Buying Shares the Slack Way

The last time Slack Investor wrote about how he buys shares was two years ago, and The Slack Buying Process is worth a read for the detail. I must admit that not much has changed in the method that I use. Two of the shares that I bought back then Alphabet (US:GOOGL) and Betashares NASDAQ 100 (ASX:NDQ) have done OK in that time period, but Coles (ASX:COL) has lagged a bit, but because of dividends, is not on the losing pile yet.

	Buying Price AUG 2021 (AUD)	Current Price SEP 2023 (AUD)
US:GOOGL	$195.45	$214.53
ASX:NDQ	$34.09	$36.28
ASX:COL	$17.94	$15.85

Regardless of these preliminary two-year results, nothing fundamentally has changed for these companies and will stick things out for at least a 5-yr period – and then judge performance.

Since retiring, not much buying and selling goes on in my stable pile. For the investing pile, as I am now mostly a fully-invested “Buy and Hold” type of bloke, I don’t get to buy very often. The only opportunities come when I sell something, or my dividends build up beyond my living expenses.

The first thing to do is get a list of companies that you might be interested in. Slack Investor is an avid reader of the financial press. I get heaps of buying ideas from investment sites such as the AFR, Livewire, Morningstar, ShareCafe, InvestSmart, Motley Fool, etc. I pay particular attention when any articles I read mention “growth”.

Unlike when I am buying fish, for buying shares, I really want to look at the “guts” of a company. For this purpose, my best friend is the excellent Market Screener site. I type in the company name and then look at the Financials Tab. This gives me an overview of what the company has done and what analysts project that a company will do. There are lots of things to look at when evaluating a company – Management team, past performance, level of debt, projected sales, etc. However, if I could boil down a company to its essence with just two financial measures, it would be these two discussed below.

Return on Equity (ROE)

The ROE is usually expressed as a percentage and is the Companies

ROE = Stated Net Income/ Shareholder Equity.

For an instant way to look at whether a company is profitable, they will report a positive ROE. It is an indicator of how well the company uses shareholder funds. If I was getting a 5% return on my money in the bank, my ROE for that investment would be 5%. Obviously a high ROE is good. Slack investor likes his investments to have an ROE of at least 15%.

Sadly, the ROE can sometimes be manipulated by the management team by using a number of tricks. They might use accounting loopholes to distort earnings, or hiding assets off the balance sheet – both of these tricks will inflate the ROE.

As the denominator of the ROE equation is just shareholder equity, it ignores the effect of borrowings. Companies can boost their ROE by taking on large loans (risk). Also, a company with a large cash reserve (desirable for potential take-overs and share buy backs) will be penalised in the ROE calculation.

By screening out companies with large debt and including only companies with a track record of good management,- you can try to mitigate these risks in ROE calculation. Slack Investor is always looking forward, and he likes to use the Projected ROE of Future Income/Shareholder Equity.

Price/Earnings Ratio (PE)

The PE Ratio is defined as a companies share price to its earnings per share.

PE Ratio = Current Share Price/ Current Earnings per Share.

Slack Investor is usually looking at “growth” companies with a relatively high PE Ratio. A high PE ratio could either mean that a company’s stock is overvalued, or that there is an expectation that there might be high growth rates in the future.

By itself, the PE Ratio can be misleading. Sometimes, the earnings of a company can be manipulated through accounting measures and, there is a flaw in this ratio as it does not account for the assets and liabilities of a company.

A PE ratio is best used when compared against similar companies in the same industry or, for a single company across a period of time. Slack Investor usually gets the jitters when the projected PE Ratio is over the 40-50 mark.

Putting it all together

	PE 2026	ROE % 2026
ASX	20	14
CPU	16	33
TNE	38	34
XRO	62	20
SEK	25	11
COH	38	23
RMD	18	22

I put all my possible “growth” stock buying options into a table and used Market screener Financials to get the projected (future) values for PE Ratio and ROE for 2026. I rejected XRO as it was too expensive (PE Ratio greater than 40) and ASX and SEK for low ROE ( <15%). TNE is a great company with good ROE and no debt, but slightly expensive (ROE 38). COH was also slightly expensive (ROE 38).

This left me with CPU (Computershare) and RMD (Resmed). Both good companies with good prospects. Lets have a look at the charts.

For now, Resmed (RMD) seems to be on a downward trend – and Computershare (CPU) on the up. The trend is your friend. This is not advice, but I bought some Computershare on the basis of the above analysis – slightly worried about the debt levels of CPU (which would tend to inflate the ROE), but I bought a small amount and will give this investment 5 years – then re-evaluate.

FY2023 Nuggets and Stinkers and … July 2023 – End of Month Update

“Life is not a bowl full of cherries, there’s good and bad stuff“
Fuzzy Zoeller (American professional golfer)

Fuzzy Zoeller does not always say wise things, but his quote above is on the money. Slack Investor takes the good with the bad.

The trampoline effect of stinkers becoming nuggets in consecutive years reared again, with REA making the transition this year. Also, Nuggets … might end on the Stinker pile the year after. Slack Investor puts more emphasis on growth over a multi-year period, but compiles the yearly Nuggets and Stinkers list …. because its fun!

Growth stocks (usually high Return on Equity (ROE >15%), as with other stocks, often have cycles of price – bouts of overvaluation followed by a period of undervaluation.

The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use the incredibly useful Market Screener to analyze the financial data from each company and extract the predicted 2o25 Price/Earnings (PE) Ratio, Dividend Yield, and Return on Equity (ROE), on the companies below. This excellent site allows free access (up to a daily limit) to their analyst’s data, on the financials tab for each stock, once you register with an email address.

Slack Investor Stinkers – FY 2023

Financial year 2023 was a welcome recovery in the technology sectors. All of Slack Investors followed markets Australia, the UK and the US having gains over the financial year 2023. However, Slack Investor is always ready for lessons in humility and still managed to pick up a few stinkers along the way.

