Download table of . summary of...
Sunday 9 January 2005
table of contents . . .
summary of recommendations
summary of recommendations
1
Stock
Recommendation Current Price Target
Stop Loss
Time Frame
how to use this newsletter
1
AHS
Buy
$1.29
$1.80
$1.10
12 months
sample page
2
NVE
Buy
33.5 cents
60 cents
20 cents
12 months
TLS
Trading BUY
$4.94
See pg 11
See pg 11
1 week
NCM
Lock in Profits
$17.08
See pg 12
See pg 12
1 month
STOCK ON THE MOVE atlas group holdings limited
3
novera energy limited
3
portfolio management
4
stock on the move distributions
13
INSTALMENT INVESTOR how instalment warrants work
7
The quick guide on how to use the Investment Wise newsletter. There are 2 categories, the novice stock market trader (please follow steps on the left hand column) and the advanced stock market trader (please follow steps on the right hand column).
OPTION/WARRANT TRADING technical analysis
10
telstra corporation limited
11
WRITING COVERED CALLS newcrest mining limited
DISCLAIMER
HOW to use this newsletter
novice trader
advanced trader
step 1
step 1
Read the sample page – How to interpret our Stock on the Move picks on page 2
Read pages 7 to 12. These are relevant to your level of trading
12
16
step 2
step 2
Read pages 2 to 6. These are relevant to your level of trading
Read the Disclaimer on page 16
step 3 Read the Disclaimer on page 16
A Publication of PPS Investments Pty Ltd A.C.N 097 446 369 Australian Financial Service Licence no: 246670 © Copyright 2001-2005
1
Investment Wise The Stockmarket Edge
HOW to interpret our Stock on the Move picks Investing in Small-Mid Cap Stocks to achieve Big Returns Expected Knowledge: Level of Difficulty:
None All Levels (i.e. Beginner, Intermediate and Advanced)
Every week emerging stocks that are about to make a big move are highlighted with a suggested investment strategy. Even in the worst Stock Market conditions, there are always stocks that will appreciate in value. Traditionally, this has been the aim of Fund Managers around the World – To Find Market Outperformers. Now, you too can access recommendations that have a proven record of success. The sample shown on the right is the typical format of a “Stock on the Move” recommendation. Refer to the explanations below on how to interpret the information provided.
SAMPLE Stock on the Move Recommendation
Peptech Limited Stock Exchange Code
PTD
Recommendation
BUY
First Recommended
05-01-2001
Current Share Price
$1.87
A unique code used by the Australian Stock Exchange to identify listed companies
12 Month Price Target
$3.50
Suggested Stop Loss
$1.54
Intended investment advice placed on a particular stock
Earnings per Share (cents)
21.20
Market Capitalisation ($)
278.6 M
Date at which the stock is/was first recommended as a “BUY”
How many shares do I buy ?
Current Share Price
Price that the stock last traded at the time of writing
Trade Size
12 Month Price Target
The expected level of that the stock is expected to reach within the next 12 months
Stock Exchange Code
Recommendation
First Recommended
Suggested Stop Loss
Amount ($) you are prepared to lose
=
Market Price − $1.53
PTD 3.0
Price at which investors should sell their shares if the stock trades below indicated level
2.5
2.0
Earnings per Share (cents)
Market Capitalisation ($)
How many shares do I buy ?
Measures the earnings that are attributed to each equivalent ordinary share over a 12 month period The total number of shares on issue multiplied by their market price. This can be applied to work out the market value of one company Decide the dollar amount you are prepared to lose if the stock trades below the Suggested Stop Loss (typically 2-3% of the total amount of money you have to invest). If you can afford to lose $350, then the maximum number of shares which should be purchased is: $350 ÷ (Market Price − Stop Loss Sell Price)
1.5
1.0
0.5
1994
1995
1996
1997
1998
1999
2000
2
Peptech (PTD) researches, develops, produces and markets peptides, antibodies and related products for the pharmaceutical, veterinary and agricultural industries. The Company's peptide-based products are used for the treatment of diseases in the areas of cancer, inflammation and infection in humans and the management of animal health and fertility.
D I S C L A I M E R : This report was produced by PPS Investments Pty Ltd (ACN 097 446 369), trading as Investment Wise, which is an Australian financial services licensee (Licence no. 246670). PPS Investments Pty Ltd has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, PPS Investments Pty Ltd does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. W A R N I N G : This report is intended to provide general financial product advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision. D I S C L O S U R E : PPS Investments Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, PPS Investments Pty Ltd may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. This report may not be reproduced, distributed or published for any purpose, unless the person or entity seeking to do so is expressly authorised in writing by PPS Investments Pty Ltd.
Sunday 9 January 2005
© Copyright 2001-2005
2
Investment Wise The Stockmarket Edge
Stock on the Move Atlas Group Holdings Limited
Novera Energy Limited
Stock Exchange Code
AHS
Stock Exchange Code
NVE
Recommendation
BUY
Recommendation
BUY
First Recommended
09-01-2005
First Recommended
09-01-2005
Current Share Price
$1.29
Current Share Price
33.5 cents
12 Month Price Target
$1.80
12 Month Price Target
60 cents
Suggested Stop Loss
$1.00
Suggested Stop Loss
20 cents
Earnings per Share (cents)
12.20
Earnings per Share (cents)
-1.30
Market Capitalisation ($)
120.9 M
Market Capitalisation ($)
60.1 M
How many shares do I buy ?
