of gearing. Investors should be aware
that the products listed at a greater discount incur more interest
charges and there is no guarantee that investors will profit from
investing in these products. Investors should also seek advice
from an Accredited Derivatives Adviser and a Tax Specialist.
Two investors are considering a $10,000 investment in National
Australia Bank. Investor-A decides to invest in the shares and
Investor-B decides to invest in the instalment warrants to take
advantage of the enhanced dividend yield and franking credits.
Assuming National Australia Bank is trading at $30.00 and
pays an annual dividend of $1.35 consider the scenarios below.
National Australia Bank Instalment
Second Payment (Loan Amount)
Capital
Interest (8.00% pa)
Borrowing Fees
Instalment Warrant Price
Blue Chip Stocks – UP TO 80% OFF !
Level of Difficulty:
Expected Knowledge:
Intermediate-to-Advanced
ASX Instalments Booklet
(Enjoy dividends before paying
for your shares)
$16.00
$14.00
$1.28
$0.40
$15.68
At January 20X1, say NAB is trading at $30.00:
Blue Chip stocks have always been preferred investments due
to their ability to produce solid earnings even in the worst
economic conditions. Investors can use Instalment Warrants to
gain exposure to Blue Chip stocks without the high capital
outlay that is normally required. Instalment warrants are like
buying shares on lay-by but the investor receives the full
dividend and franking credits. Investors pay approximately 50%
of the current underlying share price, which means the
remaining portion is borrowed from the issuer. A pre-paid
interest component is built into the initial price and depreciates
over the life of the instalment warrant.
•
Investor-A buys 333 NAB shares at $30.00
Dividend Yield = ($1.35 ÷ $30.00) x 100% = 4.56%
•
Investor-B buys 637 NAB instalments at $15.68
Dividend Yield = ($1.35 ÷ $15.68) x 100% = 8.61%
At January 20X2, say NAB is trading at $33.00:
•
Investor-A sells 333 NAB shares at $33.00
Profit = Capital Gain + Dividend Income
= ($33.00 − $30.00) x 333 + $1.35 x 333
= $1,448.55 or 14.49%
•
Investor-B sells 637 NAB instalments at $17.00
Profit = Capital Gain + Dividend Income
= ($17.00 − $15.68) x 637 + $1.35 x 637
= $1,700.79 or 17.00%
NOTE. Pre-Paid interest is initially built in to the price of the
instalment warrant and deducted in the form of time decay over
its trading life. At maturity, all interest has been repaid (i.e. no
time value) and the price of the instalment warrant is worth
($33.00 − $16.00) = $17.00.
Sunday 10 October 2004
© Copyright 2001-2004
7
Investment Wise
The Stockmarket Edge
Instalment Trading Strategy
Trading the Dividend of Blue Chip Stocks
Blue Chip stocks generally pay dividends to their shareholders.
For this reason, Blue Chip stocks are very popular amongst
investors when the stock is close to paying a dividend. To be
eligible for the dividend, investors must own the stock before
the ex-dividend date. This requirement often creates a lot of
interest in the shares as investors buy the stock in order to
receive the dividend.
!! WARNING !!
This section is intended as a CASE STUDY ONLY. The
example discussed here is historical and is not an indication of
future returns. All prices have been backdated and are
theoretical results. There is no guarantee that such returns can
actually be achieved. Instalment warrants are derivative
products and are extremely risky. Investors should also seek
advice from an Accredited Derivatives Adviser and a Tax
Specialist.
The Trading Strategy - ANZIPF
ANZIPF is an Instalment Warrant that can be used to take
advantage of leverage, enhanced dividend yields and possibly
franking credits (see your Tax Adviser). The second payment of
ANZIPF is $10.00 and expires on 26 June 2003. The instalment
trading strategy is as follows.