Integral Diagnostics (IDX) -19% (Sold Oct 2022)

(IDX – 2025: PE 18, Yield 3.8%, ROE 10%) Integral Diagnostics provides medical imaging services at a number of urban and regional locations in Australia and New Zealand. This company was also one of my stinkers last year (FY2022 -39%) The sinking feeling that I got during my monthly chart reviews was just too much … and I finally gave into that negative energy in October 2022 – and sold. This, unfortunately, turned out to be the bottom of the market – and IDX has made a modest recovery since.

Computershare (CPU) -18% (Sold May 2023)

(CPU– 2025: PE 16, Yield 3.8%, ROE 29%) Computershare is well known to owners of some Australian shares as they run the registry for many Australian companies. It started as an Australian technology business in 1978 and since has become a major global player in financial services. Slack Investor just bought at a bad time … and I sold in May 2023 to make another share purchase. CPU seems to be a solid global business though – Will look at buying this one again.

Dicker Data (DDR) -18% (Still held)

(DDR – 2025: PE 14, Yield 6.8%, ROE 42%) Dicker Data is the only Australian owned and ASX-listed major IT provider. It is a hardware, software and cloud distributor for most of the well known US IT companies (Microsoft, Cisco, HP, etc). The business is projected to continue to grow and, as the share price seems to have “bottomed out”, Slack Investor will continue to hold on because of the companies excellent projected PE, Yield, and ROE.

BetaShares Asia Technology Tigers ETF -7% (Sold Sep 2022)

(ASIA – 2023: PE 17, Yield 2.6%,) Growth in Asia … What could go wrong! Plenty it seems. These “technology tigers” that make up this ETF have been part of a global selloff of tech-related shares in Asia since 2021 as many US investors take flight from the China market due to US/China tensions.

This company was also one of my stinkers last year (FY2022 -33%) and was “on watch” during my monthly chart reviews. Sadly, the pain became too much and I unloaded near the bottom of the market again … and, it has since made a modest recovery. I have maintained at least some exposure to the Asian tech sector with with Vanguard FTSE Asia ex Japan ETF (VGE.ASX).

Slack Investor Nuggets – FY 2023

Nuggets made a comeback this Financial Year. Slack Investor continues to invest in high Return on Equity (ROE) companies with a track record of increasing earnings, Companies with these qualities sometimes behave as “golden nuggets”.

Technology One (TNE) +48%

(TNE – 2025: PE 37, Yield 1.5%, ROE 34%) This Software as a Service (SaaS) and consulting company continues to be profitable. This great business was also a nugget last year (+17%). A high 2025 PE of 37 (Expensive) is a little scary but, if the high Returns on Equity (34%) remain, on balance, this is OK. I found this company through the writings of Rudi Filapek-Vandyck – a great Australian Investor and writer, when he talks, Slack Investor listens.

Altium (ALU) +40%

(ALU – 2025: PE 34, Yield 2.3%, ROE 32%) Altium is an Australian based developer and seller of computer software for the design of electronic products worldwide. It focuses on electronics design systems for 3D printed circuit board (PCB) design. Slack Investor has part-owned this business since 2009 and has enjoyed the increasing value that ALU has created. This sector is very now … and remains a favourite of Slack Investor.

CarSales.com (CAR) +37%

(CAR – 2025: PE 28, Yield 3.0%, ROE 10%) CarSales.com is the go to for selling cars, boats and other vehicles. It does, in an efficient way, what the classified ads used to do. I have noticed that the Return on Equity is dropping (Now 10%) and will keep this company on watch – but I cant argue with the recent price rises.

BetaShare NASDAQ 100 ETF (NDQ) +36%

(NDQ – 2023: PE 26, Yield 1.0%) Exposure to the powerhouse of US Tech companies with the simplicity of an ASX ETF. Management fees are reasonable at 0.48% – Slack Investor remains a fan.

Pro Medicus (PME) +36%

(PME – 2025: PE 78, Yield 0.6%, ROE 46%) Pro Medicus is a developer and supplier of healthcare imaging software and services to hospitals and diagnostic imaging groups. Slack Investor actually met the CEO and co-founder of Pro Medicus, Dr Sam Hupert, at an investment seminar last year. His modesty, US foothold, and debt-free approach to expanding his business impressed me – I’m obviously glad I bought in – but the very high PE ratio (+78) is worrying – expensive.

REA Group (REA) +30%

(REA – 2025: PE 39, Yield 1.5%, ROE 29%) Like Carsales.com, REA has dominated the space left by the old newspaper classifieds in selling real estate in Australia. REA has expanded into India and other global locations. A high PE ratio (39) but while projected Return on Equity (ROE) remains high (29%), this is OK.

VanEck Wide Moat ETF (MOAT) +30%

(MOAT – 2023: PE 19, Yield 2.6%,) The Wide Moat ETF run by VanEck is a rules-based selection of “attractively priced US companies with sustainable competitive advantages” Sounds good doesn’t it. The management expense ratio of 0.49% is OK for such curated US exposure.

Slack Investor Total SMSF performance – FY 2023 and July 2023 end of Month Update

After a difficult 2022, FY 2023 is described by J. P. Morgan as being “kinder to balanced portfolios”. True That! The growth stocks that were punished last year bounced back strongly. In the Australian superannuation scene, the median growth fund (61 to 80% in growth assets) returned +9.2% for FY 2023. The ASX 200 chart shows a gradual climb for the financial year.

ASX 200 Weekly chart for FY 2023 – From Incredible Charts

After a tough FY 2022, the FY 2023 Slack Investor preliminary total SMSF performance looks like returning to form and coming in at around +18%. The 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2023, the Slack Portfolio has a compounding 5-yr annual return of around 10%.

The new financial year started of positively for Slack Investor markets. The ASX 200 + 2.9%; FTSE 100 +2.2%; and S&P 500 +3.1%. He remains IN for all index positions.

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

Alignment

Four of the planets that are visible to the naked eye – Saturn, Mars, Venus and Jupiter were aligned on **April 24, 2022** at 4.40am visible from Southbank, Melbourne – SBS Australia

We have 8 planets in our solar system (sorry Pluto!) all whizzing around the sun at different rates, occasionally they “align” when the planets line up or appear close together in a small part of the sky .

Planetary Alignment is a special thing, depending on which planets are involved – and their order. Sadly, Slack Investor wasn’t paying attention when 4 of the 5 planets visible to the naked eye (Mercury, Venus, Mars, Jupiter and Saturn) appeared in a line around the world on April 24 2022.

