tim blue top 100, page-4

SPECIALTY FINANCE

Moving in on the banks

1. Money3 (MNY)

With plans to no longer be an unsecured payday lender, Money3 sees its future as a financier of used motor vehicles for those with a tarnished credit record, and in other secured areas no longer pursued by the big financiers. Its shares have halved from highs of a year ago despite strong net profit performance though its national network of 66 branches, online “Cash Train” business and a broker network. Liked by Patersons.

1. Credit Corp Group (CCP)

Credit Corp is one of the larger players in the purchase debt ledger business, where delinquent portfolios are bought from banks and utilities at a steep discount to the face value and the companies make their money by pursuing individual debtors for repayments. It has also launched Wallet Wizard, a small-amount term lender that targets subprime borrowers (but is not a payday lender). Wallet Wizard merges two previous products that have accrued a substantial asset book.

1. Collection House (CLH)

Another car loan and short-term lender whose shares have moved up and down on the back of Canberra chat on interest rate caps on such lenders. Baillieu Holst has a price target on it of $2.

1. Mortgage Choice (MOC)

The home-loan broker might have pulled the plug on its health insurance comparison website Help Me Choose, a smaller rival to the listed iSelect. But that was only a small part of its revenue. Plans are being hatched for a financial planning offshoot, but meanwhile, it remains a high-yielding, low-risk but low-growth exposure to the housing sector. Criterion rates it a buy.

POTS OF POTENTIAL

Intriguing plays

1. Aconex (ACX)

An IT systems provider to the construction, mining and infrastructure sectors that allows detailed tracking and management of big multifaceted projects. Has more than 50,000 users worldwide for its cloud-based information bases. Given a 30 per cent growth rate, Credit Suisse rates it an outperform with a $5.25 share price target, saying the company is best placed to win a bigger share of a global market estimated to be worth more than $8.5 billion.

1. QUBE (QUB)

Qube Holdings, a port and logistics operator focused on containerised and bulk products, automotive and stevedoring services, is in a tussle to acquire Asciano as part of a strategy to consolidate the fragmented logistics chain. It seeks strategic land assets adjacent to transport links leading to ports in Melbourne and Sydney. These include the Moorebank Intermodal Terminal Project that could be big and generate much growth in group earnings and competitive advantages. Success could mean share price appreciation over time. Morningstar suggests investors accumulate the stock.

1. ResMed (RMD)

Its shares might be trading at a discount to most fair value estimates, but Morningstar thinks clinical evidence to date linking sleep-disordered breathing to a series of medical disorders beyond cardiology will open up rewarding commercial opportunities for ResMed. “The obstructive sleep apnoea business remains robust and progress in the adjacent medical areas of chronic obstructive pulmonary disease is positive for growth,” it says. Given its offshore presence, it should benefit from further weakening of the Australian dollar.

1. Woolworths (WOW)

Woolworths’ share price has suffered from slowing revenue growth since early 2014 under competition from Aldi and drag from the Masters hardware chain. In contrast, Coles has maintained solid revenue growth despite Aldi. Morningstar expects Woolworths to reduce profit margins to maintain market share and reignite revenue and profit growth. A fair value price would be $33, according to Morningstar.

1. Crown Resorts (CWN)

Crown Resorts offers defensive earnings via its two Australian casinos in Melbourne and Perth, and potential to grow from its 34.3 per cent-owned Crown Melco in Macau, as well as new casinos earmarked to be built in Sydney and Las Vegas. Recent share price weakness has followed a slowdown in Macau in the wake of a government crackdown on corruption, tighter credit conditions for junkets and fears of economic slowdown in China. A stabilisation of any of the current headwinds would be good for the share price, says Morningstar.

1. Virtus Health (VRT)

The country’s biggest assisted reproductive services provider, which each year helps more than 5000 couples achieve their dream of having a baby. It provides a large slice of all in vitro fertilisation (IVF) cycles in Australia, backed up with diagnostic clinics and day hospital services. It recently bought a large stake in a similar Irish business, and has an offshoot in Singapore. Liked by Morningstar.

FUNDS

Domestic equities

1. Allan Gray Australia Equity Fund

A deep value manager, Allan Gray is overweight energy and materials, yet it holds the view that while prices have collapsed (think gas, gold and aluminium), demand for these commodities hasn’t gone away and at some point commodity consumers will have to pay a price that allows producers to stay in business. There’s no guarantee that it will happen in the next 12 months, but in the eyes of InvestSense, Allan Gray’s focus on the highest-quality producers should help. It’s returned close to 8.5 per cent a year over three years.