•
Buy ANZIPF leading up to the ex-dividend date
•
Receive entitlement to the dividend of 39 cents
•
Hold ANZIPF for a maximum of 2 weeks after the
ex-dividend date in anticipation that ANZ will recover
its dividend (i.e. Appreciate to share price levels prior
to the ex-dividend date)
•
Sell ANZIPF on dividend recovery (or if ANZ does
not recover its dividend within 2 weeks)
ANZ Banking Group Limited
On 17 May 2002, ANZ was expected to trade ex-dividend and
pay a fully franked dividend of 39 cents. This meant that
investors who wished to receive the 39 cent dividend had to
own the shares before 17 May 2002. ANZ was trading at
$19.13 on 8 May 2002 and creating an opportunity to trade the
stock leading up to the ex-dividend date.
The Trade - ANZIPF
•
On 8 May 2002, ANZ was trading at $19.13
ANZIPF Bid:
$9.98
ANZIPF Ask: $10.00
•
On 17 May 2002, ANZ trading ex-dividend for 39cents
•
On 31 May 2002, ANZ trading $19.50
ANZIPF Bid:
$10.30
ANZIPF Ask: $10.32
•
Profit = Capital Gain + Dividend
= ($10.30 − $10.00) + $0.39
= $0.69 or 6.9%
Sunday 10 October 2004
© Copyright 2001-2004
8
Investment Wise
The Stockmarket Edge
Instalment Investor
ANZ Banking Group Limited (ANZ)
ANZ last traded $19.18 (at the time of writing). The next exdividend date is expected on 8 November 2004. We believe this
creates a great opportunity to trade instalments to take
advantage of enhanced dividend yields and potentially franking
credits (see your Tax Adviser). Instalment investors may
consider trading the period leading up to the ex-dividend date
and holding for no more than 2 weeks after the ex-dividend date
in anticipation that the stock may recover its dividend.
NOTE. All figures below are quoted in cents. For simplicity,
time decay is assumed constant. Investors should be aware that
cheaper (more geared) products have greater Weekly Interest
Decay. We prefer instalments that are 50% of the share price,
since the interest on the outstanding loan is significantly less.
ANZ
19.00
18.00
17.00
16.00
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2004
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Code
Strike
Price
Expiry
Bid
Offer
Intrinsic
Value
Pre-Paid
Interest
Weekly Interest
Decay (in cents)
Discount
ANZIOC
925
23-Jun-05
1038
1039
993
46
1.3
45.83%
ANZIZO
1000
15-Jun-05
970
971
918
53
1.5
49.37%
ANZIOL
1000
29-Apr-05
958
959
918
41
1.4
50.00%
ANZIYE
1263
25-Sep-06
927
932
655
277
2.7
51.41%
ANZIZQ
1100
02-Dec-05
920
921
818
103
1.7
51.98%
ANZIMO
1150
22-Dec-05
881
883
768
115
1.9
53.96%
ANZISH
1050
25-Nov-04
878
879
868
11
1.6
54.17%
ANZIML
1250
29-Jun-06
848
850
668
182
2.1
55.68%
ANZIMM
1150
23-Jun-05
836
838
768
70
1.9
56.31%
ANZISG
1200
23-Jun-05
787
788
718
70
1.9
58.92%
ANZIMC
1200
20-May-05
783
784
718
66
2.1
59.12%
ANZIMF
1150
18-Nov-04
778
780
768
12
2.1
59.33%
ANZIGF
1200
17-Nov-04
726
728
718
10
1.8
62.04%
ANZIYB
1291
26-May-05
705
708
627
81
2.5
63.09%
ANZIWG
1250
06-Dec-04
687
689
668
21
2.5
64.08%
ANZIOI
1300
18-Nov-04
627
628
618
10
1.8
67.26%
ANZIMV
1500
23-Jun-05
519
521
418
103
2.8
72.84%
ANZIWJ
1450
06-Dec-04
495
496
468
28
3.4
74.14%
Sunday 10 October 2004
© Copyright 2001-2004
9
Investment Wise
The Stockmarket Edge
Option/Warrant Trading
How to Profit from a Rising and Falling Market
Level of Difficulty:
Advanced
Expected Knowledge: ASX Options Booklet (Understanding Options Trading)
ASX Warrants Booklet (Understanding Trading Warrants)
Each day, money moves in and out of the Stock Market. This is the reason why
share prices move up and down. The table below shows our short-term view on
each stock based on Technical Analysis. The highlighted stock is our pick of the
week and a trading strategy is presented in the Option/Warrant Trading Strategy.