The bright string of lights in the morning sky (in April 2022) is thought to be a one-in-1000-year event.
Australian Geographic

Slack Investor is coming to the planetary alignment party very late and is now setting his sights on September 8, 2040, when five naked-eye planets (Mercury, Venus, Mars, Jupiter, and Saturn) will be within a circle of 9 degrees in the sky.

Investing alignment

Slack Investor may be a poor astronomer but one of his skills is noticing when two of the most important attributes in the stock market have an alignment – Value and Momentum.

Value investing involves looking at stocks that appear to be trading for less than what they are worth using a value screener like “book value” or the Price/Earnings ratio. Slack Investor likes to use the Cyclic Adjusted Price Earnings Ratio (CAPE) as a broad indicator of value – the lower the CAPE, the better the value.

Momentum investing just uses charts and indicators to pick out the current movement of a stock. Based upon the theory that – If the trend is upwards … it is likely to continue upwards. This is tricky though … the trend is your friend … until it isn’t!

Because trend trading is difficult, I always like a bit of assurance or alignment with value. Ideally, I like value and momentum in a stock before parting with Slack cash.

Value

It has been 6 months since I produced a set of index value charts based upon CAPE to look at how the markets are travelling.

As with individual companies, the whole share market will oscillate between overvalued and undervalued. Slack Investor has written about the Cyclically Adjusted Price to Earnings ratios (CAPE) which use ten-year average inflation-adjusted earnings. By plotting this CAPE over a period of time, we can look at how the whole sharemarket is currently valued in terms of historical data.

Using monthly CAPE data from Barclays, the 40-yr mean is calculated and plotted together with the CAPE values. A “fair value” zone is created in green where the CAPE is within one standard deviation of the mean.

Historic CAPE ratios for the ASX 200 – From 1982 to April 2023– Click the chart for better resolution.

Historic CAPE ratios for the FTSE 100 – From 1982 to April 2023– Click the chart for better resolution.

Historic CAPE ratios for the S&P 500– From 1982 to April 2023 *– Click the chart for better resolution*.

From the above, The ASX 200 is right on fair value (1% above av.) and the FTSE 100 is cheap (5% below av.). Both are worth looking at for the moment as their CAPE values are at, or below their long-term averages. The S&P500, is still in the “Fair value” range, but at 20% above the long term average – so, no bargain here.

Momentum

There are lots of stock indicators that track momentum. Slack Investor has blogged about The Coppock Indicator before. It 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 screens below as a white line) bottoms from under the zero line and then slopes upwards.

Monthly charts of the ASX 200, FTSE100 and S&P500 together with the Coppock Indicator (White Line) in the lower section of each chart. 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 ASX 200 (Since 31 Jan 2023) and the S&P 500 (Since 31 Mar 2023) are showing signs of recovery from the bear market with the is well into the Coppock recovery cycle. The FTSE 100 is also showing signs of recovery, but as the Coppock indicator did not get below the zero line, this is not a proper Coppock reversal.

Alignment of Value and Momentum Together

Slack Investor will again rant about how 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, the Coppock Indicator has been reliable so far in predicting stock gains. This is not advice, but the ASX 200 currently has the alignment of both value and momentum indicators. Alignment is good … If I wasn’t already fully invested, I would have a crack!

FY2022 Nuggets and Stinkers and … July 2022 – End of Month Update

“So the last shall be first, and the first last: for many be called, but few chosen“
Matthew 20:16 – King James Version of the Christian Bible

Slack Investor is not a very religious person – but he is a numbers man and 84% of the global population identifies with a religious group – so I have to go with the flow here. This sort of majority demands respect. The Christian disciple Matthew was reporting on one of Jesus’s teachings. Biblical scholars think that Jesus was trying to point out that Heaven’s value system is far different from earth’s value system.

The “Last first and First last” might also be applied to how some of the Slack Portfolio stocks have been going over consecutive years. There seems to by a cycle of last years Nuggets … might end on the Stinker pile the year after – and vice-versa. Growth stocks have many virtues … but they are not immune to the cycles of price – bouts of overvaluation followed by a period of undervaluation.

The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use Market Screener to analyze the financial data from each company and extract the predicted 2024/2o25 Return on Equity (ROE), Dividend Yield and Price/Earnings (PE) Ratio on the companies below. This excellent site allows free access (up to a daily limit) to their analysts data once you register with an email address.

Slack Investor Stinkers – FY 2022

Financial year 2022 was the Pepé Le Pew of all of Stinktown for Slack Investor.I hold mostly growth shares in the technology and healthcare sectors. These sectors have been heavily punished across the world so far in 2022.

This is the first time I have had a negative result for my investments over a financial year since 2009. Slack Investor is a great believer in long term investing returns – usually evaluated over a 5-year period – so this year’s result, while painful, does not change my overall strategy.

Three of my “stinkers” this year were actually “nuggets” from last year. For FY 2020, Codan +161%, REA +59% and IDX +37%. Such is the cyclic nature of some growth stocks.

Codan (CDA) -58% (Still held)

(CDA – 2025: PE 14, Yield 3.8%, ROE 25%) Codan is a technology company that specializes in communications and metal detecting. This company was one of my big nuggets last year (+161%) – so I should not have been really surprised that there could have a bit of a pullback. The decline hurt, but the fundamentals of the company remain sound. Holding on.

Xero (XRO) -41% (Sold)

(XRO– 2025: PE 81, Yield 0.3%, ROE 15%) Xero is an innovative cloud -based accounting provider for small business. Every business owner that Slack Investor talks to say that Xero is a boon to their business. This sort of “word of mouth” got me over-excited this year and I just held my nose and jumped in – against all my rules of avoiding the excessively high forward PE ratios of over 50! It is these high PE companies that are usually punished first in a downturn – and that’s exactly what happened. I still look at it and think its a decent growing business – but I can feel the recent bite!