Trade Size
=
How many shares do I buy ?
Amount ($) you are prepared to lose
Trade Size
Market Price − 99 cents
=
Amount ($) you are prepared to lose Market Price − 19.5 cents
Note. Amount ($) you are prepared to lose is typically 2-3% of the total amount of money you have to invest
Note. Amount ($) you are prepared to lose is typically 2-3% of the total amount of money you have to invest
Atlas Group Holdings Ltd (AHS), established in Australia in 1939, is focused on the processing and distribution of specialty steels in Australia and New Zealand. Brand names include, Atlas Speciality Metals and Bisalloy Steels. In AHS’s first financial year as a public listed company, they have not disappointed. In volatile conditions, AHS posted a strong result, increasing sales revenues by 11% to $310m and EBIT were up 17.9% to $19.8m. AHS paid a total of 7.8c in fully franked dividends which leaves the company trading at an attractive dividend yield of 6% and trading at a modest PE of 10.6. Whilst AHS have not been listed for long in comparison to peers, it still looks undervalued. AHS’s growth strategy via acquisition (eg Southward Engineering) and organic development of existing business has placed the company well for the future. AHS is recommended as a ‘buy’ for growth and value.
Novera Energy Ltd (NVE) is a renewable energy generator with one of the largest landfill gas power generators in the UK. NVE is also focused on biomass gasification and wind power projects. The 50:50 joint-venture agreement announced on the 20th of December 2004, with Macquarie Bank, has completely changed the dynamics of NVE that should place NVE in a much stronger position than before. Novera Macquarie Renewable Energy (NMRE) is the new joint-venture, which will acquire and operate renewable energy assets. NMRE has purchased Novera Energy Europe Ltd from NVE at $63m which included all of NVE’s LFG operations in the UK. The purchase of United Utilities Green Energy by NMRE gives the new entity an enterprise value of A$301.3m from day one, which both Macquarie and NVE are both paying A$40.8m
Sunday 9 January 2005
each. NVE is recommended as a ‘buy’ for further growth.
© Copyright 2001-2005
3
Investment Wise The Stockmarket Edge
Portfolio Management How to manage recommendations from Stock on the Move like the Professionals The key to successful trading is cutting losses quickly and holding onto winning trades. Very often investors sell out of winning trades, only to see the stock trade a lot higher. However, it is more disturbing to see an unrealised profit of 60% turn into a losing trade. It is very difficult to pick market tops and bottoms. We use “Profit Stops” to help investors manage their investments. Profit Stops are like Safety Nets that protect unrealised profits. The chart on the right demonstrates our use of Profit Stops. The Initial Stop Loss is raised as the stock trades higher to lock in profits. Notice that as the stock trades higher, the Profit Stop is revised to a higher level. Finally, as the stock trades below the Revised Profit Stop, we sell the stock to realise a profit of 16%. This Portfolio Management section is how we help you manage your investments in Stock on the Move. New Stock on the Move picks featured this week have also been included and updated Stop Loss and Profit Stops are highlighted. The Profit Stop always starts off as the Initial Stop Loss. We recommend that investors sell the stock should the share price trade below the Stop Loss or Profit Stop indicated in the table below.
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
20-06-03
MGI
2,500
$1.630
−
$2.100
$2.000
$2.370
+$1,850.00
