Situations That Bring Profit

By Simon Angelo

I have a booking tonight at one of my favourite Italian restaurants.  And the whole family is going to eat at half price...  Simply I'm taking advantage of a situation and a new concept called First Table.

Recognising that many restaurants are fully staffed but empty between 5-5:30pm, the First Table site lets you buy an early booking to dine at half price for 5 or $10.

They are also taking advantage of a situation.

We seek to do the same in the markets

We're looking for situations in and around our favoured businesses that allow us to buy the stock cheaply.  And following this strategy has seen a continuation of the wonderful road that opened in January.

After January's pleasing return of 5.34% for the month, we've done 4.00% for the month of February, delivering a 9.34% gain across the composite portfolio.*
 

..................................... Notice to Eligible and Wholesale Investors .....................................

Markets are on the rise again...profits will be made 
To avoid missing out, you need a brokerage account.
Find out how to apply for an account today

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A couple of situations have helped

First, on the forex front we managed to buy two key currencies quite cheaply.  GBP.NZD at less than $1.88.  And AUD.NZD at less than $1.04.

Both markets are currently filled with fear. 

In the UK, the pound was sold off as Theresa May came closer to crashing out of the EU. 

There's going to be some sort of deal.  It may be delayed.  But irrational fear led to overselling.  As I write, the pound is now closing on $1.95.

Australia's woe is property and that may come home to roost in New Zealand too.  Simply, the property bubble built on years of cheap credit is starting to crack.  Metropolitan home prices are draining downward with that fear.  And debt multiples, which are too high for comfort are starting to threaten the economy.

As a result, short sellers on the Aussie dollar have been active, pulling it down to a 4-year low against the Kiwi.

In this case, it's not that the fear around an Australian property bubble is unjustified - it's that the Kiwi dollar shouldn't be that much higher.  We have our own concerns here that mirror Australia's - although our debt multiples are lower.

A big worry for both countries is ongoing export volumes to China.  China is slowing and the trade spat with Trump is far from resolved.  And there will be fallout from Australia's rejection of Huawei's 5G - similarly for us if we go down that route.

The NZD softened this week quite dramatically after January's trade deficit hit an unexpected high and the earnings of export companies like Comvita [NZX:CVT] failed to meet expectations.

Equity situation

We used Brexit uncertainty, growing earnings and a predicted buyback of stock to obtain Lloyds Banking Group [LSE:LLOY] at a pleasing buy of around 58p for a number of clients.

The buyback went ahead the other week.  Earnings growth continues, especially on the online front and the stock looked about to break 64p last night.  While we wait for more growth, clients enjoy a bank beating dividend yield in excess of 5%.

So why aren't you buying more?

You make money with shares when you buy.  That means understanding a business and industry completely.  And understanding when a trend or situation gives a buy potential.

Now, we're monitoring a number of other situations, particularly in the markets of Europe, the US and Australia.

The sudden softening of the NZD has slowed us up somewhat.  If you are holding other currencies, particularly GBP, USD or EUR, those can be put to work in your brokerage account quite readily.

Meanwhile we expect to take advantage of some new, strong situations very soon.  But not today.  It's never good to buy on a Friday as people feel buoyant about the upcoming weekend (and their planned restaurant meals) and pay too much.