Integral Diagnostics (IDX) – 39% (Still held)

(IDX – 2024: PE 16, Yield 4.5%, ROE 12%) This medical image company provides diagnostic image services to GP’s and specialists. IDX was another of my nuggets from last year (+37%) that has just shed all of last years gains. The Return on Equity of this company is starting to get a bit low (<15%) – But the PE and yield seem OK. Will keep this company on watch for the moment.

BetaShares Asia Technology Tigers ETF -33% (Still held)

(ASIA – 2022: PE 14, Yield 0.7%,) Growth in Asia … What could go wrong! Plenty it seems.

These “technology tigers” that make up this ETF have been part of a global selloff of tech-related shares this year.

A lot of the Chinese companies (such as Alibaba) have been marked down because the Chinese government imposed its will on a few industries. Also the US government has hinted at action on Chinese companies that have listed on American market. However, the ASIA ETF has large holdings in such monsters as Taiwan Semiconductors, Samsung and Tencent Holdings – so I will accept the current pain and stick with this as a long-term holding

REA Group (REA) -33% (Still held)

(REA – 2024: PE 29, Yield 1.8%, ROE 32%) The owners of RealEstate.com.au. which is the go to portal for house selling and buying. 65% of Australia’s adult population are checking the site every month looking at property listings and home prices. Another long-term holding.

I have only listed the stinkers that lost over 30% this year … sadly, there were many more rogues that lost over 15% for the Slack Fund. They include PPK Group (PPK) -28%; Altium (ALU) -25%; Nick Scali (NCK)-20%; Pushpay Holdings (PPH)-16%; and A2 Milk (A2M)-15%.

Slack Investor Nuggets – FY 2021

Nuggets were few and far between this year. A great benefit of investing in companies that have a high Return on Equity (ROE), and with a track record of increasing earnings, is that they sometimes behave as “golden nuggets”.

Technology One(TNE) +17%

(TNE – 2025: PE 34, Yield 1.7%, ROE 36%) This Software as a Service (SaaS) and consulting company continues to be profitable. This year is the 13th year in a row of record half-yearly profits. A high 2025 PE of 34 (Expensive) is a little scary but, if the high Returns on Equity (36%) remain, on balance, this is OK.

Macquarie Group (MQG) +10%

(MQG – 2025: PE 25, Yield 4.0%, ROE 13%) Macquarie is a complex business with a range of banking and financial services, and plays in global markets and asset management. Once again, the management seem to know what they are doing – Slack Investor remains a fan.

Honourable mention to the only other company that ended in the black – Coles (COL) a decent +8% in these troubled times.

Slack Investor Total SMSF performance – FY 2022 and July 2022 end of Month Update

In a year that Chant West describes as “a rough year for markets”. Following FY2021, which was one of the strongest years for Super funds (+18% for FY21), things have now lurched south with the median growth fund (61 to 80% in growth assets) returning -3.3% for FY22.

The FY 2022 Slack Investor preliminary total SMSF performance looks like coming in at around -14%. However, the 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2022, the Slack Portfolio has a compounding 5-yr annual return of over 13%.

Despite a breach of the stop loss for the ASX 200 last month, Slack Investor remains tentatively IN for Australian index shares on a dramatic rise of 5.7% this month. The FTSE 100 also had a good month (+3.5%)and I remain IN. The US Index S&P 500 eclipsed them all with a remarkable 9.1% gain – and I am now a BUY back IN.

Last month the ASX 200 price went below its stop loss. Slack Investor tries not to exit a stock against the momentum of the market, so I have been off the couch and closely watching the ASX 200. It has remained above the rising trend line and emerged above the monthly stop loss. I am tentatively still IN.

ASX 200 Weekly chart – From Incredible Charts

After a sell, it is important to have a notion when to get back IN to an Index or a stock. When trend trading, my main tool for finding a buy signal is a trend following (or momentum) system called the Directional Movement Index. There are many ways of setting up this system. Slack Investor likes the “smoothing” that is enabled by a system that looks back over the previous 11 periods – but the complexities are best left for the Resources page.

S&P 500 Weekly chart showing a BUY signal on the Directional movement Index weekly chart. The weekly price ranges are at the top and Average Directional Movement Index (ADX) patterns below – From Incredible Charts

In addition to the BUY signal from the Directional Movement Index for the S&P 500, the charts show a triggering of the “Wedgie” pattern where the stock price breaks through a long term down-trend. This reinforces the BUY.

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

The Slack Buying Process … and August 2021 – End of Month Update

*The moneychanger and his wife, b*y Marinus van Reymerswaele, 1538, Public Domain, via Wikimedia Commons

As much as Slack Investor hates retail shopping – he loves to have the opportunity to buy into companies. Like any new relationship, when you buy a stock, you are not really sure about how its going to work out – but its exciting!

I have never been good at predicting when the stock market will have a correction … and the current high valuations (PE Ratios well above the long term average) do make me nervous. However, Slack Investor would much rather be in the game than out of it and I have been looking for a few companies that would hopefully not suffer too greatly if a correction occurred in the stock market.

This is not advice … just an insight to the Slack Investor bumbling buying process. My rate of converting bought shares into winners of 55% is not that impressive – but my overall performance results are good.

I get heaps of buying ideas from investment sites such as Motley Fool, Livewire, ShareCafe. But I will always, always, check things out for myself before parting with any Slack Dollars. This involves a rigorous screening of the fundamental financial metrics PLUS a look at how the stock chart is going on Incredible Charts. This technical analysis consists of a quick scan to see if the chart is in a continual growth trend … or has just had a “breakout”, or broken out of a downtrend.

Let’s put on the buying boots. As well as the companies below, Slack Investor has also recently added to some small positions in PPK.ASX and TNE.ASX.

Slack Investor Buys Alphabet (GOOGL.NASDAQ)

Half of my buying cash went into an existing holding – Alphabet (GOOGL), This money making juggernaut is part of the new economy and I could buy this company all day. The first step is to go to the phenomenal MarketScreener.com. Registration is free on this site and they allow you to look at analyst data for up to 5 stocks a day.

Search for your stock and then finding the Financials Tab for that company. Firstly, I look at the chart Income/Sales and Earnings per Share. An increasing trend is good and, if the estimated earnings (2021 – 2023) are also increasing, I’m acutely interested. I do a quick check on debt levels. Alphabet is a cash king – has more cash than debt – solid tick.