+45.40%
04-07-03
ARQ
3,500
$0.690
−
$1.460
$1.300
$1.730
+$3,640.00
+150.72%
11-07-03
NLX
4,100
$0.340
$0.265
−
$0.750
$0.385
+$184.50
+13.24%
15-08-03
CTO
7,500
$0.165
$0.130
−
$0.350
$0.155
-$75.00
-6.06%
15-08-03
PRG
1,200
$2.380
−
$3.080
$3.250
$3.440
+$1,272.00
+44.54%
22-08-03
LCL
2,200
$0.890
$0.720
−
$1.500
$0.800
-$198.00
-10.11%
29-08-03
BTC
2,400
$0.530
$0.330
−
$0.900
$0.385
-$348.00
-27.36%
17-10-03
SOL
610
$6.650
−
$9.040
$9.000
$10.100
+$2,104.50
+51.88%
14-11-03
DOW
400
$3.800
−
$4.400
$6.000
$4.750
+$380.00
+25.00%
14-11-03
TEN
1,000
$2.780
−
$4.210
$4.000
$4.280
+$1,500.00
+53.96%
21-11-03
LNN
740
$5.860
−
$7.620
$6.800
$8.650
+$2,064.60
+47.61%
05-12-03
MCW
2,600
$1.760
−
$1.950
$1.900
$2.110
+$910.00
+19.89%
12-12-03
SGS
1,600
$1.250
−
$1.400
$2.500
$1.500
+$400.00
+20.00%
19-12-03
CCL
890
$6.150
−
$7.310
$7.500
$7.960
+$1,610.90
+29.43%
09-01-04
IRE
1,300
$2.650
−
$3.450
$4.500
$3.800
+$1,495.00
+43.40%
09-01-04
MCC
1,500
$1.420
−
$3.650
$2.500
$4.100
+$4,020.00
+188.73%
16-01-04
MPI
8,700
$0.120
$0.064
−
$0.250
$0.064
-$487.20
-46.67%
Sunday 9 January 2005
© Copyright 2001-2005
4
Investment Wise The Stockmarket Edge
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
30-01-04
TBC
7,700
$0.220
−
$0.370
$0.400
$0.430
+$1,617.00
+95.45%
27-02-04
BBG
890
$7.430
−
$11.21
$9.500
$11.550
+$3,666.80
+55.45%
05-03-04
AMM
7,700
$0.190
$0.130
−
$0.400
$0.225
+$269.50
+18.42%
12-03-04
CIY
750
$4.450
$3.800
−
$6.500
$4.660
+$157.50
+4.72%
12-03-04
MPH
2,500
$0.670
$0.480
−
$1.200
$0.840
+$425.00
+25.37%
19-03-04
HPX
1,900
$1.620
$1.370
−
$2.300
$1.710
+$171.00
+5.56%
19-03-04
ITE
2,800
$0.330
$0.160
−
$0.800
$0.305
-$70.00
-7.58%
08-04-04
TNE
4,100
$0.550
$0.435
−
$0.850
$0.730
+$738.00
+32.73%
16-04-04
SLX
2,000
$0.910
−
$1.090
$1.600
$1.230
+$640.00
+35.16%
23-04-04
GHG
2,600
$0.710
$0.530
−
$1.100
$0.790
+$208.00
+11.27%
23-04-04
RMD
370
$6.540
$5.200
−
$9.000
$6.660
+$44.40
+1.83%
30-04-04
PRG
470
$3.050
−
$3.080
$3.750
$3.440
+$183.30
+12.79%
14-05-04
IRE
640
$3.000
−
$3.450
$4.500
$3.800
+$512.00
+26.67%
14-05-04
LNN
400
$6.430
−
$7.620
$6.800
$8.650
+$888.00
+34.53%
21-05-04
GAS
1,000
$2.360
$1.900
−
$3.000
$2.540
+$180.00
+7.63%
11-06-04
ASB
1,200
$1.150
−
$1.660
$1.800
$1.930
+$936.00
+67.83%
11-06-04
TIM
1,100
$1.480
$1.050
−
$3.000
$2.010
+$583.00
+35.81%
18-06-04
CXP
735
$5.070
$4.400
−
$6.500
$5.970
+$661.50
+17.75%
25-06-04
ENE
660
$2.850
$2.110
−
$5.000
$3.370
+$343.20
+18.25%
02-07-04
AUO
1,700
$0.720
$0.430
−
$1.300
$0.570
-$255.00
-20.83%
09-07-04
AAC
1,900
$1.300
$1.050
−
$2.000
$1.600
+$570.00
+23.08%
09-07-04
GDY
1,300
$1.220
$0.850
−
$2.000
$1.510
+$377.00
+23.77%
16-07-04
FXR
1,700
$0.730
$0.450
−
$1.300
$0.510
-$374.00
-30.14%
16-07-04
ILU
660
$4.540
$3.800
−
$6.000
$6.300
+$1,161.60
+38.77%
23-07-04
GRO
2,500
$0.820
$0.630
−
$1.500
$0.990
+$425.00
+20.73%
23-07-04
IDT
960
$2.290
$1.780
−
$3.200
$2.270
-$19.20
-0.87%
30-07-04
VOY
5,200
$0.280
$0.190
−
$0.550
$0.285
+$26.00
+1.79%
30-07-04
WOR
690
$3.300
−
$4.970
$5.500
$5.640
+$1,614.60
+70.91%
06-08-04
ADZ
1,500
$1.620
$1.300
−
$2.500
$1.600
-$30.00
-1.23%
06-08-04
MAY
1,000
$3.810
$3.350
−
$4.500
$4.340
+$530.00
+13.91%
13-08-04
UXC
2,300
$0.830
$0.630
−
$1.300
$0.830
$0.00
0.00%
20-08-04
SDG
2,100
$1.160
−
$1.790
$1.600
$1.970
+$1,701.00
+69.83%
27-08-04
FKP
1,000
$2.960
$2.480
−
$4.500
$3.930
+$970.00
+32.77%
27-08-04
PPX
470
$5.440
$4.400
−
$7.500
$4.790
-$305.50
-11.95%
03-09-04
SSX
2,000
$1.180
$0.950
−
$1.600
$1.230
+$100.00
+4.24%
10-09-04
OPL
4,300
$0.275
−
$0.460
$0.500
$0.560
+$1,225.50
+103.64%
10-09-04
SPT
700
$4.800
$4.500
−
$6.500
$5.060
+$182.00
+5.42%
17-09-04
ENE
530
$3.040
$2.110
−
$5.000