!! WARNING !!
This section is intended for ADVANCED
INVESTORS ONLY. Options and warrants are
derivative products and are extremely risky. The
warrants below have been chosen based on our own
selection criteria and there is no guarantee that
investors will profit from investing in the products
listed. Investors should also seek advice from an
Accredited Derivatives Adviser.
Code
Last Trade
Technical Comment
AMP
$6.23
Stock attempting to bounce from current levels, but any close below $6.00 would be bearish
ANZ
$19.17
Stock still facing resistance at the $19.50 level and likely to make new highs soon
BHP
$14.82
Stock continues to break new highs with only a close below $13.00 indicating any change in trend
BIL
$7.03
A potential head and shoulders reversal forming with a close below $6.95 likely to be bearish
CBA
$30.20
With a break of the short term down trend, early signs indicate higher prices towards $32.00
CML
$9.34
Small consolidation pattern likely to represent a good buying opportunity as long as $9.00 is not breached
FGL
$4.86
With the break of $4.70 level from triangle pattern, stock is likely to test the $4.90 level next
LLC
$11.65
Stock has broken out of a running triangle formation with next likely target at $12.00
NAB
$26.90
A break of the $27.40 level is likely to see a test of the $28.50 level next, with $26.60 an important support
NCP
$11.10
Stock has retraced from recent run and must hold the $10.85 support level for any bullish case
QAN
$3.38
Stock trying to break out from a consolidation pattern with $3.60 as the first target level
RIO
$39.18
Stock facing resistance at current levels with the advance to all time highs at $41.50 just a matter of time
SGB
$22.04
Stock has rallied back towards the $22.00 level and the key to bullish behaviour is support at $21.35
TLS
$4.71
Stock now testing important support at the $4.45 level and future breach of this level would be bearish
WBC
$17.62
Stock has broken out of the flag formation as expected and is nearing all time highs near $18.00
WOW
$13.63
Stock continues to consolidate at these levels as expected, before likely to move higher again
Sunday 10 October 2004
© Copyright 2001-2004
10
Investment Wise
The Stockmarket Edge
Warrant Trading Strategy
Lend Lease Corporation Limited
LLC
Stock Exchange Code
LLC
Recommendation
Trading BUY
Long above $11.80
Stop below $11.60
Current Share Price
$11.65
Abandon below $11.30
Short Term Support
$11.30
Short Term Resistance
$11.80
Trading Horizon
1 week
Preferred Warrant
LLCWOJ
Suggested Trade Size
5,500 units
12.00
11.50
11.00
10.50
Our technicals indicate that LLC is looking strong in the short
term. With short-term support at $11.30 and resistance at
$11.80, traders looking to gain exposure to the underlying share
price may consider the warrants below. Scenario results below
have been calculated using constant delta, volatility and 5 days
time decay. Traders may use the indicated support and resistance
levels to initiate and/or abandon the trade. (i.e. If LLC trades
above $11.80 – Go Long with a potential target of $12.40 and
use $11.60 as your stop loss. If LLC trades below $11.30
before trading above $11.80, abandon the trade completely).
12
19
26
2
9
August
16
23
30
6
13
Septe mber
20
27
4
11
October
18
25
1
8
Nove mber
15
2
!! WARNING !!
This section is intended for ADVANCED INVESTORS ONLY.
The calculations below assume that delta; time decay, interest and
volatility remain constant. The figures and returns are indicative only
and there is no guarantee that indicated returns can actually be
achieved. Investors should seek advice from an Accredited
Derivatives Adviser.
The following table shows the expected movement of each warrant if the stock trades to the TARGET in 5 days.
LLC × $0.60
% Return
$0.370
+$0.130
+35.14%
23-Dec-04
$0.265
+$0.110
+41.51%
23-Dec-04
$0.180
+$0.090
+50.00%
Type
Code
Strike Price
Expiry
Offer
Call
LLCWOJ
$10.50
23-Dec-04
Call
LLCWOI
$11.00
Call
LLCWOK
$11.50
The following table shows the expected movement of each warrant if the stock trades to the STOP LOSS in 5 days.
