Stock picks from ASX Investor Day Nov 2023

 Two of the more interesting stocks are suppliers of fixed income debts to companies. The advantage to shareholders are that they can access to such fixed income investments and yet have the liquidity that is not too different to ordinary equities in the market.

These two are:

Metrics Inc (MOT.AX) 

Metrics Master Income Trust (MXT.AX)

Along with the other stocks, the 3 buying strategies to myself are:

code        Buy        Num          Cost                Sell

CUV 17.20 71.43 1228.57 15.8

MOT 2.15         714.29 1535.71 2.01

MXT 2.05         833.33 1708.33 1.93

How to create your own Share Index or Stock Index

 The technical details of this is found in inspired by: https://www.youtube.com/watch?v=dbF6tnZDzCQ   which gave a good explanation of how to calculate or create your own share index. The aim of this post is to give a bit more explanation and details.

Firstly, what is a share index and why do we need them? Put simply, a share index is a collective representation of a group, or basket, of shares. Instead of looking at the share price of an individual company, a share index price is the collective price of a group of shares. In the U.S. three of the popular Share Indices are the Dow Jones (a group of 30 companies), the Top 500 (a group of 500 companies) and the Nasdaq (a group of technology companies). The purpose of a share index is to provide a collective view so that it represents the market as a whole. Individual company share price may move up or down, but collective a share index give an overall picture of the market.

Secondly, as mentioned above there are many different share indices and they are created to represent different group of companies or different sectors in the market or even different countries. So it is up to the creator of the index to decide which stocks to include.

Thirdly, another variable in the share index is the amount of each of the specific stock. For example do we include 5 shares of Apple stocks and 10 shares of IBM stocks? The amount may be a reflection of which stocks we like to see having more or less in.

Here is a very simple example.

Step 1: Choose Stocks A, B, C; each with a certain amount; ie. number of shares, say 5, 10, 15. The share prices could be $1, $2, $3. Multiply the respective amount by share prices and add together. So $5 + $20 + $45 = $70. This represents Day 1's total Basket value. This is not the share index price yet. 

Step 2: Choose an arbitrary starting value of the index. This may be the most difficult to understand. Simply don't think about this step and choose a nice round number. Say 100 or 1000 or something. This is the Share Index price on Day 1.

Step 3: Repeat Step 1 for Day 2. Let's say the result of the Basket is $75.

Step 4: The Share Index on Day 1 is say 100. Now to calculate the Share Index on Day 2, it is: 

ShareIndexDay2 = (BasketDay2 / BasketDay1) * ShareIndexDay1

=  (75/70) * 100.

Step 5: For Day 3, the Share Index price would be: 

(BasketDay3 / BasketDay2) * ShareIndexDay2

= (BasketDay3 / BasketDay2) *  (BasketDay2 / BasketDay1) * ShareIndexDay1

= (BasketDay3 / BasketDay1) * ShareIndexDay1

Step 6: This can be easily generalised to any day in the future. At Day 100, we don't need to calculate the for Day 99, Day 98, Day 97. Instead we can have the simple formula based on Day 1 only. So:

ShareIndexDayN = BasketDayN / BasketDay1 * ShareIndexDay1

The important decisions in creating a Share Index is:

a) Which company stocks to include - which will determine what this Index represents.

b) The proportion of each stock.

c) The Share Index at Day 1. This really does not matter - just pick a nice value here.

 

How to manage a fast-growing basket of Index

This is the case whereby we expect new members to be added on to the index at a fast pace. An example would be a basket of Metaverse altcoins. How do we frequently add to the basket of Index in a fair way.

Suppose we start with 7 stocks.

- At the initial date, assign each stock to have a value of $1. Calculate the units of each stock that would give the value of $1.

- The initial basket value is $7.

- Over time, the basket grows to a value of $120 for example. 

- Add a new stock, such that the new stock holdings is $120/7. Calculate the number of this new stock required.

- On this date when the 8th stock is added, the value of the basket is 120 + 120/7.

With this method, if the basket value is still very low, adding the 8th stock would boost the overall market price.