$3.370
+$174.90
+10.86%
17-09-04
HPX
1,060
$1.830
$1.370
−
$2.300
$1.710
-$127.20
-6.56%
24-09-04
MPM
1,040
$1.820
−
$2.050
$2.700
$2.160
+$353.60
+18.68%
24-09-04
PTD
1,100
$1.620
$1.200
−
$2.500
$1.770
+$165.00
+9.26%
Sunday 9 January 2005
© Copyright 2001-2005
5
Investment Wise The Stockmarket Edge
Buy Date
Stock
Model Qty
Buy Price
Stop Loss
Profit Stop
Target
Last Trade
Profit/Loss
% Return
01-10-04
IGO
1,600
$1.240
$0.950
−
$2.000
$1.160
-$128.00
-6.45%
01-10-04
SMY
1,800
$0.860
$0.600
−
$1.600
$0.870
+$18.00
+1.16%
08-10-04
KRS
2,700
$0.630
$0.450
−
$1.000
$0.590
-$108.00
-6.35%
08-10-04
LAF
10,800
$0.125
−
$0.165
$0.250
$0.190
+$702.00
+52.00%
22-10-04
CUE
7,500
$0.115
−
$0.250
$0.200
$0.320
+$1,537.50
+178.26%
22-10-04
SED
4,700
$0.260
$0.160
−
$0.500
$0.280
+$94.00
+7.69%
29-10-04
AEO
1,400
$1.580
$1.250
−
$2.000
$1.750
+$238.00
+10.76%
29-10-04
EQI
1,200
$1.640
$1.250
−
$2.500
$1.480
-$192.00
-9.76%
12-11-04
ATG
3,500
$0.730
$0.600
−
$1.000
$0.880
+$525.00
+20.55%
12-11-04
POH
4,100
$0.290
$0.175
−
$0.550
$0.320
+$123.00
+10.34%
19-11-04
CRD
9,000
$0.190
$0.140
−
$0.400
$0.185
-$45.00
-2.63%
19-11-04
LFE
1,700
$0.780
$0.500
−
$1.500
$0.600
-$306.00
-23.08%
26-11-04
VSL
2,000
$1.190
$0.950
−
$1.700
$1.300
+$220.00
+9.24%
03-12-04
MGX
4,500
$0.235
$0.130
−
$0.400
$0.320
+$382.50
+36.17%
10-12-04
PCG
3,500
$0.435
$0.300
−
$0.650
$0.490
+$192.50
+12.64%
17-12-04
SPT
610
$5.200
$4.400
−
$6.500
$5.060
-$85.40
-2.69%
21-12-04
LVR
1,040
$0.000
−
$0.800
n/a
$1.000
n/a
n/a
05-01-05
AHS
2,500
$1.290
$1.100
−
$1.800
$1.290
$0.00
0.00%
07-01-05
LIM
174
$7.250
$6.200
−
n/a
$6.950
-$52.20
-4.14%
07-01-05
NVE
3,500
$0.335
$0.200
−
$0.600
$0.335
$0.00
0.00%
Stop level updated
NO TE.
Stock has traded below stop level and will be removed from table
MPM s pun-off and a llocated sha res in Lev iatha n R esou rces. Lev ia than R esources sha r es list ed o n 21 D e cember 2004 . MPM taken ov er by LIM. $1.00 cash and 0.1675 LIM shares fo r eve ry MPM s har e he ld. GD P exc hang e cod e chang ed to LF E.
NOTE. The returns shown above are simulated, in that PPS Investments has not purchased an interest in such stocks and rather the portfolio shows returns that could be achieved if the relevant quantity of the particular stock was purchased on the "Buy Date" and held until the date of this newsletter. Therefore, there is no guarantee that the above returns can actually be achieved. Returns may be under-stated since dividends and other distribution income are not included in the above calculations. Dividends and other distribution income are listed on page 13.
THIS CONCLUDES THE SECTION FOR NOVICE INVESTORS. PLEASE READ THE DISCLAIMER ON PAGE 16. Sunday 9 January 2005
© Copyright 2001-2005
6
Investment Wise The Stockmarket Edge
Instalment Investor !! WARNING !!
EXAMPLE
This section is intended for INTERMEDIATE-TOADVANCED INVESTORS ONLY. Instalment warrants are derivative products and are extremely risky. The listed products have been sorted in order of gearing. Investors should be aware that the products listed at a greater discount incur more interest charges and there is no guarantee that investors will profit from investing in these products. Investors should also seek advice from an Accredited Derivatives Adviser and a Tax Specialist.
Two investors are considering a $10,000 investment in National Australia Bank. Investor-A decides to invest in the shares and Investor-B decides to invest in the instalment warrants to take advantage of the enhanced dividend yield and franking credits. Assuming National Australia Bank is trading at $30.00 and pays annual dividends of $1.35 consider the scenarios below.