1. UBS HALO Australian

Share Fund

This fund has a contrarian approach, overweight to the energy sector, on the view that oil prices are artificially oversold by speculators. With oil producers suspending investments, which means less supply a few years down the road, constant demand should mean higher prices, in the eyes of InvestSense. The fund has posted returns of 10.7 per cent a year over three years.

1. Macquarie High Conviction Fund

Resources companies might have crashed on the ASX, but this fund in looking elsewhere has delivered 22 per cent (after fees and expenses) for the year to November 30, 2015. Focusing on “what matters”, it looks to invest in only 20 to 30 companies, and has posted close to 17 per cent a year over three years and 9.2 per cent a year since its November 2005 inception.

1. Greencape High Conviction Fund

Offers access to a highly concentrated portfolio of mainly Australian equities but can hold up to 10 per cent in stocks listed offshore, a style adopted since inception in 2006. It’s delivered more than 3 per cent for the year to November and 11.4 per cent a year over the past three years, net of fees. Regularly rates highly among ratings agencies such as Morningstar and Lonsec.

1. WaveStone Capital Australian Share Fund

An active long-only manager based on three key people with a wealth of experience. This fund has delivered 12.4 per cent since inception and 14.5 per cent after fees for the year to November 30, 2015. It is recommended by Zenith and rated by Lonsec.

1. Alphinity Australian Share Fund

Seeks to find undervalued companies entering an earnings upgrade cycle. The approach is bottom-up stock picking enhanced by selected quantitative inputs. This fund has delivered 10.9 per cent a year for the three years to November 2015 and 8.5 per cent a year over the past five years, net of fees. A related concentrated fund has delivered 12.1 per cent a year over three years. The Australian Share Fund is highly recommended by Zenith.

SMALL COMPANIES

1. UBS Microcap Fund

Offers exposure to some of Australia’s most dynamic and fastest-growing listed companies, defined as those with a market cap of less than $250m at portfolio entry. Launched in August 2014, it’s delivered a total return, after fees, of 19.7 per cent since inception and nearly 22 per cent after fees over the past 12 months.

1. Macquarie Australian Small Companies Fund

Investing in smaller companies can offer big rewards. After fees and expenses this one has earned 36.6 per cent for the year to November 30, 2015, and 14.1 per cent a year over three years.

1. S. G. Hiscock ICE Fund

A not-quite-typical small cap fund that seeks companies that own or use assets that are difficult to replicate, such as licences, patents, brands or a captive client base, and have an entrenched market position. Thus it tends to avoid mining, property and basic manufacturing, and heads towards stocks in healthcare and technology. Has returned close to 21 per cent a year for the past three years. The minimum investment is $250,000.

INTERNATIONAL FUNDS

1. Arrowstreet Global

Equity Fund

Offers exposure to between 150 and 400 large and small companies across both developed and emerging markets. Combining intuition and quantitative research, after fees and expenses it has delivered just over 30 per cent a year over three years, and 18 per cent a year over 5 years. Australian investors can gain access to the fund, which is based in Boston, through the Macquarie Professional Series.

1. Fidelity Global Demographics Fund

Designed to exploit the world population getting bigger, wealthier and older, this fund seeks global stocks where demographic factors drive company growth — global consumer and healthcare companies make up 70 per cent of the portfolio. Over three years it’s delivered a gross return of more than 27 per cent a year. Minimum investment is $25,000.

1. Macquarie Asia New Stars No. 1 Fund

It’s been a volatile year in Asian sharemarkets, particularly in China, yet this fund’s focus on domestic demand sectors such as consumer and healthcare has done well to return 16.9 per cent for the year, 26.6 per cent a year over three years and 15.9 per cent a year since inception in May 2010.

FIXED INCOME

1. Advance International Shares Multi-Blend Fund

A fund for those seeking long-term capital growth through exposure to a diversified portfolio of international shares and currencies. The way the fund is set up allows for potential tax and cost benefits, while encouraging a “hands-on” approach to take advantage of market themes. The fund offered a single-year performance of 17.3 per cent, three-year returns of 24.4 per cent a year and five-year returns of 14.8 per cent a year as at October 31, 2015.

1. UBS Diversified Fixed Income Fund

Offers access not just to an Australian portfolio but also global fixed income assets. Actively managed, it has returned close to 4.5 per cent a year over three years after management costs. The fund is rated by Lonsec and Zenith.

1. T. Rowe Price Dynamic Global Bond Fund

In a rising-rates world, unconstrained bond funds have had the wind in their sails. This one manages duration tactically to derive a sustainable income from global bond instruments, while avoiding high correlation to equity markets (often a side effect of high credit exposure). InvestSense says it stands out for its relative simplicity, a focus on government bonds and opportunistic use of credit exposure, which translates to notable capital preservation. Returned close to 8 per cent in the past year.