Income statement for Alphabet (GOOGL on the US NASDAQ exchange) – from MarketScreener

I continue with MarketScreener to extract the Return on Equity (ROE), both past and forecast. I hope that it is above 15% – Big Tick. The final bit of vital information is the Price Earnings (PE) Ratio and it is here that I gauge whether the stock price is too high for Slack Investor. For a good growth stock, I try not to buy into companies that have a projected PE of more than 40-(50 at a pinch). The analyst estimates for GOOGL is a forecast PE of 23.0 in 2023 – Tick

YEAR	2018	2019	2020	2021(e)	2022(e)	2023(e)
ROE	18.6	19.3	19.0	27.2	25.8	25.2
PE Ratio	23.9	27.2	29.9	28.0	26.6	23.0

Table of fundamental financial metrics for Alphabet. The documented Return on Equity (ROE) and Price Earnings (PE) Ratio are shown for 2018-2020. Analyst estimates are shown for later years – MarketScreener.com

Slack Investor Buys NASDAQ 100 ETF (NDQ.ASX)

Not everyone has access to direct access to US shares – if you only have an ASX broker, then to get exposure to Alphabet, a good substitute is to buy the BetaShares NASDAQ ETF (NDQ) – Alphabet represents 8.1% of this ETF – and you get profit machines like Apple, Amazon, Microsoft and Facebook thrown in. I topped up my holding here as well.

The ROE for the NASDAQ Index is 17.7 and increasing (30 June 21) – Above 15, Tick. The projected 2023 estimate for the Price/Earnings Ratio for the NASDAQ Index is 22.47 – Below 40, Tick – Very reasonable for growth sector companies.

NASDAQ 100 Index 2020 PE Ratios and Forward Estimates of PE for 2021, 2022. 2023 – From nasdaq.com

Slack Investor Buys Coles Group (COL.ASX)

YEAR	2019	2020	2021(e)	2022(e)	2023(e)	2024(e)
ROE	29.8	32.8	37.0	34.9	33.3	34.3
PE Ratio	12.4	22.9	22.4	23.4	22.8	21.4

Table of Fundamental metrics for Coles Group . The documented Return on Equity (ROE) and Price Earnings (PE) Ratio are shown for 2019-2020. Analyst estimates are shown for later years – MarketScreener.com

The Return on Equity (ROE) for this retail business is pretty impressive and, the PE Ratio would be pretty good for a growth company – but the Income Chart below reveals that Coles is not really a “growth” company – so the expectation is that the PE Ratios should be much lower, in the early 20’s or below would be the Slack Limits for slow growth companies.

*Income statement for Coles Group (COL.ASX) showing a very gradual increase in projected income – Compare this with the Alphabet chart above – from* MarketScreener

The income chart shows some pretty shallow growth and the slow earnings per share (EPS) growth makes the Coles Group something that Slack Investor would not usually be interested in. But, I go to Coles Supermarket at least twice a week and I actually like going there as a company part owner. Coles is in the “stable income” section of the Slack Portfolio rather than “Growth”. Even if the worst of times was thrust upon us and there was a recession in the next few years, a business like Coles will keep on performing. I would much rather put up with the price fluctuation of shares and have my money in a business like this at a projected yield of 3.5 – 4% p.a. than have Slack Dollars tied up in cash for 2 years in a Big 4 bank term deposit at 0.3%.

August 2021 – End of Month Update

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

There were significant rises in all followed markets (S&P 500 +2.9%, and the FTSE 100 +1.2%). The Australian stock market is also in record territory (ASX 200 +1. 9%). This is all happening during extensive COVID-19 related lockdowns in the populous South Eastern part of Australia.

Slack Investor is normally relaxed about most things, but I am moving to the edge of my couch and starting to get ready for action. Looking at the monthly charts for all the indexes, in these boom times, the index prices have been getting too far ahead of my stop losses for comfort. I have tightened up my rules for adjusting stop losses upwards.

All Stop Losses are live and are being moved upwards every month if the index price exceeds the stop loss by 10% or more. All Indexes have got this treatment this month – It is sometimes difficult to work out where to put the stop losses on the monthly chart. I usually go to the weekly charts and find a minimum on the weekly price range that is within 10% of the current price (see below). If the stock price is below the stop loss at the end of the week – I will usually sell at the next opportunity.

The weekly US S&P 500 Index chart showing an upward adjustment of the stop loss from 4056 to 4233 – Thanks Incredible Charts

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

FY2021 Nuggets and Stinkers and July 2021 – End of Month Update

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.“
George Soros

Now George knows how to make a dollar and, to his great credit, is a generous philanthropist. I am sure, like any successful investor, that George looks back at times on his investment decisions. Slack Investor looks forward to this time of year when I can reflectively analyse my greatest investing failures. Fortunately, my stinker to nugget ratio was good this year.

The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use Market Screener to analyse the financial data from each company and extract the predicted 2023 Return on Equity and 2023 Price/Earnings Ratio on the companies below. This excellent site allows free access (up to a daily limit) to their analysts data once you register with an email address.

Slack Investor Stinkers – FY 2021

Growth stocks (High Return on Equity >15% and increasing sales) are fantastic companies to associate with as they are growing and hopefully, their earnings per share, are growing also. The downside to this is that these companies are usually sought after in the stock market and command high prices in relation to their current earnings because the “future earnings” of the company are priced into the current price. This gives them a high PE Ratio. Whenever there is a future earnings revision, or a stutter in growth, there is usually a dramatic drop in price.

Slack Investor has a look at his stocks every weekend on a free chart program (Thanks Incredible Charts!). I actually pay a small amount to get the chart data early in the morning. Both of my “stinkers” this year were actually “nuggets” from last year. For FY 2020, Appen +58% and A2M +26%. Such is the cyclic nature of some growth stocks.

Appen (APX) -24%

APX (2023 ROE 14%, 2023 PE 19) remains a company that puzzles me “the development of human-annotated datasets for machine learning and artificial intelligence”. The company has had a few problems due to COVID-19 and a hit to its underlying profit and increased competition. Slack Investor got out late last year at $25.87 as the weekly chart moved below the stop loss at $28.11. However, this represented a loss of 24% for the financial year.