National Australia Bank Instalment Second Payment (Loan Amount) Capital Interest (8.00% pa) Borrowing Fees Instalment Warrant Price
Blue Chip Stocks – UP TO 80% OFF ! Level of Difficulty: Expected Knowledge:
Intermediate-to-Advanced ASX Instalments Booklet (Enjoy dividends before paying for your shares)
$16.00 $14.00 $1.28 $0.40 $15.68
At January 20X1, say NAB is trading at $30.00: Blue Chip stocks have always been preferred investments due to their ability to produce solid earnings even in the worst economic conditions. Investors can use Instalment Warrants to gain exposure to Blue Chip stocks without the high capital outlay that is normally required. Instalment warrants are like buying shares on lay-by but the investor receives the full dividend and franking credits. Investors pay approximately 50% of the current underlying share price, which means the remaining portion is borrowed from the issuer. A pre-paid interest component is built into the initial price and depreciates over the life of the instalment warrant.
•
Investor-A buys 333 NAB shares at $30.00 Dividend Yield = ($1.35 ÷ $30.00) x 100% = 4.56%
•
Investor-B buys 637 NAB instalments at $15.68 Dividend Yield = ($1.35 ÷ $15.68) x 100% = 8.61%
At January 20X2, say NAB is trading at $33.00: •
Investor-A sells 333 NAB shares at $33.00 Profit = Capital Gain + Dividend Income = ($33.00 − $30.00) x 333 + $1.35 x 333 = $1,448.55 or 14.49%
•
Investor-B sells 637 NAB instalments at $17.00 Profit = Capital Gain + Dividend Income = ($17.00 − $15.68) x 637 + $1.35 x 637 = $1,700.79 or 17.00%
NOTE. Pre-Paid interest is initially built in to the price of the instalment warrant and deducted in the form of time decay over its trading life. At maturity, all interest has been repaid (i.e. no time value) and the price of the instalment warrant is worth ($33.00 − $16.00) = $17.00.
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Investment Wise The Stockmarket Edge
Instalment Trading Strategy Trading the Dividend of Blue Chip Stocks Blue Chip stocks generally pay dividends to their shareholders. For this reason, Blue Chip stocks are very popular amongst investors when the stock is close to paying a dividend. To be eligible for the dividend, investors must own the stock before the ex-dividend date. This requirement often creates a lot of interest in the shares as investors buy the stock in order to receive the dividend.
!! WARNING !! This section is intended as a CASE STUDY ONLY. The example discussed here is historical and is not an indication of future returns. All prices have been backdated and are theoretical results. There is no guarantee that such returns can actually be achieved. Instalment warrants are derivative products and are extremely risky. Investors should also seek advice from an Accredited Derivatives Adviser and a Tax Specialist.
The Trading Strategy - ANZIPF ANZIPF is an Instalment Warrant that can be used to take advantage of leverage, enhanced dividend yields and possibly franking credits (see your Tax Adviser). The second payment of ANZIPF is $10.00 and expires on 26 June 2003. The instalment trading strategy is as follows. •
Buy ANZIPF leading up to the ex-dividend date
•
Receive entitlement to the dividend of 39 cents
•
Hold ANZIPF for a maximum of 2 weeks after the ex-dividend date in anticipation that ANZ will recover its dividend (i.e. Appreciate to share price levels prior to the ex-dividend date)
•
Sell ANZIPF on dividend recovery (or if ANZ does not recover its dividend within 2 weeks)
ANZ Banking Group Limited On 17 May 2002, ANZ was expected to trade ex-dividend and pay a fully franked dividend of 39 cents. This meant that investors who wished to receive the 39 cent dividend had to own the shares before 17 May 2002. ANZ was trading at $19.13 on 8 May 2002 and creating an opportunity to trade the stock leading up to the ex-dividend date.
The Trade - ANZIPF •
On 8 May 2002, ANZ was trading at $19.13 ANZIPF Bid: $9.98 ANZIPF Ask: $10.00
•
On 17 May 2002, ANZ trading ex-dividend for 39cents
•
On 31 May 2002, ANZ trading $19.50 ANZIPF Bid: $10.30 ANZIPF Ask: $10.32
•
Profit = Capital Gain + Dividend = ($10.30 − $10.00) + $0.39 = $0.69 or 6.9%
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Investment Wise The Stockmarket Edge
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Investment Wise The Stockmarket Edge
Option/Warrant Trading How to Profit from a Rising and Falling Market Level of Difficulty: Advanced Expected Knowledge: ASX Options Booklet (Understanding Options Trading) ASX Warrants Booklet (Understanding Trading Warrants) Each day, money moves in and out of the Stock Market. This is the reason why share prices move up and down. The table below shows our short-term view on each stock based on Technical Analysis. The highlighted stock is our pick of the week and a trading strategy is presented in the Option/Warrant Trading Strategy.
!! WARNING !! This section is intended for ADVANCED INVESTORS ONLY. Options and warrants are derivative products and are extremely risky. The warrants below have been chosen based on our own selection criteria and there is no guarantee that investors will profit from investing in the products listed. Investors should also seek advice from an Accredited Derivatives Adviser.
