Accumulation and Compounding | Slack Investor

Nuns Know Best

In Nuns … Wisdom – The New Indian Express

Slack Investor loves a good story – whether its true or not! I like the owning of stocks and I also admire anyone who can stick to their vows. All of this seems to intersect with the story of the Coppock Curve – a technical indicator that can be mapped on stock price charts that has a great track record for showing when the market has reached the “bottom” of a cycle.

When I first started to think a bit more seriously about financial things, I was going to an evening investment class in Townsville. The class was held by a personal Slack Investor Hero, Robbie Fuller, who put on these classes for no personal gain … he just wanted to educate people about the opportunities that lay waiting in the stock market. Robbie would teach us about fundamental analysis (trying to measure the intrinsic value of a stock) and technical analysis (charts and trends). There was always a particular beauty when fundamental and technical information aligned about a company.

The class was usually a lot of fun, but I remember a time around 2011 when the markets were going through a bit of a lacklustre period and we had all had a few recent losing trades – there was just not much excitement about stocks.

Robbie came bounding in one evening after 31 July 2012 with the news that the Coppock Indicator had just turned … it was a sign that “good things will happen”- He was right – It was the start of a 3-yr period where the Australian market was mostly rising. It is much easier to trade when the “tide is coming in”.

The Coppock Curve is a “smoothed” momentum indicator developed by the economist Edwin “Sedge” Coppock and published in in a 1962 issue of Barron’s. It all started when he was commissioned by the Episcopal Church to find long-term investment opportunities for the Church fund.

According to the legend, he asked a group of nuns (or bishops!) how long it took the bereaved to “recover” from their grief. The answer was 11 to 14 months. He took the radical step of thinking that something similar might happen in stock markets after a market high and subsequent downtrend. He assumed that because markets are motivated by emotion, they might be ready to “move on” after a period of 11-14 months of “grief”.

“Crowds do too much too soon”, he wrote. “They overdo. When they get an urge to speculate, their concerted demand forces prices up at a rate far greater than the growth of the company into which they are buying. Likewise, when they liquidate holdings or make short sales during a panicky decline, they ignore basic economic facts. They overdo because they are motivated by emotion rather than reason.”
Edwin “Sedge” Coppock – from Business Insider

The Coppock Indicator has had an incredible track record in signalling the end of a “bear market”. The signal (Green Arrow) is triggered when the indicator (shown in the lower screen below) bottoms from under the zero line and then slopes upwards.

Monthly chart of the ASX 200 together with the Coppock Indicator below. The green arrows show the “bottom of the market” predictions using the Coppock Indicator. The red arrows show a possible time to sell – Click the chart for better resolution – Incrediblecharts.com

The indicator gives buy signals very rarely, only 6 times in the past 30 years for the ASX 200. But it has just given another one, signalling a buy for the ASX 200. The maths of the curve is a little complex, but it looks for the next uptrend after the market establishes a high and then goes through a 11-14-month “greiving” period.

Is Coppock’s Bollocks?

There is no perfect trading indicator. Coppock designed his indicator to try to establish a “bottom of the market” buy signal to identify long term investment opportunities. He didn’t try to use it as a selling tool. However, there is a trading strategy that uses this indicator after a BUY signal.

SELL when the Coppock Curve takes its first downwards trajectory OR,
SELL when the Coppock Curve falls below zero

I have trialled both methods and the strongest gain (p.a) results were with the first method. I have marked these sell signals on the chart above with red arrows and tabulated the gain results below.

COPPOCK CYCLE	BUY DATE	ASX200	SELL DATE	ASX200	GAIN	PERIOD(yr)	GAIN (p.a.)
1	31-May-95	1981	28-Jan-96	2171	10%	0.66	14.5%
2	30-May-03	3010	29-Apr-05	3983	32%	1.91	16.9%
3	29-May-09	3817	30-Jun-10	4493	18%	1.09	16.3%
4	31-Jul-12	4269	28-Jun-13	4802	12%	0.91	13.7%
5	31-May-16	5378	30-Jun-17	5721	6%	1.08	5.9%
6	30-Nov-20	6517	29-Oct-21	7323	12%	0.91	13.5%
	31-Jan-23	7400?	?	?	?	?	?

Slack Investor uses Incredible Charts to do all his charting … but their indicator screen can get complicated. To easily follow the Coppock Indicator on any stock, just use the free, but great, StockCharts and put in the same chart attributes below.

ASX 200 Chart from StockCharts – showing stock price on top and the Coppock Curve below.