On the other hand, if there are many stocks in the basket already, adding the next stock would not be significant.

So this caters for a new index which will grow a lot. As the index matures, the total value of the index will grow slower, thus providing stability.

  

Stock Market websites

 This blog was started long ago, and I cannot believe I have not written a post of my favourite websites for doing stock analysis. So I will list a few here now, the focus will be the free and useful ones.

finance.yahoo.com - very useful information, the go to site for a quick search. Even has many financial statements for free and it is only the Quarterly statements that starts to ask for money.

asx.com.au - it requires login now, even though it is still free. The navigation is less efficient as it requires the user to click a few things and changes a few pages and shows limited information per page. What I would prefer is to have lots of information on the same page.

stockbeep.com - recently been recommended this website and it has quite a useful niche. It actually has a simple page that shows the top stocks by volume traded. This allows us to see when there are sudden large volumes being traded, so we can follow before the rest of the crowd comes in. There are also a few other simple Top X and Top Y pages too. Highly Recommended.

barrons.com - unlike the other sites where I mostly go for data, this site may be of interest as a news site for stocks. It is however mostly for U.S. and the Americas only.

Options:

ewotrader.com - For those into options, this might be useful. One can sign up for a newsletter were it provides current analysis using Elliot Wave.

Gold / Silver / Precious metals:

kitco.com - Lots and lots of data about gold, silver and other precious metals. When I want to check the history of the precious metals, to see is a bull or bear run has started, I usually come to this page.

Cryptocurrency:

coinmarketcap.com - The one stop shop whenever I want to compare the cryptos in a quick glance. Then you can drill down to your favourite crypto. The historical graph functionality and usability is quite good too.

Technical Analysis Startegy - RSI2 Trading Plan

The following trading signal is based on a modified version from something similar by Larry Connors.

Essentially a market is in a bull market scenario (SMA-200 increasing) but is facing a short term correction (SMA-5 decreasing). Since we are confident it is an uptrending market, undergoing short term correction, we would want to buy more stocks under certain conditions.

The conditions are:

i) Stock price is above the SMA-200, where the SMA-200 is in an uptrend.

ii) The stock price just went below the SMA-5day.

iii) The RSI-2 indicator has just gone below 10.0

..... then buy

The Exit Criteria is 

- when the stock price rises above the SMA-5

..... then sell

S&P/ASX All Technology Index (XTX) - Accumulate Daily Data using Process Automation

Continuing with the newly created XTX index, it would be more convenient for future analysis, to actually collect the daily data. Sourcing the daily data of the stocks are not difficult since various finance websites provide them. However, since they are daily data, it will become very tedious, time consuming and require great discipline to spend time everyday to add to the dataset. Fortunately with something called Process Automation, this chore can be designed to be performed automatically without any human effort.


('red dot' animation is added for illustrative purposes only)

Essentially there are 2 parts to the design, each part will involve data collection/transformation and process automation.

Part A: MultiWebInput
- Using Monarch DataPrep, extract the multiple daily stock prices directly from the chosen website by specifying their URL.
- In DataPrep, Append the multiple stocks into a single table and perform the necessary clean-up.
- Using Monarch Server Automator, design a daily schedule to run the process described above, and producing an output, say 'newdata'

Part B: MultiStockAppend
- Using Monarch DataPrep, append the 'newdata' with the existing 'olddata'.
- Using Monarch Server Automator, design another daily schedule to run the process above, and also making the results to become the new 'olddata'.

Obviously there could be a variety of other designs that can achieve the same goals and may even be more efficient - please feel free to add your ideas as 'Comments' below. Once the Monarch Server Automator is setup, the data will be updated daily without any further intervention, unless new stocks are to be added for example.

S&P/ASX All Technology Index (XTX) - starts on 24 Feb 2020

A new index called S&P/ASX All Technology Index (XTX) was launched on 21 Feb 2020 and will start listing on 24 Feb 2020. It is a broader technology index than the current S&P/ASX 200 Information Technology Index, allowing investors to diversify more easily into the technology sector.