The downward trend marked by the thick blue line is setting up niciely for one of Slack Investors favourite chart trading patterns – “The Wedgie”. When the share price punches through a downward trend line of at least 6 months … and the fundamentals are right, Slack Investor is interested. Given the forward PE for 2023 is a relatively low 19 – I might have another crack at this once the price has poked above the blue wedge line.

A2 Milk (A2M) -21%

A2M (2023 ROE 17%, 2023 PE 23) sells A2 protein milk products to the world. The actual benefits of the A2 only protein seem to be limited to easier digestion. Long term independent studies with large data sets are still in the works … but the marketing skill of this company is undisputed. COVID-19 brought big changes to sales with the collapse of the “daigou” market and worries about China trade sanctions. Slack Investor sold about half way through the downtrend – but not before taking a hit for the team.

Slack Investor Nuggets – FY 2021

A great benefit of investing in companies that have a high Return on Equity, and with a track record of increasing earnings, is that they sometimes behave as “golden nuggets”.

Codan (CDA) +161%

What a company! Codan is a technology company that specializes in communications and metal detecting. It has made a major US acquisition this year and paid with cash. Sales are up and predicted to keep increasing. The high 2023 ROE 32%, and relatively low 2023 PE 24 (for a growth company) makes me think there will be more price growth over the next few years – I will try and top up my position this year on any price weakness.

Alphabet (GOOGL) +61%

(GOOGL – 2023 ROE 23%, 2023 PE 23) The Alphabet list of products continues to grow. I use a ton of Alphabet products every day and the company is growing fast into the cloud with cloud computing revenue jumping 46% in the March quarter. There are a few regulatory problems coming up with the US Justice department claiming that Google’s actions harmed consumers and competition. There is also the ongoing work of G7 nations trying to make international tech companies pay their rightful share of tax on revenues in each country.

Despite this, if there is one company that Slack Investor could invest in and then pay no attention to for 10 years, and still sleep well, … it would be Alphabet.

REA Group (REA) +59%

The owners of RealEstate.com.au. which is the go to portal for house selling and buying (REA – 2023 ROE 38%, 2023 PE 44). The group has just completed an acquisition of Mortgage Choice and picked up a big chunk of a Mortgage software company. This expanding of the business must be good. 65% of Australia’s adult population are checking the site every month looking at property listings and home prices. However, the 2023 projected PE is very high (44). Using the Slack Investor bench marks, suggests the stock is expensive at the moment.

Integral Diagnostics (IDX) +37%

This medical image company (2023 ROE 16%, 2023 PE 24) provides diagnostic image services to GP’s and specialists. IDX seems to be getting a few tail winds with an ageing population and more demand for their MRI, CT and PET scans.

Macquarie Group (MQG) +36%

Macquarie is a complex business(2023 ROE 14%, 2023 PE 17) with a range of banking and financial services, and plays in global markets and asset management. The latter division looks for undervalued companies. Despite COVID-19, profits are increasing. The management seem to know what they are doing – Slack Investor remains a fan.

Betashares Global Robotics And Artificial Intelligence ETF (RBTZ) +36%

RBTZ ASX | Global Robotics & AI ETF | BetaShares

This ETF tracks the megatrend of robotics and artificial intelligence. Although the PE ratio is a bit high (2021 PE Ratio 37), this is a disruptive sector that should make gains against existing industries with the advantage of technology against rising labour costs.

Most honourable mentions to those other companies that returned over 20% for the tax year. Cochlear (COH) +34%, BetaShares Nasdaq ETF (NDQ) +33%, VanEyk MOAT ETF (MOAT) +32%, Vanguard International ETF (VGE) +29%, BetaShares HACK ETF (HACK) +31%, Vanguard Asia ETF (VAE) +28%, BetaShares QLTY ETF (QLTY) +25%. To these companies, I am grateful for your service.

Slack Investor Total SMSF performance – FY 2021 and July 2021 end of Month Update

A great year for shares, Chant West reports Super funds have delivered their strongest financial year result in 24 years, with the median growth fund (61 to 80% in growth assets) returning 18% for FY21. The FY 2021 Slack Investor preliminary total SMSF performance looks like coming in at around 22%. The 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2021, the Slack Portfolio has a compounding annual 5-yr return of over 21%.

Slack Investor remains IN for Australian index shares The FTSE 100 had a flat month (-0.1%) but rises in the US Index S&P 500 (+2.3%) and the ASX 200 (+1.1%).

The party with the US S&P 500 just keeps on going. As the S&P 500 has moved more than 20% higher than its stop loss on the monthly chart, I have adjusted the stop loss upward to 4056 from 3622. It is difficult to decide where to put the stop loss on the monthly US Index chart. In these cases, I go to the weekly chart and look for a “sensible place” to put the stop loss coinciding with a minimum value (dip) on the chart. The current stop loss is 8% below the end of month price.

US Index (S&P 500) weekly chart showing a moving up of the stop loss this month.

The US economy entered a recession in February 2020 and has now entered a phase of expansion (since June 2020). Slack Investor is nervous though and has his stop losses live for all Index funds. I will be checking these charts on a weekly basis for breaches of the stop loss.

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

July 2021 – 5 Years of Slack Investor

Extract from Rembrandt van Rijn “Self-Portrait, 1659” – From the Museo Collection. Enjoy the full image at the National Gallery of Art, Washington

“Rembrandt … says things for which there are no words in any language.”
Vincent Van Gogh

Slack Investor doesn’t put himself in the class of Rembrandt but he admires the honesty of this self portrait at age 53. It is time well spent to look a little further into his amazing catalogue.

Rembrandt, despite incredible talent and artistic output, was known to have lived beyond his means and, he sadly died in 1669 at age 63 as a poor man. He was known to have done over 40 self portraits in his life. Perhaps after 5 years of Slack Investor, it is also a time for self reflection.

Slack Investor doesn’t possess any great financial skills. My financial talents pale in significance with the great investors. I didn’t go to a private school but my government school was one of the better ones and I scraped into a science degree at university. My Physics and Maths marks didn’t put me on the honour board – but I passed. One thing I am grateful for is that my parents instilled a desire to make the most of any opportunities that life presents. Skills that I do have are a willingness to learn and the “stubborness” to complete a task.