LLC Ø $0.20
% Return
$0.370
–$0.055
–14.86%
23-Dec-04
$0.265
–$0.050
–18.87%
23-Dec-04
$0.180
–$0.040
–22.22%
Type
Code
Strike Price
Expiry
Offer
Call
LLCWOJ
$10.50
23-Dec-04
Call
LLCWOI
$11.00
Call
LLCWOK
$11.50
Sunday 10 October 2004
© Copyright 2001-2004
11
Investment Wise
The Stockmarket Edge
Writing Covered Calls
How to Make Regular Income on Your Existing Blue Chip Shares
Level of Difficulty:
Expected Knowledge:
Intermediate-to-Advanced
ASX Options Booklet
(Understanding Options Trading)
Investors who own Blue Chip Stocks can earn a regular income
in the Options Market. This is simply done by Writing Covered
Calls over your existing stock. A Covered Call is a Call Option
sold/written when the investor already owns the stock. One
Option Contract normally equates to 1,000 shares. The risk
involved in writing covered calls is the underlying share price
trading significantly higher than the strike sold. In this instance,
the investor forgoes the opportunity to sell the stock at a higher
level. This risk allows Blue Chip Stock holders to earn regular
income on Call Premium sold.
!! WARNING !!
This section is intended for INTERMEDIATE-TO-ADVANCED
INVESTORS ONLY. Options are derivative products and are
extremely risky. The Call Options below have been chosen based on
our own selection criteria and it is assumed that the investor is
holding a minimum of 1,000 shares for every Call Option contract
sold/written.
Writing Covered Calls is an income generating strategy. Investors
selling Calls at recommended strikes must be willing to sell the stock
at these levels. Investors should also seek advice from an Accredited
Derivatives Adviser.
BHP Billiton Limited (BHP)
BHP last traded $14.88 (at the time of writing) and has traded
from a low of $8.22 to a high of $15.03. We believe the stock is
looking very attractive for existing shareholders to lock in
profits. Investors holding a minimum of 1,000 shares may
consider selling the BHP $15.00 October 2004 Call Options at a
premium of $0.25 (at the time of writing) for income. If the
stock closes above $15.00 at expiry, you may effectively be
selling at $15.25 (i.e. $15.00 + $0.25).
NOTE. When an investor sells a Call Option over a stock the
investor does not already own, this is known as Writing Naked
Calls. Investors should note that Writing Naked Calls exposes
the seller/writer to unlimited losses and we strongly advise
AGAINST such practices.
Sunday 10 October 2004
BHP
14.00
12.00
Pull back possible?
Consider locking
in profits
10.00
8.00
J
A
S O N
© Copyright 2001-2004
D 2003
M A
M
J
J
A
S
O
N D
2004
M A
M J
J
A
S
O
N
D
2005
M
A
M
12
Investment Wise
The Stockmarket Edge
Stock on the Move Distributions
Ex-Date
Stock
Distribution per Share
Shares Held
24-06-03
AIP
$0.0500
3,300
$165.00
24-06-03
BWP
$0.0536
3,500
$187.60
24-06-03
HLY
$0.0830
840
$69.72
24-06-03
MGI
$0.0307
2,500
$76.75
24-06-03
MTT
$0.0460
1,500
$69.00
18-08-03
SPC
$0.0300
1,800
$54.00
22-08-03
ALZ
$0.0300
1,600
$48.00
25-08-03
ALS
$0.1200
1,200
$168.00
26-08-03
BLD
$0.1200
1,600
$192.00
29-08-03
AHD
$0.0650
820
29-08-03
ALN
$0.1200
1,900
$228.00
02-09-03
IFM
$0.0190
1,800
$34.20
02-09-03
WTP
$0.0050
5,200
$26.00
03-09-03