INCOME & GROWTH

1. Schroder Real Return CPI Plus 5 per cent Fund

A diversified investment solution that aims to deliver an annual return 5 per cent above inflation. The fund continually assesses investment opportunities in order to meet its objective while striking a balance between risk and reward, meaning it is suitable for investors looking to achieve real returns. Highly recommended by Zenith and Lonsec.

1. MLC Inflation Plus

One for investors, especially retirees, seeking a real return above the consumer price index through a multi-manager approach. It comes in three options: assertive, moderate and conservative, each with different return targets (CPI plus 6 per cent, 5 per cent and 3.5 per cent respectively). They’re actively managed to achieve required results. Recommended by Zenith and by Lonsec.

1. Antares Dividend Builder

Has a diversified portfolio of high-yielding Australian companies that aim to grow dividends over time, with an emphasis on securing franked income and minimising portfolio turnover to keep net realised capital gains low. It’s also available as a separately managed account, which gives investors beneficial ownership of the shares.

1. Pengana Australian

Equities Fund

The fund seeks out reasonably-priced companies, judged by the usual metrics of operating leverage, balance sheet and return to shareholders, that can generate an after-tax cash earnings yield of 6-8 per cent a year with strong growth for the medium term. The fund is keen on capital preservation rather than ‘‘super’’ returns and cash holdings when suitable equities can’t be found.

LICENSED INVESTMENT COMPANIES

1. Perpetual Equity Investment Company

One for those who like direct investments but don’t want to pick stocks themselves or commit exclusively to passive investing, this concentrated Australian equity fund could be for you. InvestSense says its value focus, with a mid-cap bias and more importantly an exposure to global listed securities, gives the manager useful flexibility.

EXCHANGE-TRADED FUNDS

Global diversity

1. Magellan Global Equities Fund (MGE)

Sitting within the ASX’s family of exchange-traded products, Magellan has been a stellar performer since arriving on the market under its new structure that allows market trading of an unlisted fund. The managers have had an acute sense for picking undervalued global stocks and have also gained from the sliding Australian dollar. Has posted a return of more than 21 per cent a year for 10 years.

1. iShares Global 100 ETF (IOO)

The world is a vastly bigger place than the Australian market and growing strongly in parts, such as the technology end of US markets. This ETF tends to invest in technology, financials, healthcare, consumer staples and energy, but it is not a place to find high dividends.

1. iShares Europe ETF (IEU)

If you prefer to focus on Europe, this one tracks the performance of leading companies there. Companies are chosen on market capitalisation, liquidity, industry group and geographic diversity. As the European Central Bank continues to support the economy with its quantitative easing policy, Wise-owl expects European equities to outperform in 2016.

1. iShares Global Healthcare ETF (IXJ)

Direct exposure into 90 stocks that include the world’s big pharmaceuticals, such as Novartis, Pfizer, Roche and Merck, and seem well placed to ride the baby-boomers into old age. Investors would have picked up a gain of more than 40 per cent over the past year.

1. BetaShares Nasdaq 100 ETF (NDQ)

Offers investors diversified, liquid, low-cost and transparent exposure to the Nasdaq 100 Index that reflects the exchange’s tech-oriented enterprises, including Apple, Google, Amazon and Facebook. It claims to be the only ETF in Australia to track the Nasdaq 100 index. Since its inception to the end of November 2015, NDQ has returned close to 13 per cent, compared to the S&P 500, which has returned about 6 per cent for the same period.

1. Betashares US Dollar ETF (USD)

One way to ride the rise of the US dollar and the decline of the Aussie. It’s simple and cost-effective, and if you agree with the view that the former is going up and the latter down, in line with our terms of trade, then value should accrue.

1. Vanguard International Fixed Interest Index (Hedged) ETF (VIF) and Vanguard International Securities Index (Hedged) ETF (VCF)

These two help address a gap in international fixed-income securities available to investors via a listed product. The Vanguard International Fixed Interest Index (Hedged) ETF holds about 1200 bonds issued by around 34 countries, while the Vanguard International Securities Index (Hedged) ETF tracks an index containing about 13,000 securities issued by government-owned entities and investment-grade corporate issuers. A way to diversify into global fixed interest and income.

1. Vanguard Australian Property Securities Index ETF (VAP)

Residential property has long been a darling of Australian investors, especially through years of market volatility. But with price growth and residential rental yields slowing in many parts of the country, investors might look elsewhere for property exposure. The Vanguard Australian Property Security Index ETF provides broadly diversified exposure to listed Australian real estate investment trusts, with holdings in retail, office, industrial, tourism and multi-sector ventures. A distinct alternative to an illiquid investment in a single bricks and mortar building.