Code
Last Trade
Technical Comment
AMP
$7.22
A break above resistance at $7.30 is likely to lead to a target of $8.00
ANZ
$20.62
Stock looks set to test previous high at $21.00
BHP
$15.20
Indicators starting to diverge as stock attempts to test previous high towards $15.70
BIL
$7.19
The $7.50 level remains as formidable resistance as stock prepares to test this level again
CBA
$32.42
As expected, stock has reached the $32.50 level with the $33.50 level next in sight
CML
$9.77
Stock appears to be trying to break out of a small triangle formation with resistance at $10.00
FGL
$5.84
Stock has broken all time highs and any retrace should be used as a buying opportunity
LLC
$13.08
Stock showing signs of reversing at current levels which should be used as a buying opportunity
NAB
$28.82
Stock fell short at $29.00 with an ominous wedge forming signalling a possible reversal at these levels
QAN
$3.71
Stock preparing to test previous resistance at the $3.80 level next
RIO
$39.25
Stock continues to show signs of reversing at these levels with resistance at $40.20
SGB
$25.28
Stock continues to break new highs but indicators are starting to diverge
TLS
$4.94
Stock attempting to break out of a triangle pattern likely to lead to a target of $5.50
WBC
$19.45
Stock has fallen short at $19.75 with signs of reversing at current levels towards $19.00
WOW
$14.72
Stock has reversed at resistance of $15.17 with short term support towards the $14.00 to $14.50 region
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© Copyright 2001-2005
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Investment Wise The Stockmarket Edge
Warrant Trading Strategy Telstra Corporation Limited Stock Exchange Code
TLS
Recommendation
Trading BUY
Current Share Price
$4.94
Short Term Support
$4.80
Short Term Resistance
$5.00
Trading Horizon
1 week
Preferred Warrant
TLSWMJ
Suggested Trade Size
9,000 units
Our technicals indicate that TLS is looking strong in the short term. With short-term support at $4.80 and resistance at $5.00, traders looking to gain exposure to the underlying share price may consider the warrants below. Scenario results below have been calculated using constant delta, volatility and 5 days time decay. Traders may use the indicated support and resistance levels to initiate and/or abandon the trade. (i.e. If TLS trades above $5.00 – Go Long with a potential target of $5.30 and use $4.90 as your stop loss. If TLS trades below $4.80 before trading above $5.00, abandon the trade completely).
!! WARNING !! This section is intended for ADVANCED INVESTORS ONLY. The calculations below assume that delta; time decay, interest and volatility remain constant. The figures and returns are indicative only and there is no guarantee that indicated returns can actually be achieved. Investors should seek advice from an Accredited Derivatives Adviser.
The following table shows the expected movement of each warrant if the stock trades to the TARGET in 5 days. TLS × $0.30
% Return
$0.091
+$0.079
+86.81%
24-Feb-05
$0.043
+$0.040
+93.02%
23-Mar-05
$0.065
+$0.026
+40.00%
Type
Code
Strike Price
Expiry
Offer
Call
TLSWMJ
$4.75
24-Feb-05
Call
TLSWMK
$5.00
Call
TLSWOG
$5.00
The following table shows the expected movement of each warrant if the stock trades to the STOP LOSS in 5 days. TLS Ø $0.10
% Return
$0.091
–$0.033
–36.26%
24-Feb-05
$0.043
–$0.020
–46.51%
23-Mar-05
$0.065
–$0.019
–29.23%
Type
Code
Strike Price
Expiry
Offer
Call
TLSWMJ
$4.75
24-Feb-05
Call
TLSWMK
$5.00
Call
TLSWOG
$5.00
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© Copyright 2001-2005
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Investment Wise The Stockmarket Edge
Writing Covered Calls How to Make Regular Income on Your Existing Blue Chip Shares
Level of Difficulty: Expected Knowledge:
Intermediate-to-Advanced ASX Options Booklet (Understanding Options Trading)
Investors who own Blue Chip Stocks can earn a regular income in the Options Market. This is simply done by Writing Covered Calls over your existing stock. A Covered Call is a Call Option sold/written when the investor already owns the stock. One Option Contract normally equates to 1,000 shares. The risk involved in writing covered calls is the underlying share price trading significantly higher than the strike sold. In this instance, the investor forgoes the opportunity to sell the stock at a higher level. This risk allows Blue Chip Stock holders to earn regular income on Call Premium sold.
!! WARNING !! This section is intended for INTERMEDIATE-TO-ADVANCED INVESTORS ONLY. Options are derivative products and are extremely risky. The Call Options below have been chosen based on our own selection criteria and it is assumed that the investor is holding a minimum of 1,000 shares for every Call Option contract sold/written. Writing Covered Calls is an income generating strategy. Investors selling Calls at recommended strikes must be willing to sell the stock at these levels. Investors should also seek advice from an Accredited Derivatives Adviser.
Newcrest Mining Limited (NCM) NCM last traded $16.96 (at the time of writing) and has traded from a low of $10.51 to a high of $18.35. We believe the stock is looking very attractive for existing shareholders to lock in profits. Investors holding a minimum of 1,000 shares may consider selling the NCM $17.50 January 2004 Call Options at a premium of $0.13 (at the time of writing) for income. If the stock closes above $17.50 at expiry, you may effectively be selling at $17.63 (i.e. $17.50 + $0.13). NOTE. When an investor sells a Call Option over a stock the investor does not already own, this is known as Writing Naked Calls. Investors should note that Writing Naked Calls exposes the seller/writer to unlimited losses and we strongly advise AGAINST such practices.