SYM
$0.0400
2,300
$92.00
05-09-03
SGN
$0.0430
830
$35.69
08-09-03
CTX
$0.0400
1,400
$56.00
08-09-03
TSE
$0.0700
1,300
$91.00
09-09-03
GFD
$0.0150
5,800
$87.00
09-09-03
HIL
$0.1050
1,200
$126.00
09-09-03
EQI
$0.0300
2,700
$81.00
10-09-03
APN
$0.0650
1,060
$68.90
12-09-03
GWT
$0.0800
2,500
$200.00
15-09-03
CSM
$0.0275
3,500
$96.25
15-09-03
FFL
$0.0500
8,300
$415.00
16-09-03
JBM
$0.2000
2,200
$440.00
16-09-03
PRT
$0.0600
1,600
$96.00
19-09-03
PHY
$0.0250
1,100
$27.50
22-09-03
COA
$0.0600
1,700
$102.00
23-09-03
ADB
$0.2100
1,200
$252.00
24-09-03
FUN
$0.0200
7,100
$142.00
24-09-03
MGI
$0.0332
2,500
$83.00
29-09-03
SDI
$0.0450
620
$27.90
02-10-03
SOT
$0.0050
1,700
$8.50
03-10-03
GRD
$0.0300
1,600
$48.00
03-10-03
LCL
$0.0150
2,200
$33.00
09-10-03
FAN
$0.0440
7,100
$312.40
09-10-03
OKN
$0.0300
1,160
$34.80
13-10-03
ALZ
$0.0300
1,600
$48.00
Sunday 10 October 2004
© Copyright 2001-2004
Distribution Income
$53.30
13
Investment Wise
The Stockmarket Edge
Ex-Date
Stock
Distribution per Share
Shares Held
20-10-03
NUF
$0.1300
1,300
$169.00
22-10-03
DVC
$0.0300
1,400
$42.00
24-10-03
SOL
$0.1000
610
$61.00
31-10-03
MGW
$0.1100
870
$95.70
11-11-03
ENV
$0.0570
4,500
$256.50
25-11-03
MTT
$0.0500
1,500
$75.00
28-11-03
CPB
$0.1400
1,100
$154.00
08-12-03
LNN
$0.1400
740
$103.60
02-01-04
PRG
$0.0550
1,200
23-02-04
CCL
$0.1300
890
$115.70
24-02-04
BLD
$0.1400
1,600
$224.00
27-02-04
AHD
$0.0600
820
$49.20
01-03-04
HCN
$0.0100
1,700
$17.00
02-03-04
IRE
$0.0800
1,300
$104.00
03-03-04
IFM
$0.0190
1,800
$34.20
05-03-04
SYM
$0.0200
2,300
$46.00
05-03-04
VGL
$0.0400
1300
$52.00
09-03-04
DOW
$0.0400
400
$16.000
09-03-04
SPC
$0.0300
1,800
$54.000
10-03-04
ADB
$0.1900
1,200
$228.000
15-03-04
WTP
$0.0200
5,200
$104.000
15-03-04
CAB
$0.0650
870
$56.550
15-03-04
MIA
$0.0150
4,500
$67.500
22-03-04
COA
0.06000
1,700
$102.00
23-03-04
BBG
0.12500
890
$111.25
25-03-04
ALZ
0.04000
1,600
$64.00
25-03-04
HPX
0.06000
1,900
$114.00
25-03-04
MGI
0.03375
2,500
$84.38
30-03-04
LCL
$0.0170
2,200
$37.40
01-04-04
PMM
$0.0400
2,100
$84.00
02-04-04
NUF
$0.0800
1,300
$104.00
05-04-04
APN
$0.1180
1,060
$125.08
06-04-04
OKN
$0.0375
1,160
$43.50
16-04-04
RHC
$0.0750
710
$53.25
21-04-04
SOL
$0.0800
610
$48.80
10-05-04
SGN
$0.0910
830
$75.53
10-05-04
TBC
$0.0050
7,700
$38.50
31-05-04
LNN
$0.1400
740
$103.60
31-05-04
LNN
$0.1400
400
$56.00
04-06-04
CPB
$0.1900
1,100
Sunday 10 October 2004
© Copyright 2001-2004
Distribution Income
$66.00
$209.00
14
Investment Wise
The Stockmarket Edge
Ex-Date
Stock
Distribution per Share
Shares Held
24-06-04
ALZ
$0.0400
1,600
$64.00
24-06-04
GHG
$0.0250
2,600
$65.00
24-06-04
MCW
$0.0720
2,600
$187.20
24-06-04
MGI
$0.0337
2,500
$84.25
29-06-04
TEN
$0.0850
1,000
$85.00
02-07-04
PRG
$0.0650
1,200
$78.00
02-07-04
PRG
$0.0650
470
$30.55
05-07-04
KYC
$0.0300
2,600
$78.00
05-07-04
SMX
$0.0120
7,100
$85.20
05-07-04
SMX
$0.0120
5,200
$62.40
10-08-04
HPX
$0.0400
1,900
$76.00
10-08-04
TIM
$0.0200
1,100
$22.00
16-08-04
HCN
$0.0125
1,700
$21.25
23-08-04
CCL
$0.1250
890
$111.25
27-08-04
DOW
$0.0200
400
$8.00
30-08-04
HWE
$0.0150
1,900
$28.50
31-08-04
AVV
$0.0500
860
$43.00
31-08-04
MAY
$0.0650
1,000
$65.00
01-09-04
ILU
$0.1000
660
$66.00
03-09-04
ADZ
$0.0220
1,500
$33.00