PROPERTY

1. AMP Capital Wholesale Australian Property Fund

A vehicle for retail and SMSFs to invest in commercial property, ranging from Australian office to retail and industrial properties. It aims to provide stable returns made up primarily of income with some long-term capital growth. One-year returns are 8 per cent and three-year returns are just over 10 per cent a year. The minimum investment is $10,000 and the fund is recommended by Zenith and Lonsec.

INFRASTRUCTURE

1. AMP Capital Core Infrastructure Fund

Retail investors can own infrastructure assets such as Melbourne Airport in Australia and Angel Trains in Britain through this fund. With a mix of 50 per cent direct infrastructure assets and 50 per cent listed infrastructure securities, the fund seeks to deliver predictable cash flows through economic cycles. In the five years to September, it has delivered 11.1 per cent a year with a cash yield of 6.7 per cent.

1. AMP Capital Dynamic Markets Fund

A lower-cost and lower-volatility alternative to broader equity markets. The fund’s asset allocation is flexible, moving with markets across a range of asset classes with the aim of delivering more stable returns over time. The fund has consistently achieved returns above its benchmark, with one-year and three-year performance tracking at 11 per cent.

DIY INCOME

Income and security for SMSFs

1. AAI’s floating rate bond

AAI Limited, an insurer and subsidiary of Suncorp Group, issued a new floating rate subordinated bond in November. Being floating rate, the amount of interest investors earn is directly linked to future expected interest rates. If the market expects interest rates to rise, the interest earned on these bonds will also rise. The estimated yield to call in November 2020 is a high 5.4 per cent a year.

1. BHP Billiton fixed

rate US dollar bond

BHP Billiton’s shares might have crashed this year and questions arisen about its dividends, but it will still pay interest on its bonds no matter what happens to the price of iron ore. The company issued multi-currency subordinated bonds in US dollars, euro and sterling in October totalling $US6.5bn. Maturity dates vary but there is one US dollar-denominated bond with a first-call expected maturity in 10 years’ time. Expected yield to first-call date is a whopping 6.41 per cent a year, according to FIIG Securities. Minimum investment is $US200,000 ($276,000).

1. Sydney Airport inflation-linked bond

Sydney Airport is a monopoly infrastructure asset with unique and compelling cashflows. It has a long-dated, protective, inflation-linked bond due to mature in 2030. Variations in inflation during the life of this bond are added or subtracted from the capital price of the bond, known as the adjusted capital price. At maturity investors receive the $100 issue value plus the cumulative impact of inflation over the life of the bond. FIIG Securities says total return when held to maturity is expected to be 6.06 per cent a year, assuming inflation is 2.5 per cent — the RBA target midpoint — but could be higher if inflation spirals.

INVESTING TOOLS

1. CMC Markets Stockbroking Pro Platform

A customisable online share trading platform with appeal for frequent traders. It offers technical analysis, advanced ordering types and dynamic content at the click of a mouse. A charting package offers studies, patterns, stock charts and overlays for the keen user.

1. ANZ Smart Choice Super

A low-cost superannuation fund that adjusts investments according to age, becoming more conservative over time. It allows you to manage your super online, alongside your banking through ANZ internet Banking, ANZ goMoney and Grow by ANZ. Customers can also consolidate their super online using ANZ’s paperless rollover service.

APPS A GOGO

1. Your watch as a portfolio tracker?

Try CommSec’s Apple Watch app, for much info on the go. With the app you can see a portfolio, watch lists and even ask Siri to get live share prices. Keep your eye open for the rollout of Android Pay, a Google-based app that should allow all sorts of payments by waving your phone near a reader.

1. Grow by ANZ

Puts your super, insurance and share investing side by side with everyday banking. Trade shares, see research on Australian stocks, buy and manage insurance needs, open a new super account and round up existing super in just a few taps. It has Touch ID log in and a Quick Balance feature which allows you to see all account balances in a single swipe. It is available for iPhone, iPad and iPod touch and is compatible with the Apple Watch. Download via iTunes.

TOP SHELF

1. Macquarie Black

Credit Card

Macquarie’s premium card offers two Macquarie Reward points for every dollar spent, plus benefits and access to premium services, including discounted limousine travel and airport lounge benefits, free travel insurance, a 24/7 concierge service and a no annual points cap. New applicants benefit from a zero per cent balance transfer for the first 14 months and can also access up to four cards for their family members with no annual fee.

1. Macquarie Global

Managed Account

For those who have a financial adviser and $500,000 to invest, Macquarie offers discretionary investment management, while taking into account customisations, prevailing markets and likely tax position. There are multi-strategy options and access to professional investment managers.

The Weekend Australian accepts no responsibility for these product offerings. The author owns BHP shares. Some of the firms featured have or seek corporate work with several of the stocks mentioned. Readers should contact a licensed financial adviser.