One of the magazines I regularly read is the "SmartInvestor". I find a number of longer term tips here which prove to be profitable. Apparently others are catching onto this as well. I didn't get a chance to look at it early this month and only got to it this weekend. I usually grab a highlighter and rummage through the pages looking for fundamentally sound companies that are being touted as the next big thing. I then use my own judgement on whether or not the company is a worthwhile purchase.
This month I highlighted the following stocks for the following reasons :
Brambles Limited (ASX:BXB) : The company is debt free, the balance sheet is undergeared, possible takeover target, rapid organic growth, high rates or return on capital.
Reckon Limited (ASX:RKN) : Operates in a duopoly, More than half its income is from recurring revenue, strong earnings growth, trading at a discount.
Q Limited (ASX:QXQ) : Market capitalisation understates its potential.
Austin Engineering Limited (ASX:ANG) : Surge in workload, EBITDA growth near 40%, management confirmed at least 40% growth for 2007, lots of cash reserves, Price to Earnings of 9.
Phosphagenics Limited (ASX:POH) : Insulin through skin product, P/E ratio of 10.
Mariner Bridge Investments Limited (ASX:MBR) : Great management, possible strong returns, nice trend in chart.
Adcorp Australia Limited (ASX:AAU) : Share price has halved, established provider, conservative price earnings multiple, 11% yield, Low growth outlook set to change, strong cash flow, debt free, acquisitions possible.
Allomak Limited (ASX:AMA) : In LPG industry as a wholesale supplier of LPG kits, Reaffirmed earnings guidance of at least $4.2 million, PE of 8.4 and dividend yield at 8%.
Structural Systems Limited (ASX:STS) : EPS at least 22c, PE of less than 10, significant discount to peers.
SP Ausnet Limited (ASX:SPN) : Fat dividend yield of6.63%, Should be in top 5 yielding companies for 2007/2008.
This is a list of 10 shares which I saw potential in after looking at the magazine. It usually takes me about 30 Min's to get through the magazine and identify the top stocks worth looking at from a fundamental perspective.
So how did these top 10 stocks go ?
The magazine comes out on the 15th Jan 2007. So if we assume we bought at the opening price on the 15th and held till today :
- BXB - Purchase at $12.82. Now trading at $13.31 (3.8%)
- RKN - Purchase at $1.02. Now trading at $1.08 (5.8%)
- QXQ - Purchase at $0.039. Now trading at $0.057 (46%)
- ANG - Purchase at $0.97. Now trading at $1.30 (34%)
- POH - Purchase at $0.335. Now trading at $0.34 (1.5%)
- MBR - Purchase at $2.57. Now trading at $2.50 (-2.7%)
- AAU - Purchase at $0.54. Now trading at $0.645 (19%)
- AMA - Purchase at $0.42. Now trading at $0.48 (14%)
- STS - Purchase at $1.72. Now trading at $1.94 (12%)
- SPN - Purchased at $1.40. Now trading at $1.415 (1%)
The profit on some of these shares is remarkable. The highest was an astounding 46%. The lowest was a meager loss of 2.7%. Five of the ten stocks produced more than 10% profit. The average profit was 13.44%. This works out to be a return of approx 161% a year.
Lets assume this works every month (I can't say this is true as I have only got a couple of months of data). Lets also assume you could make a rough 10% on your money which is a 3% discount to this months result. Compounding this through a year actually produces a result of 213% return. Assuming you start with 10K and invest evenly every month you would reach 100K within 2 years 1 month. You would reach a million within 4 years 1 month.
Is it worth following ... well the small amount of research suggests there is a case to follow this unique system. While I can follow this easily it is a bit hard for other people to reproduce the same results, as I selected 10 stocks which I thought had potential. There is a lot more than 10 stocks in the magazine.
Why not pick up a magazine you had from a while ago and try it out ... it might just turn out to be an interesting and profitable experiment.
Good Luck Investing.