Slack Investor is a great believer that market timing is difficult and that the best time to buy stocks is “all the time” – by automating your investments so that their is no decision inertia. Use dollar cost averaging.

However, looking at the chart history of this indicator … and the GAIN results in the above table, this is not advice, but now looks like a good time to get into the Australian market. Although, officially, the Coppock results are based on the end of month data. In addition, using Slack Investor’s CAPE valuation method, at the end of December 2022 the ASX 200 was “fairly valued”.

Nuns are not infallible … but mostly wise.

Let’s Lay a Few Bricks … and Mid-Month Update

A 1999 extract from The Sydney Morning Herald showing a 13-yr old Chris Brycki – smartcompany.com.au

Slack Investor will admit to being less than young … but I am still capable of being a “Fan boy” when I see something impressive happening in the financial world.

After a series of schoolboy stock picking successes – winning the ASX’s Share Game a remarkable 3 times and, at university, he entered the JP Morgan Trading Competition, which he also won several times. The talented Chris “the Brick” Brycki, launched into a career with stockbrokers and financial houses. After a while, he started to question the long term performance of fund managers.

“… The problem is that over time, even by being right, the value added is not big enough to counteract the 1% fee that a lot of these fund managers charge.”
Chris Brycki – Stockspot – Livewire

Chris founded Stockspot in 2013 as an alternative way to invest. Their Robo Advice model offers a low-cost automated alternative to traditional fund managers and advisors. After a simple online survey to determine your investing stage and risk tolerance, an investment portfolio type is recommended to you.

Stockspot Building Blocks

Chris, founder and CEO of Stockspot, in 2020 – From smartcompany.com.au

Chris (and Stockspot) have come up with the breathtakingly simple, yet genius (Both Slack Investor and Donald Trump have a loose definition of genius), strategy. After researching thousands of ETF’s and, based on exposure, performance and low fee costs – Stockspot has selected just 5 of them as the building blocks for a range of different portfolios. The portfolios are based on risk tolerance, financial situation and the investor’s appetite for volatility. The five component ETF’s are in Australian Shares (VAS), Global Shares (IOO), Emerging Global Markets(IEM), Australian Fixed Income (IAF), and Physical Gold (GOLD).

ETF	Symbol (ASX)	1-yr Performance	Growth since Inception	Management Fee
Vanguard Australian Shares Index	VAS	-7.92%	8.25%p.a (13+ years)	0.10%p.a.
iShares Global 100	IOO	-4.43%	7.37%p.a. (15+yearsr)	0.40%p.a.
iShares MSCI Emerging Markets	IEM	-20.59%	7.18%p.a.(19+ years)	0.69%p.a.
iShares Core Composite Bond	IAF	-11.42%	2.73%p.a.(10+ years)	0.15%p.a.
ETFS Physical Gold	GOLD	+7.34%	7.75%p.a.(19+ years)	0.40%p.a.

The five ETF’s that Stockspot use to build their portfolios (1-yr Performance is to 13Oct 2022) – most of these ETF’s have a $500 minimum if you are investing directly.

It is best to disregard the above 1-yr performance – It has just been a bad year for most assets. The ETF management fees are low (depending on ETF complexity), there is good long term performance (Growth since Inception) and they have selected Physical Gold for inclusion.

Slack Investor does not naturally lean into Gold as it is a speculative, non-income producing asset. However, I might have to change my mind here. The reason Stockspot include Gold in all their portfolios is based upon historical data and the way gold tends to outperform in times of crisis. The results in this last year performance of +7.34% for Gold, speak for itself – as other asset classes flounder.

Mixing it all up

Slack Investor has written about Stockspot before in terms of Robo Advice and their valuable Superannuation reports. By using these 5 ETF’s in various combinations, Stockspot is able to give their customers a combination of returns and risk at a relatively low cost. There are even sustainable versions of each of the below portfolios available. As an example, the moderately conservative Sapphire portfolio is constructed with the following portions.

VAS: 27.2%
IAF: 35.2%
IEM: 14.4%
IOO: 7.9%
GOLD: 14.8%

A chart showing relative risk and return (grey line) of a portfolio varying between 100% Australian Bonds and 100% Australian Shares. The Stockspot portfolios have historically yielded lower returns than 100% Australian Shares) – but only slightly in their most aggressive Topaz portfolio. **Overall, through their diversification, the portfolios represent much lower risk.**

After fees, over a 5-yr period, Stockspot has outperformed 99% of similar funds over 5 years.