Although Slack Investor has been very fortunate in his life with opportunities to travel and work in many interesting countries in his twenties. My own financial story is not really one to emulate. I had a delayed journey to financial independence by returning to Australia at 29 broke, no superannuation, and owing money. My limited skill set was lucky to include the ability to learn from others and to be single minded in pursuit of a goal – that was, to be financially secure.

My journey was greatly helped by going to an investing class by Robbie Fuller, He had selflessly contributed his investing knowledge to a U3A class in Townsville for over 20 years and also ran an evening class for investors. I learned a lot from Robbie. He showed me how to look at a companies sales, debt levels, future earnings and potential growth and to try and assess its real value (fundamental investing). He also opened up the world of charting to me. Looking at a price chart of a company – trends, breakouts and stop losses (technical investing) – and I am grateful. A basic knowledge of the fundamental and technical aspects of investing is so important – and not many people have this knowledge.

However, not everyone can have a convenient investment class in their town. I originally started this blog as a means to show those interested in investing that, by gaining a few skills, you can become a better investor and manage your own financial affairs at a minimum cost – knowledge is power.

Never depend on a single income. Make Investments to create a second source.
Warren Buffet

Slack Investor hopes to keep going. I am sure that Rembrandt had a good life -an enormous creative talent, a love for his wife Saskia, other relationships after his wife’s sad death, a son and a daughter. However, Rembrandt earned much, and he lost much. He was forced to sell his house and most of his art collection for a pittance to avoid bankruptcy in the late 1650’s. A bit of financial self reflection is often required if you want to achieve financial independence – Take control.

Slack Investor’s Favourite Charts

There are lots of great charts on the web. I look forward the release of the Vanguard Index chart every year – and this will be the subject of another post when they release the 2021 chart. However, the chart below drives home the benefits of consistent investing over time – and I like that.

*Returns on an Australian Index fund 1990 – 2020 –* Vanguard Australia – click for better resolution.

This chart shows the beautiful connection of constant investing and time. Over 30 years since 1990, the chart shows the 2008 GFC crash and last year’s Covid-19 crash. Despite these major downturns. given time, their is always a recovery. An investor who starts with nothing but invests in a US index fund by contributing $250 per month would have compounded $443 205 by the end of 2020. If the investor had increased the monthly contribution to $1000, then the rewards would be $1 772 819.

Another way of showing the benefits of time and compounding investing is to look at the average returns on a single investment of $10 000 in various asset classes over 30 years.

Returns on $10 000 after 30 years of Investing in various asset classes 1990-2020 – Vanguard Chart found at Canstar.com.au

3 Most Popular Slack Investor Posts

Ride your own bike

Retirement sweet spot

Chance would be a fine thing

Always Watching

Slack Investor is not known for his fast work … and have often taken the couch when action was probably needed. There are some stocks that I will hold for the long run, and their weekly charts are not of big concern to me. However, about half of my portfolio is on a weekly watch – I review the charts on a weekend and cast the Slack Investor jaundiced gaze over each stock that I own (Thanks Incredible Charts!)

“You can observe a lot by watching”
Yogi Berra – American Baseball Legend and Master of Tautology

I do have some routines though …

Daily

This is the least satisfying timescale and, if I could successfully train myself to ignore this daily oscillation of my investments – I would. The reason to avoid daily swings of the share price is that I have absolutely no idea about whether the price of a stock or index will go up or down on the next day – the share price is determined by others! In the chart below, in the first 7 days shown, the daily index went down, down, up, down, down, up, up, etc – monitoring daily prices can be frustrating!

I have to admit that I follow my investments every few days through a portfolio in Yahoo Finance and will download prices to my accounting software – the free Microsoft Money Sunset International Edition available at the most excellent Ameridan’s Blog. I download share prices into Microsoft Money with MS Money Quotes with a 10 USD lifetime licence. In the USA, Personal Capital is recommended.

I am happy to say that, when on holiday, or busy, I have no need to monitor on the daily timescale. Regardless, no decisions are made on this daily basis.

Weekly

Weekly is where the “rubber hits the road” for Slack Investor – and I look forward to my weekly sessions with my portfolio. I set aside an hour on the weekend to make sure my portfolio prices are updated and the charts are reviewed. The weekly time scale smooths out a bit of the volatility and I then open up Incredible Charts to scroll through my portfolio.

Incredible charts offer a free month sign up and then $9.95 per month for access to worldwide updated delayed charts daily from 6pm Australian time. This package is not in “real time” and does not suit a day trader. But for an investor on my slower time scale, it is very good value. These charts open up the whole world of technical analysis as it allows you to monitor trends in your stocks and mark in trend lines and stop losses.

I have always used the weekly charts to make decisions on buying a company – looking for a momentum shift in the trading using the Directional Movement System. I also like to trade a “breakout”, or a “wedgie”

Monthly

This is the timescale when I am most happiest and would like to make decisions just every month. After a life of work where decisions were a constant grind – It is a gift not to make decisions!

It is still my aim to make selling decisions monthly – but things seem a little precarious lately and, for now, I am on a weekly decisions cycle for selling. The sell happens when a stock price finishes below my stop loss at the end of the week/month (see Technical Sell below).

Yearly

This is the “Look at yourself in the mirror” period where Slack Investor does the evaluation of his portfolio performance against benchmarks at the end of each financial year. Although the financial year ends at June 30, it usually takes until the middle of August for me to get my final results and benchmarks together. I present my results at the annual Financial Year Results post.

Special Occasions Selling

Slack Investor is in one of those right now and he has to free up some cash to by selling some shares. I like to do things a bit methodically and here is my process for a sell.

Technical Sell

This is my first port of call. Technical Analysis uses charts and trends and I have been watching the charts for the past 4 weeks for a technical sell signal in my portfolio. For me, this happens when the stock price falls below the pre-determined stop loss that I have set. I will then try to sell at the start of the next week/month. My rules are not rigid here, if the stock starts to rebound after I have made my sell decision, I might stick with it for a little while longer.

