Portfolio Update as at 28/08/2016

It's been quite a volatile last month with a number of companies reporting. Currently up 12.5% after the portfolio pulled back recently.

MBE reported solid growth, but earnings per share was potentially down on what the market was expecting. I was expecting more like 1.5c, but it came in at 1.2c. This was partly due to the treatment of tax and partly due to the need to fund growth. The market still prices it on its current earnings and doesn't give it much credit for the future growth potential. If their international expansion matches the Aussie business then good times are ahead. The UK will be the first hint as to whether they will be successful. This year should provide some good indications.

PRO reported pretty much as expected. They had a hiccup last FY giving guidance that proved a little too bullish. The company is growing well, and the SP has been rerated with limited upside now priced in. Their commentary was encouraging and this year could see the SP resume the upwards trend. Q1 results will be interesting - the company has already hinted they should be strong. Earnings per share were a little bit lower than I expected due to amortisation which I assume is a result of the eMite purchase. Cashflow from operations was very good coming in at 4.9m (7.7cps).

GLH resolved its contract dispute and it was a cracker. $1m per year locked in until 2020 and a lesser amount following that. This resulted in good revenue and 4.2cps in earnings. The company also increased is expenses significantly to position itself going forward. Currently on a trailing PE of 11 with further growth expected this FY.

MOY - I like gold in the current financial environment. MOY is significantly undervalued compared with other miners. It is a turnaround story. Further positive drilling results will increase life of mine which appears to be what is holding back the SP.

MGX - it's a long term game and the good run the SP had has halted for now. I am still considering putting the money to use elsewhere that might have more immediate upside.

ADA - I am glad I sold as the market was expecting a little more than it delivered. The only reason I sold (in the 3.30s) was I thought the SP was getting ahead of itself. I still hold half of my original purchase in my main portfolio. I like the prospects of the company

The Portfolio as at 02/05/2016

Sorry for the lack of updates for those following. It's been an insane month or so and I've had no time to write anything. However, I've still been investing and doing the odd bit of research where I can.

I purchased Global Health Limited (ASX:GLH) on Friday 29 April at opening with a price of 37c because I liked the valuation (based on previous research I've done and then waiting). Over the past two days the SP has moved to 45c (on low volume). It was a complete fluke, nothing more scientific than that! Anyway, I wrote a bit about GLH a while back, and nothing has changed other than an earnings upgrade with guidance now at 3-4cps. There also appears to be a few irons in the fire with things looking positive for the company. 

On another front, I've tossed and turned about whether to add miners to this portfolio. In the end I have decided not to because I will be at the mercy of commodity prices. I can plan my investment around this, but with a one year timeframe it is rather risky if prices stay subdued.

I have added miners to my personal account however. I purchased Silver Lake Resources (ASX:SLR) on 08/03/2016 for 37c. SLR is a gold miner and explorer with no debt and a lot of cash on hand. They are cashflow positive at the current gold price. If the gold price doesn't appreciate they have enough cash on hand to survive in the mean time.

I also purchased Mt Gibson Iron (ASX:MGX) on 26/04/2016 for 22.5c. As they name suggests they are an iron ore miner and explorer. They also have loads of cash (approx 33cps which is more than the SP!) and no debt. They are currently about cashflow neutral with the iron ore price as it stands. They too will be able to survive a subdued market for long enough for the iron ore price to pick up.

Common theme with me and miners - wait until sentiment is rock bottom and valuations are very cheap. Ensure the company has loads of cash and no debt. Buy once there appears to be a resurgence in the underlying commodity price. If you are wrong about the commodity, then the company still has enough cash to survive. Then just wait until the commodity increases and the market starts liking miners again!

Hopefully I'll find the time to write more about these purchases because there's more detail I would like to add to justify my purchases.

Portfolio as it stands (current portfolio value 22k including 5.7k cash currently:

Update

I haven't done a post in a while so here is a quick update:

Research

I have been filtering through a list of about 30 (and growing by the day) companies I have come across. These are companies I've encountered in the news, on forums, word of mouth and any other medium. That obviously means there are no gaurentees about their quality and each company needs to be looked at from scratch. I simply use it as a method to discover a company I don't know about.

A few I've come across justify further research. This usually means they are reasonably valued, have a decent balance sheet, have an interesting business and make money. I'll post about them if I consider they are worth pursuing further.

I'm considering investing in a gold miner as a possible turnaround in the industry is apparent. However, I may decide to keep this out of my 20k portfolio as it's likely going to be a lot more volatile and therefore a longer term view may be necessary. 

There's been a good rally this week in the US. A sustained consolidation may bring some money back into riskier assets. As I already predicted, the world doesn't seem as though it will end. Investing in companies growing their earnings is a good place to have your hard earned. Short term pain is tolerable provided you understand a company's risks and take a long term view (more than a year!!). Let others capitulate and sell around you and buy when things are cheap. 

Portfolio Plan

I've reconsidered my original plan of buying shares in 4 companies with 5k in each. I may end up limiting total purchases to 2.5k in some companies and holding another one or two companies. It all depends how my buy list looks. Having said that, PRO released their half year which was a good one (largely as expected but with good commentary around future growth). The market sold down which means I will probably complete this position.

Global Health Limited (ASX:GLH) is a company that lost a big contract and had an eps drop a year ago. Since then they've resumed winning contracts and growing the business. There was recently an independent research report written about them. Rather than rewriting about them please see the link: http://risingstarresearch.com.au/resources/Global%20Health%20.pdf

I've held shares through the rough times and topped up just before Christmas as the forward PE multiple was around 7. Since then it's rerated considerably and warrants further consideration. I will be watching their half year results and commentary closely. Any upgrade will likely see another rerate. If I can get in early enough I would happily add it to the 20k portfolio.