AMETHYST Conservative	SAPPHIRE Moderately conservative	TURQUOISE Balanced	EMERALD Growth	TOPAZ High growth
3.1% p.a	4.8% p.a	5.3% p.a	6.1% p.a	6.8% p.a

5-yr annual performance (After Fees) – to 30 September 2022 – From Stockspot

There are fees involved for Stockspot to manage your money. For a balance of $200000, they amount to 0.66%. At first blush, these fees (on top of the ETF fees) sound a bit steep to Slack Investor. However, for all types of investors, with a time horizon of at least 3-5 years, for a stress-free place to put your money, this might be exactly what they are looking for. Stockspot do a tailor-made portfolio construction, all the re-balancing of assets and, they take care of all brokerage costs – Not Bad! They even have zero management fees for children accounts up to $10,000 (for under 18s) and the ability to dollar cost average with regular top-ups.

Stockspot does not earn fees from or have a commercial relationship with the ETFs we recommend. We don’t pay professionals for recommending our service to their clients.
Stockspot

Slack Investor can think of lots of situations where people would like a decision-free, low-fee, diverse investment that is designed to grow in the long term. Well done Chris Brycki (and Stockspot), for advancing the investing cause with particular attention to keeping the fees down … you are a Slack Investor Hero.

October 2022 – Mid-Month Update

This image has an empty alt attribute; its file name is trend-1445464__180.jpg

Despite the above discussion, my small-scale market timing experiment continues until its projected end in 2024. My frustration with this experiment continues – as it often goes against one of Slack Investors firm beliefs. If you can avoid it – Do not sell an asset when it is undervalued. Using historical CAPE values, at the end of September 2022, the UK Index (FTSE 100) was 13% below its long term mean, the US Index (S&P 500) was 9% above its long term mean, and the Australian Index (S&P 500) was 7% below its long term mean.

At the end of September 2022, Slack Investor was on SELL ALERT for Australian index shares (ASX 200), the US Index (S&P 500) and the UK Index (FTSE 100). Each of them had broken through their monthly stop loss.

I have a “soft sell” approach when I gauge that the market is not too overvalued. I generally will not sell against the overall trend but monitor my index funds on a weekly basis once the monthly stop loss has been triggered.

Well … I can see no obvious up-trend at the end of the week for the US and UK markets and will exit at the end of week price of 3583 for the S&P 500 and 6858 for the FTSE 100. I am still just hanging in with the ASX 200 as they had a strong finish to the week.

The Index pages and charts have been updated for the UK Index and US Index.

Vanguard 2022 Annual Long term Investing chart and … August 2022 – End of Month Update

Extract from the 2022 Vanguard Index chart (Just the 2008-2022 portion) – the dollar values on the right are the results of investing $10000 in index funds in each asset class for 30 years (since July 1992). *– Check out the full glory of the* Vanguard 2022.PDF chart *– Click for better resolution.*

The lessons of long term investing

Every year Vanguard publish their performance data on each asset class. Slack Investor looks forward to this – as it demonstrates the powerful compounding that happens when the appreciating asset classes of Shares and Property are held for a long time (30 years). Although this Vanguard collection of data shows the volatility of asset values in the short term – it also also emphasizes the joys of holding and accumulating shares or property for long periods of time. These asset classes have steadily increased in value over the last 30 years. $10000 invested in Australian Shares in 1992 would have compounded to $131 413 in 2022, US Shares would have compounded to $182,376. Staying in Cash would have yielded $35 758.

Slack Investor says download and study this chart … and work towards getting some appreciating assets … accumulate, then hang on!

Financial year total returns (%) for the major asset classes

In the Vanguard 2022 table below, for each asset class the total annual returns are given and the best performing class for each year is shaded in blue … and the worst in pink. What stands out to Slack Investor is that is rare for and asset class to lead in annual returns (blue) for two years in a row – and there are years where the leading asset class (blue) becomes the worst performer (pink) in the next year. This drives home the often repeated sentence in the finance world.

Past performance is not a guarantee of future results – but 30 years of data talks loudly to Slack Investor.

Total returns for each asset class for the 30 years since 1992 – Check out the full glory of the Vanguard 2022.PDF *– Click for better resolution.*

This table highlights the benefits of diversification across asset classes for the long term investor. Each asset class might be the best performing (Blue shading), or the worst performing (Pink shading) for the year – and might dominate (or languish) for up to two years in a row. However, often a worst performing asset will show up as the best performing asset in the very next year – or vice versa.