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Investment Wise The Stockmarket Edge
Stock on the Move Distributions Ex-Date
Stock
Distribution per Share
Shares Held
24-06-03
AIP
$0.0500
3,300
$165.00
24-06-03
BWP
$0.0536
3,500
$187.60
24-06-03
HLY
$0.0830
840
$69.72
24-06-03
MGI
$0.0307
2,500
$76.75
24-06-03
MTT
$0.0460
1,500
$69.00
18-08-03
SPC
$0.0300
1,800
$54.00
22-08-03
ALZ
$0.0300
1,600
$48.00
25-08-03
ALS
$0.1200
1,200
$168.00
26-08-03
BLD
$0.1200
1,600
$192.00
29-08-03
AHD
$0.0650
820
29-08-03
ALN
$0.1200
1,900
$228.00
02-09-03
IFM
$0.0190
1,800
$34.20
02-09-03
WTP
$0.0050
5,200
$26.00
03-09-03
SYM
$0.0400
2,300
$92.00
05-09-03
SGN
$0.0430
830
$35.69
08-09-03
CTX
$0.0400
1,400
$56.00
08-09-03
TSE
$0.0700
1,300
$91.00
09-09-03
GFD
$0.0150
5,800
$87.00
09-09-03
HIL
$0.1050
1,200
$126.00
09-09-03
EQI
$0.0300
2,700
$81.00
10-09-03
APN
$0.0650
1,060
$68.90
12-09-03
GWT
$0.0800
2,500
$200.00
15-09-03
CSM
$0.0275
3,500
$96.25
15-09-03
FFL
$0.0500
8,300
$415.00
16-09-03
JBM
$0.2000
2,200
$440.00
16-09-03
PRT
$0.0600
1,600
$96.00
19-09-03
PHY
$0.0250
1,100
$27.50
22-09-03
COA
$0.0600
1,700
$102.00
23-09-03
ADB
$0.2100
1,200
$252.00
24-09-03
FUN
$0.0200
7,100
$142.00
24-09-03
MGI
$0.0332
2,500
$83.00
29-09-03
SDI
$0.0450
620
$27.90
02-10-03
SOT
$0.0050
1,700
$8.50
03-10-03
GRD
$0.0300
1,600
$48.00
03-10-03
LCL
$0.0150
2,200
$33.00
09-10-03
FAN
$0.0440
7,100
$312.40
09-10-03
OKN
$0.0300
1,160
$34.80
13-10-03
ALZ
$0.0300
1,600
$48.00
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Distribution Income
$53.30
13
Investment Wise The Stockmarket Edge
Ex-Date
Stock
Distribution per Share
Shares Held
20-10-03
NUF
$0.1300
1,300
$169.00
22-10-03
DVC
$0.0300
1,400
$42.00
24-10-03
SOL
$0.1000
610
$61.00
31-10-03
MGW
$0.1100
870
$95.70
11-11-03
ENV
$0.0570
4,500
$256.50
25-11-03
MTT
$0.0500
1,500
$75.00
28-11-03
CPB
$0.1400
1,100
$154.00
08-12-03
LNN
$0.1400
740
$103.60
02-01-04
PRG
$0.0550
1,200
23-02-04
CCL
$0.1300
890
$115.70
24-02-04
BLD
$0.1400
1,600
$224.00
27-02-04
AHD
$0.0600
820
$49.20
01-03-04
HCN
$0.0100
1,700
$17.00
02-03-04
IRE
$0.0800
1,300
$104.00
03-03-04
IFM
$0.0190
1,800
$34.20
05-03-04
SYM
$0.0200
2,300
$46.00
05-03-04
VGL
$0.0400
1300
$52.00
09-03-04
DOW
$0.0400
400
$16.000
09-03-04
SPC
$0.0300
1,800
$54.000
10-03-04
ADB
$0.1900
1,200
$228.000
15-03-04
WTP
$0.0200
5,200
$104.000
15-03-04
CAB
$0.0650
870
$56.550
15-03-04
MIA
$0.0150
4,500
$67.500
22-03-04
COA
0.06000
1,700
$102.00
23-03-04
BBG
0.12500
890
$111.25
25-03-04
ALZ
0.04000
1,600
$64.00
25-03-04
HPX
0.06000
1,900
$114.00
25-03-04
MGI
0.03375
2,500
$84.38
30-03-04
LCL
$0.0170
2,200
$37.40
01-04-04
PMM
$0.0400
2,100
$84.00
02-04-04
NUF
$0.0800
1,300
$104.00
05-04-04
APN
$0.1180
1,060
$125.08
06-04-04
OKN
$0.0375
1,160
$43.50
16-04-04
RHC
$0.0750
710
$53.25
21-04-04
SOL
$0.0800
610
$48.80
10-05-04
SGN
$0.0910
830
$75.53
10-05-04
TBC
$0.0050
7,700
$38.50
31-05-04
LNN
$0.1400
740
$103.60
31-05-04
LNN
$0.1400
400
$56.00
04-06-04
CPB
$0.1900
1,100
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© Copyright 2001-2005
Distribution Income
$66.00
$209.00
14
Investment Wise The Stockmarket Edge
Ex-Date
Stock
Distribution per Share
Shares Held
24-06-04
ALZ
$0.0400
1,600
$64.00
24-06-04
GHG
$0.0250
2,600
$65.00
24-06-04
MCW
$0.0720
2,600
$187.20
24-06-04
MGI
$0.0337
2,500
$84.25
29-06-04
TEN
$0.0850
1,000
$85.00
02-07-04
PRG
$0.0650
1,200
$78.00
02-07-04
PRG
$0.0650
470
$30.55