- The XTX will include international companies, with stocks from U.S., Ireland, and New Zealand.
- On Feb 24, 2020 - it will start with 46 stocks. These WAAAX stocks (Wisetech, Afterpay, Altium, Appen and Xero) are certain to be there.
- Other stocks are Computershare, REA Group, Carsales, Link Group, NextDC.
- The XTX basket will not be based on a fixed number of stocks; and it will be rebalanced quarterly based on its criteria.
- The criteria include  minimum Market Cap of $120 million, minimum daily traded value of $120,000,  minimum of 30% relative liquidity ratio.
- Telcos won't be in this index, since there is sub-category for them.
- The existing S&P/ASX 200 Information Technology Index is for technology companies that are also in the ASX200. On the other hand, the new XTX is broader and will include  GICS sub-categories ranging from communication services like interactive media and healthcare technology as well.

Based on the anticapated 10 stocks that will be included, some of the stats are shown below using Altair's Panopticon. This will be updated after 24 Feb 2020, when the official list is known.

Update 24 Feb 2020
- The list of the constituent stocks for XTX is still not available. It is possible that the constituents will not be made known to the public.
- https://us.spindices.com/indices/equity/sp-asx-all-technology-index

Update 26 Feb 2020
The list of 46 countries comprising the index has been made known. The details are here:
https://www.itnews.com.au/news/so-heres-the-full-list-of-46-companies-in-the-sp-asx-all-tech-index-538501
https://www.fool.com.au/asx-all-tech/

Update 7 Mar 2020
Note that the ticker or symbol for XTX is sometimes listed as ^AXTX, with the caret sign in front.

Acknowledgements:
Post contributed by C.Chee
References
https://www2.asx.com.au/markets/trade-our-cash-market/overview/indices/asx-all-technology-index.html
https://www.fool.com.au/asx-all-tech/
https://www.afr.com/technology/revealed-xero-to-head-100b-aussie-nasdaq-20200219-p542cl
https://www.itnews.com.au/news/asx-aussie-tech-index-launches-today-538337

Stocks of the Day - Ansell - Pandemic Buy

Recent Corona Virus incident has left the stores AND warehouses depleted of medical face masks.

Ansell Limited (ANN.AX) is one such company that sells a variety of medical disposal items such as face masks. For example:
Some BioClean, sterile face masks are:
https://www.ansell.com/au/en/life-sciences/life-sciences-products/facemasks?page=1&page_size=10
And the respiratory face masks are:
https://www.ansell.com/eu/en/products/sandel-respiratory-face-masks


So the question is, is this share worth buying? But we should ask more questions first.

Q:Is the situation serious enough to affect ANN's share price?
A: The world is running out of face masks, at least in all retail outlets and online sites I've visited. So yes, there is a demand.

Q: Will the seriousness of the Corona Virus subside? One would definitely hope so, and hope that it subsides soon. However, as we speak, we are seeing an increasing severity, so we have not reach the turning point yet. In terms of buying ANN, it would be buy quick, and ready to sell.

Q: There may be a few other face masks manufacturers, so how is ANN performing relative to its peers?
A: Comparing with 75 peers in the HealthCare Sector and Equipment/Services Industry:
Sales is $2.1B, being the 5th out of 75
MarketCap slight over $4B, ranked 6th. Compare this with its relatively high Sales above.
P/E ratio of 18.95 and ranked 22nd - it is clearly not overpriced according to this metric.
Growth rate at a healthy 16% , ranked 14th.
Earnings Yield at 5.25, ranked 15th.
So it appears that ANN is not usually in the top of the list, but mostly ranked in Top15 in the metrics above. The exception is PE ratio, where lower rank may actually be good. The ranks are important from the point of comparing against its peers, since the numbers by themselves are quite arbitrary.

In short, ANN may be on of the undervalued stocks, simply from its financial metrics. Couple this with the surge in worldwide demand for its medical products, ANN may be a Strong Buy.

Disclaimer: I don't own ANN today, but plan to buy soon. This is NOT financial advice It is my personal opinions and has no guarantee of future performance.