Slack Investor is accepting of the negative returns for FY 2022 for most of the asset classes – and is concentrating on the 30-yr average long-term annual returns for holding shares and property of over 9% p.a.

When averaged over 30 years, the asset class and annual returns are : For AUST. SHARES 9.8%; INT’L SHARES 9.1%; U.S. SHARES 11.7%; LISTED PROPERTY 9.3%; and INT’L LISTED PROPERTY 10.7%; This compares with the average cash return of 4.4% p.a.

Slack Investor knows where he wants to be.

August 2022 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

Inflation fears seemed to have spooked the overseas markets (S&P 500 -4.2 %, and the FTSE 100 -1.9%). The Australian stock market ended up pretty flat this month (ASX 200 +0 6%).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Financial Year 2022 Slack Results

“When you can measure what you are speaking about, and express it in numbers, you know something about it. ”
Lord Kelvin (William Thomson, Mathematician and Physicist, 1824-1907)

Slack Investor reflects on a tough investing year. I have mostly “stuck to my guns” investing with growing companies that have an established earnings record and forward P/E ratios <50. There have been a few lapses (e.g. XRO) which had a forward PE ratio of about 100 when I bought it last financial year … and, I paid the price when the higher interest rates and threats of inflation caused a rapid change in valuation of most tech stocks.

I expect a bit of volatility in my mostly “growth” investment portfolio and I try to reassure myself that, despite the odd negative year in the Slack Investment Portfolio the Stable Income portfolio is doing its job and keeping Slack Investor with enough cash to keep things running. In the world markets, the FTSE 100 Total Return Index was up 5.7% (last FY down 13.8%). Dividends helped the Australian Accumulation Index to be down 7.5% for the financial year (last FY +27.8%). The S&P 500 Total Return Index took a breather at last – and was down 10.7% (last FY up 36.4%) for the same period. All of these Total Return Indexes include any accumulated dividends, wheras the chart below of the ASX 200 for FY 2022, just shows stock prices.

The ASX 2oo Weekly chart for FY 2022- Dividends helped stem the losses for FY2022, but the ASX Accumulation Index is still down 7.5% for the FY – Incredible Charts – Click for better resolution.

Slack Portfolio Results FY 2022

All Performance results are before tax. The Slack Portfolio is Slack Investor’s investment portfolio and it had its first negative year since its establishment in 2010 – with an annual FY 2022 performance of -14.3%. Full yearly results with benchmarks are shown in the table below. It was a challenging year for all of my benchmarks that were exposed to sharemarkets (Median Balance Fund -2.5%, Vanguard Growth Fund -13.0%, ASX 200 Accumulation -6.5%).

Slack Investor seems to be clueless in real estate predictions … I have thought for some years that there must be a sizable correction soon – as the prices are still stratospheric in Melbourne and Sydney compared to incomes. The correction may still yet happen as interest rate rises are yet to take their toll.

The Brisbane real estate market was the place to be for FY 2022 (+25.6%) on top of a big year last year!) – Inflation was also a suprise for the challenged Slack Investor – with the CPI at +6.1%.

YEAR	SLACK FUND	MEDIAN BAL	VGARD GROWTH	ASX200Acc	RES BRIS	RES MELB	CASH	CPI
2010	6.6	9.8	12.3	13.1	10.8	26.9	4.2	3.1
2011	2.5	8.7	9.1	11.7	-2.4	0.9	4.4	3.7
2012	8.3	0.4	1.3	-6.7	1.3	-0.9	4.3	1.2
2013	26.5	14.7	18.6	22.8	7.7	8.3	3.2	2.4
2014	23.6	12.7	14.5	17.4	11.5	12.8	2.6	3.0
2015	2.4	9.6	11.8	5.7	7.7	15.6	2.5	1.5
2016	14.2	3.1	4.2	0.6	8.4	9.5	2.2	1.3
2017	19.5	8.1	8.8	14.1	6.5	17.7	1.9	1.9
2018	37.6	7.2	10.0	13.0	5.2	3.9	3.9	2.1
2019	19.7	6.2	9.8	11.5	1.7	-6.0	2.0	1.3
2020	9.4	0.3	0.6	-7.7	8.4	13.8	1.1	-0.3
2021	21.7	13.0	20.3	27.8	17.9	10.7	0.2	3.8
2022	-14.3	-2.5	-13.0	-6.5	25.6	3.1	0.3	6.1

The Slack Fund yearly progress vs BENCHMARKS. The Median Balanced Fund (41-60% Growth Assets), Vanguard Growth Fund, ASX 200 Accumulation Index, Corelogic Residential Property Home Value Index in both Brisbane and Melbourne, and Cash (Australian Super Cash Fund) and Consumer Price Index (CPI)

However, the five-year compound annual performance gives me a much better idea about how things are going and will smooth out any dud (or remarkable!) results. The Slack Fund is still ahead of Benchmarks – but currently being challenged by Brisbane Residential real estate.