05-07-04
KYC
$0.0300
2,600
$78.00
05-07-04
SMX
$0.0120
7,100
$85.20
05-07-04
SMX
$0.0120
5,200
$62.40
10-08-04
HPX
$0.0400
1,900
$76.00
10-08-04
TIM
$0.0200
1,100
$22.00
16-08-04
HCN
$0.0125
1,700
$21.25
23-08-04
CCL
$0.1250
890
$111.25
27-08-04
DOW
$0.0200
400
$8.00
30-08-04
HWE
$0.0150
1,900
$28.50
31-08-04
AVV
$0.0500
860
$43.00
31-08-04
MAY
$0.0650
1,000
$65.00
01-09-04
ILU
$0.1000
660
$66.00
03-09-04
ADZ
$0.0220
1,500
$33.00
10-09-04
GAS
$0.0500
1,000
$50.00
10-09-04
MCC
$0.0378
1,500
$56.70
10-09-04
OKN
$0.0425
1,160
$49.30
13-09-04
MIA
$0.0170
4,500
$76.50
15-09-04
WOR
$0.0650
690
$44.85
16-09-04
AAC
$0.0600
1,900
17-09-04
CXP
$0.0700
735
$51.45
17-09-04
SSX
$0.0400
2,000
$80.00
17-09-04
CXP
$0.0700
735
$51.45
17-09-04
SSX
$0.0400
2,000
$80.00
20-09-04
CIY
$0.2300
750
20-09-04
MPH
$0.0200
2,500
$50.00
24-09-04
ALZ
$0.0400
1,600
$64.00
24-09-04
MGI
$0.0350
2,500
$86.88
01-10-04
FKP
$0.0800
1,000
$80.00
01-10-04
IDT
$0.0400
960
$38.40
08-10-04
LCL
$0.0180
2,200
$39.60
11-10-04
UXC
$0.0300
2,300
$69.00
19-10-04
BBG
$0.1400
890
$124.60
21-10-04
SOL
$0.1000
610
$61.00
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© Copyright 2001-2005
Distribution Income
$114.00
$172.50
15
Investment Wise The Stockmarket Edge
Ex-Date
Stock
Distribution per Share
Shares Held
Distribution Income
05-11-04
FKP
$0.0700
1,000
$70.00
15-11-04
KRS
$0.0200
2,700
$54.00
24-11-04
TIM
$0.0350
1,100
$38.50
06-12-04
LNN
$0.1500
740
$111.00
06-12-04
LNN
$0.1500
400
$60.00
06-12-04
IGO
$0.0500
1,600
$80.00
23-12-04
GHG
$0.0200
2,600
$52.00
23-12-04
MCW
$0.0740
2,600
$192.40
23-12-04
MGI
$0.0347
2,500
$86.75
23-12-04
TEN
$0.1250
1,000
$125.00
05-01-04
PRG
$0.0650
1,200
$78.00
05-01-04
PRG
$0.0650
470
$30.55
DISCLAIMER This report was produced by PPS Investments Pty Ltd (ACN 097 446 369), trading as Investment Wise, which is an Australian financial services licensee (Licence no. 246670). PPS Investments Pty Ltd has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, PPS Investments Pty Ltd does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. WARNIN G: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision. D ISC LO SURE: PPS Investments Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, PPS Investments Pty Ltd may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report PPS Investments Pty Ltd and/or its directors, associates, employees or representatives currently hold interests in the following companies: EQI, IAG, IGO, TIM, SMY, TLS. This report may not be reproduced, distributed or published for any purpose, unless the person or entity seeking to do so is expressly authorised in writing by PPS Investments Pty Ltd. NOTES: AUG recommendation replaced by ABX as a result of the merger (05-02-03). UEL shareholders received $3.15 from Alinta Limited takeover (25-07-03). MGI completed an off-market takeover for AIP (07-10-03). HRT stock code changed to LRX (30-10-03). FAN 11:10 Share Split (28-10-03). DOW 1:4 Reconstruction (20-11-03). ARL stock exchange code changed to NLX (11-12-03). RBK converted 1-for-3 basis to RBI listed on Toronoto Stock Exchange (05-05-04). FLX 1:10 Reconstruction (11-11-04). MPM spun-off Leviathan Resources - LVR shares (18-11-04). GDP exchange code changed to LFE (01-12-04). MPM taken over by LIM. $1.00 cash and 0.1675 LIM for every MPM share held (05-01-05).
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© Copyright 2001-2005
16