Peter Hayes – Investment Veracity

Often I am asked by clients, family and acquaintances, how’s the market today?

The immediate answer to that question is that I haven’t looked at it. This could be at 8am, 10am, or 12.30pm.

The reason for this is my life as a stockbroker is not ruled by the market indices. My life as a stockbroker is ruled by particular stocks, and usually small resource companies based in West Perth or Subiaco.

These stocks aren’t even considered in the ASX, and are part of what Alan Kohler on ABC news might call the small ordinaries index. In fact, the stocks I’m interested in aren’t even in the small ordinaries index. At least, I don’t think they are. In fact I couldn’t care what index they are in, just as long as I can ring up the MD (managing director) and do DD (due diligence) on what is happening with the company.

The sharemarket is a lot of different things to a lot of different people. There are the self funded retirees who are in the market for dividends, and a bit of capital growth. There are the executives that are running companies to earn a living, and there are day traders playing the market for trading profits amongst others.

I’m an investor, and because of this I have clients that tend to invest in the same stocks as I do. Makes sense really, and generally I only invest in things that I am involved with.

Last calendar year, the ASX 200 was down 2.6 per cent for the year, but a lot of the penny dreadfuls I was “full to the gills” in outperformed most other investments. I was long thermal coal, rare earths and a bit of gold. At the start of last year I didn’t know what rare earths were, but I bloody well do now!

Apparently, the small ordinaries index rose 10.2 per cent in 2010, and the top 10 performers were all resource stocks. Resources make up some 45% of the small ordinaries. Indeed, since the absolute bottom of the market in March 2009, the small ordinaries is up over 100 per cent, and in the same time frame the ASX 100 is up by 45 per cent.

Most of my colleagues had some of the best calendar years that they’ve had in the ASX last year, and the general market was down 2.6 per cent. So statistics are best left to statisticians and actuaries, they are very misleading when coming to investing both in property and equities. Best used as a guide, not a rule.

So when considering a position in a particular investment, it’s a good idea to ask a number of people their opinions and act only once you are comfortable you have done the required “digging”. And then sometimes it can just be pure “arse”.