Slack Investor 5-year compound annual rate of return – compared to benchmarks *– Click for better resolution.*

The beauty of compounding with a succession of good performance results can be seen in the chart below showing the growth of an initial investment in June 2009 of $10000.

The rate of growth of $10000 invested by *Slack Investor in FY 2009 – compared to benchmarks – Click for better resolution.*

10-year compound annual rate of return

The Slack Fund has been around a while and, at last, I am generating some long term data (10-year compound “rolling” annual rate of return). Over this time frame, the Slack Fund has been performing very well. A long-term annual rate of return of over 15% – Go Slack Fund!

However, the 10-yr rates of return of the Median Balanced Fund, Vanguard Growth fund, ASX200, and residential property in Brisbane and Melbourne are also great long term investments, generating a 10-year compound annual rate of return of at least 7% p.a.

YEAR	SLACK FUND	MEDIAN BAL	VGARD GROWTH	ASX200Acc	RES BRIS	RES MELB	CASH
2019	15.6	8.0		10.0	5.8	8.5	2.9
2020	15.9	7.0		7.8	5.5	7.3	2.6
2021	17.9	7.4		9.3	7.5	8.3	2.2
2022	15.2	7.1	8.1	9.3	9.9	8.7	1.8

The Slack Fund 10-year compound annual “rolling” rate of return – compared to benchmarks- The Median Balanced Fund (41-60% Growth Assets), Vanguard Growth Fund, ASX 200 Accumulation Index, Corelogic Residential Property Home Value Index in both Brisbane and Melbourne, and Cash (Australian Super Cash Fund). The Vanguard Growth Fund was established in 2012 and has only just been able to generate a 10-yr rate of return.

Lifting the gaze … to a beautiful place

Earth Australia planet earth satellite view SKU 0099 image 1 — An “enhanced” satellite view of eastern Australia incorporating an “exaggerated relief” technique to emphasize the topography. The mountains of PNG and Indonesia are on the horizon.

It serves an investor well to occasionally lift themselves away from the day to day stresses of the world – and the trials of owning a share portfolio!

ASX 200 – The Australian Index

My previous post outlined a few of the difficulties of market timing and my decision to be tentatively out of the Australian Index according to my “market timing rules”. I also try not to trade against the market trend … and I would not sell while the weekly chart was looking positive.

ASX200 Weekly Chart FY 2022 – Incredible Charts

So far this has been the case, with the weekly chart just above the rising trend line. I will sell if the ASX200 is below the trend line and still below the stop loss at the end of the week. This gets to one of the problems of market timing – you can set up the most definitive strategy that will give you an objective selling point – but my heart is not in it as Slack Investor believes that the ASX 200 represents reasonable value at the moment. I am actually looking forward to the end of my 20-year market timing experiment – even though it does have the useful purpose of giving Slack Investor something to do in a market downturn.

Lifting the gaze

My absolute favourite way of lifting the gaze is to look at the Vanguard Asset Index chart over a long period. However, a later version than 2021 isn’t due out till mid August 2022 – so I have just shown last years version. The Long term asset class returns chart shown below – in a logarithmic scale, show that the asset classes of Residential Property and Australian shares – are the only really worthwhile games in town. When things just get too much in the day to day trading world – just sit on the couch and gaze in wonder at these two charts … and then perhaps doze off.

The importance of Australian shares in your portfolio | Stockspot — Long term Asset returns 1926-2020 – From Stockspot

Extract from the 2021 Vanguard Index chart (Just the 2008-2021 portion) – the dollar values on the right are the results of investing $10000 in index funds in each asset class for 30 years (since July 1991). – Check out the full glory of the Vanguard 2021 PDF chart – Click for better resolution.

CSL Goes to the Well – Share Purchase Plan 2022

I did a north to south crossing of Africa 36 years ago, mostly in a 4-wheel drive truck and, if we stopped in a village, my routine would be to grab the water containers and find a well. This was always a pleasant task as it involved a line-up, sign language and usually a few giggles at the strange visitor’s expense. Overwhelmingly, the well would be attended by women and there was usually an air of joy and strong comradery in the queue.

