run starts now?, page-40

Hi s2096914

Thanks for your detailed response to Petepan. I had drafted a response to you, but decided not to post it to avoid getting into a sterile spat, or some highfalutin debate on the meaning and nuances of words (a hobby of mine). The opening words of the draft were, “We probably agree in principle, and it is the semantics of words like “satisficing”, “optimal”, “cheapest” and “value investing” that cloud the issue.” Anyhow, you response confirms that if we had a fireside chat about investing, we would end up agreeing on most things, including the merits of The Pie Fund and The Boat Fund.

The reason why I like to do my own investing is that I enjoy the intellectual challenge and pitting my probability-distribution of unknowns against reality as it unfolds. Consequently, in the language of economists, the effort is more a utility than a disutilty.

Because the co-trustee of my SMSF keeps the records, I do not know what we paid for our first foray or two into TGA circa late 2007, but it was more than 50¢ and less than 75¢. Top-up purchases in the few year that followed has occasioned the current 187,875 shares in that portfolio to have an average buy-in price of 83.8¢. My first personal-portfolio purchase was 16,700 shares at 55¢ on 27/03/2008 (it may be the settlement date). The average buy-in price for the 312,125 shares in that portfolio is $1.414.

Since December 2007, The Pie Fund website states that $100,000 invested in the Pie Australasian Growth Fund would have returned $325,790. Had I invested $100,000 in TGA on 27/03/2008, it would at the recent low SP of $2.07 be worth $100,000 2.07/.55 = $376,364, and I would have 100,000/.55 = 181,818 shares. Each share would have picked up dividends starting in July 2008 and ending January 2014 in the order of 4.2¢+4.7¢+6.2¢+8.5¢+9.5¢+10.5¢+4.5¢ = 48.1¢, and times 181,818, that is $87,454, plus $26,236 in franking credits. This is a credible result, unless I have erred in the arithmetic. I am unaware if the Pie Australasian Growth Fund distributes dividends – growth funds tend not to distribute dividends, otherwise they would be called value funds, I think.

The previous paragraph is hindsight, so let us think about the future. When I wrote last week I was suggesting that investing in TGA at $2.07 was in my view a good punt. Let us come back a year hence and see how the return of $100,000 thus invested compares to $100,000 invested in The Pie Fund. An interested reader can work out how many units of Pie Australasian Growth Fund one gets for $100,000, and remind me in January 2015 to revisit this matter.

All that I was trying to say to Fat Bloater when I wrote last week was that in my mind, TGA is probably a good investment at $2.07, and shorting it would not be the way I would jump. It is the sustainable dividend that makes TGA a good investment when the SP zags, and I would have made heaps more out of TGA since 2007/2008 if I had been smart enough to sell on the zigs and buy back on the zags.

I think we have done TGA to death in recent days. The readers can do their own research, which should include looking at alternatives like The Pie Fund and The Boat Fund.