10-09-04
GAS
$0.0500
1,000
$50.00
10-09-04
MCC
$0.0378
1,500
$56.70
10-09-04
OKN
$0.0425
1,160
$49.30
13-09-04
MIA
$0.0170
4,500
$76.50
15-09-04
WOR
$0.0650
690
$44.85
16-09-04
AAC
$0.0600
1,900
17-09-04
CXP
$0.0700
735
$51.45
17-09-04
SSX
$0.0400
2,000
$80.00
17-09-04
CXP
$0.0700
735
$51.45
17-09-04
SSX
$0.0400
2,000
$80.00
20-09-04
CIY
$0.2300
750
20-09-04
MPH
$0.0200
2,500
$50.00
24-09-04
ALZ
$0.0400
1,600
$64.00
24-09-04
MGI
$0.0350
2,500
$86.88
01-10-04
FKP
$0.0800
1,000
$80.00
01-10-04
IDT
$0.0400
960
$38.40
08-10-04
LCL
$0.0180
2,200
$39.60
Sunday 10 October 2004
© Copyright 2001-2004
Distribution Income
$114.00
$172.50
15
Investment Wise
The Stockmarket Edge
DISCLAIMER
This report was produced by PPS Investments Pty Ltd (ACN 097 446 369), trading as Investment Wise, which is an
Australian financial services licensee (Licence no. 246670). PPS Investments Pty Ltd has made every effort to ensure that
the information and material contained in this report is accurate and correct and has been obtained from reliable sources.
However, no representation is made about the accuracy or completeness of the information and material and it should not be
relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, PPS Investments
Pty Ltd does not accept any liability, including for negligence, for any loss or damage arising from the use of, or reliance on,
the material contained in this report. This report is for information purposes only and is not intended as an offer or
solicitation with respect to the sale or purchase of any securities. WARNIN G: This report is intended to provide general
financial product advice only. It has been prepared without having regarded to or taking into account any particular
investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the
advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable,
investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any
decision. D ISC LO SURE: PPS Investments Pty Ltd and/or its directors, associates, employees or representatives may
not effect a transaction upon its or their own account in the investments referred to in this report or any related investment
until the expiry of 24 hours after the report has been published. Additionally, PPS Investments Pty Ltd may have, within the
previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of
this report PPS Investments Pty Ltd and/or its directors, associates, employees or representatives currently hold interests in
the following companies: TIM. This report may not be reproduced, distributed or published for any purpose, unless the
person or entity seeking to do so is expressly authorised in writing by PPS Investments Pty Ltd. N O TES: AUG
recommendation replaced by ABX as a result of the merger (05-02-03). UEL shareholders received $3.15 from Alinta
Limited takeover (25-07-03). MGI completed an off-market takeover for AIP (07-10-03). HRT stock code changed to LRX
(30-10-03). FAN 11:10 Share Split (28-10-03). DOW 1:4 Reconstruction (20-11-03). ARL stock exchange code changed to
NLX (11-12-03). RBK converted 1-for-3 basis to RBI listed on Toronoto Stock Exchange (05-05-04).
Sunday 10 October 2004
© Copyright 2001-2004
16