CSL have just gone to the “well” – with a Share Purchase Plan (SPP). They have purchased a Swiss company, Vifor Pharma (VIFN:SWX), which specialises in iron deficiency and renal disease. The acquisition cost US$11.7 billion and they have already covered most of this with an institutional placement and some new debt. CSL is trying to raise another $750 million from the “well” of shareholders pockets – and they seem likely to get it – let’s hope they will be welcomed back when they need water next time.

It seems to be the way of things that institutions (Brokers and Super Funds) get the first slice … and when this is done, there is a limited offer to retail investors – just to stop them whinging. Most of the time I participate in any share purchase plans as a convenient way to accumulate shares without the cost of brokerage. The CSL offer is set at $273 (or a 2% discount to the share price if CSL shares fall below this mark). Bids for the stock must be lodged by the 7th February, 2022.

“The combination with Vifor Pharma is expected to be financially compelling for our shareholders while expanding and diversifying our revenue base. It is expected to be immediately earnings accretive in the first full year of CSL ownership …”
Paul Perreault, Chief Executive Officer and Managing Director of CSL

Nice words Mr Perreault … but I have never ever read a share purchase plan that didn’t offer these comforting sentiments – CEO’s usually love to inform us of their astute decisions. “earnings accretive” just means that after all costs and synergies, the earnings per CSL share (EPS) should go up … and, when earnings go up, the share price should go up.

The projections for acquisitions and mergers are always complicated – the only real proof … will be down the track.

(There is) 30 years of evidence demonstrating that most acquisitions don’t create value for the acquiring company’s shareholders
Harvard Business Review

CSL do have a good track record of acquiring new assets and turning them into future growth engines. However, The CSL offer to acquire Vifor Pharma was generous at 40% above the Vifor list price. But this is where it gets even more complicated, the size of the premium is historically not a good predictor of how the deal will turn out. The most pertinent question is “Has CSL paid more than the acquisition was worth to to CSL.” Slack Investor has no answers yet … We will see how this deal settles.

On 14/01/2022, the CSL share price was $276.00 – A premium of $3.00 to the $273 offer price – or about 1% – so the SPP offer price is no real bargain. Despite Slack Investor’s endless devotion for the company, it seems that the market is currently out of love with CSL.

In the background, despite ongoing problems with plasma collection due to COVID-19, CSL has increased its profit for the past two financial years by 20% – but its share price does not really reflect that. After a rapid increase in 2019, the share price has gone nowhere in the last two years. Macquarie analysts have a 12-month price target on CSL of $338.

CSL Share price over the last 3 years – From marketscreener.com

Unlike Big Kev, I’m not super excited … The investor presentation, as always, looks compelling – full of talk about global reach, synergies and “developing a significant renal franchise”. But what really impressed me was the confirmation of CSL FY22 NPAT guidance of US$2,150 million – US$2,250 million. This is not advice, even though Slack Investor already has a big holding in this company, he will be participating in a slice of the CSL 2022 SPP.

Scaling Back

One of the annoying things about share purchase plans is the “scaling back”. If the SPP represents a good deal … they are usually oversubscribed. The 2021 Commonwealth Bank (CBA) SPP was such a good deal for retirees that they stumped up $18 billion more than the amount of shares on offer. Their share bids were scaled back by 79.4%. If you applied for $20 000 of CBA, you would have to send off this amount – and you would have been rewarded with $4120 of shares – and then have to wait for your refund.

The CSL 2022 SPP is not as immediately financially rewarding as the CBA offer and will probably not be scaled back as much. CSL has assured share owners that after the SPP, they will at least retaining their percentage shareholding in the company,

Slack Investor has done some rough calculations. As this new placement and SPP represents approximately 5.1% of current CSL ordinary shares on issue -This means that I should be able to buy at least 5.1% of my current holdings in the SPP without the inconvenience of scaling back.

If I owned $120 000 of CSL shares, I would be guaranteed to get at least $6120 (120K x 0.051) in the new SPP without scaling back. I round this up to the nearest allowable dollar value parcel, which is $10000 – and that’s how much I will apply for. Most people would apply for more (up to $30K) – but my portfolio is heavy with CSL, and this scaling back process just annoys me! CSL will of course refund any scaled back monies as soon as practicable after 14/02/2022 – without interest.