Another technical signal is when a stock loses its momentum – but this is a more subjective signal than when a stock simply moves below a line.

Slack Investor bought into ESPO in October 2020 at $10.39 and sold this week at a small loss $10.19. The stock didn’t grow like I thought it would – but that’s fine. I like the concept of this ETF but I am happy to be out for now and look forward to be getting back in when a strong upward trend establishes itself.

I was also able to exit on a technical sell for the Betashares ASIA ETF and I am not sure what is going on here as I thought the tailwinds for this sector were good. Small profit this time and will get back in if the trend changes.

Weekly chart for the VanEck ESPO ETF showing a breach of the stop loss – Incredible Charts.

Fundamental Sell

Fundamental Analysis revolves around trying to determine the real value of a stock by looking at its financial data (e.g, Price/Earnings ratio, Return on Equity, Debt, etc) over time and, in reference to its competitors. This is a much more complicated process.

If Slack Investor can’t find a technical sell, I look for a fundamental sign. I will list all of my sellable stocks (Shares that I don’t hold for “the long run“). The first step is to get some financial data on each company from the very good Market Screener then put them in a table and hope that something stands out as a sell. A sell signal might be a trend of falling earnings, increasing debt, or decreasing Return on Equity (ROE). I also get nervous about a stock if its predicted (+ 2 years) Price Earnings (PE) ratio goes over 50. Fortunately, I didn’t have to resort to any fundamental analysis this this time … and this approach probably needs a post in itself.

In the meantime, like my pumpkin friend … always watching …

Human Frailty: 1. Anchoring Bias

Ahhh the Humanity … Election night crowd, Wellington, 1931 Photographer: William Hall Raine – From the National Library of New Zealand

“We all are men, in our own natures frail, and capable of our flesh; few are angels.”
William Shakespeare, Henry VIII

Yes William, we humans are weak … even Slack Investor has a few human biases that get in the way of his investing. We humans are constantly battling against traits formed deep in human past where we were hanging out in caves and each day was a battle for existence. A lot of human foibles can be explained by Evolutionary Psychology. This fascinating field of study tries to identify which human psychological characteristics have evolved. In primitive times, if we found a trait that was successful and helped our survival, then we would try to repeat it.

Anchoring Bias

Anchoring bias occurs when we put to much weight on the first bit of information that we hear. A good example of anchoring is provided by Weingarten Associates.

Do you think a porcupine has more or less than 5000 quills ?

Do you see what happened here? An “anchor” was sneakily thrown in, and potential guesses from the “porcupine uninformed” would cluster around the 5000 mark. According to Science, any well dressed porcupine will have 30 000 quills.

Another great example from the world of commerce that Slack Investor would fall for is provided by Stockspot. It is common for a restaurant to have an outlier as an “anchor” in the wine list to make the other wines seem like a bargain. Confronted with this list, after the heart attack, Slack Investor would probably go for the tried and true method of going for the 2nd least expensive bottle – Although tempted, I wouldn’t order the “low price” Chateau Gloria and risk being labelled cheap for the sake of 5 bucks!

Stock prices are good examples of anchors. If a share price falls from $4.00 to $2.00, it doesn’t necessarily mean that the stock is now a bargain. Neither price should act as an anchor – the stock may never return to $4.00. The important thing is the value of the share now … At the price of $2.00, is there potential for growth? – you would have to look deeper than just the stock price to answer this question.

Slack Investor has observed how share prices move like a river, sometimes in flood and ahead of their true value and sometimes in a drought – and lagging their real worth. This is a difficult lesson, but there is no logical reason to be anchored to either your buy price or a recent high or low price. If you buy a stock at a price, and it starts heading south, the price you paid should not anchor you into waiting till it returns to the buy price – this has been one of Slack Investor’s frailties in the past. Unfortunately, much of the finance press reinforces anchors with language like “down 20% from a recent high”. It is up to the investor to take a hard look sometimes and make a decision on the future prospects of all our investments.

Chasing Last years Returns

Anchoring also influences we poor humans when we are thinking about investing and confronted with fund manager, ETF, or stock performance figures from last year. It is natural to be drawn to the high performers for the previous 12 months. A look at the Vanguard chart below showing % returns for 9 different asset classes reveals how rare it is that an asset class will repeat a top performance for the next year. Most asset classes will have their “moment in the sunshine” and this adds to the argument for diversification.

*Chart showing % annual market returns for 9 different asset classes. The chart from Vanguard* *dates back to 2007 (can be clicked on to get better resolution) … or the ultimate is the big … beautiful (Thanks Donald)… chart pdf download* here which goes back to 1991

This anchoring also is prevalent when choosing managed and superannuation funds. Last year’s top performers are always heavily promoted and usually attract the most new money. Retire Happy has done some fund research and concluded that chasing last years performance works about 15% of the time. Or, Slack Investor would say, a “not working rate of 85%!

The only way to combat anchoring is to be aware of it. Slack Investor always tries to be conscious of this anchoring bias prior to an investment decision. Are you giving enough thought to how the investment fits into the general economy? How is the stock looking on the charts? Have you done the fundamental analysis on the investment – looked at the projected sales, PE ratio, ROE? Or, are you basing your investment decision on an anchor point?

The Wedgie is Working – January 2019 Wedgie stocks 1-yr review

Australian lifeguards are known to roll their Speedos up during surfboat races to give better contact between the buttocks and the wooden seat of the boat while rowing. The image is gratuitously included because “Wedgies” are just …just … funny! -Downloaded from http://westalai.blogspot.com/ – may be subject to copyright

Slack Investor introduced one of his favourite technical chart patterns in January 2019 … “The Wedgie”. I promised to look at the results in 12 months time.

Looking at charts of stock prices and trying to recognise useful patterns is known as Technical Analysis. Some investors do not have faith in in this dark science … and Slack Investor would not act on chart signal alone – the underlying company must be sound with established earnings and good prospects.

“The Wedgie” is Slack Investor’s name for a pattern more boringly known as the “breaking of a long-term downtrendline“. You have to admit … “the Wedgie” has a more of a ring to it.

The breakout from a Wedgie on a share price chart is discussed in detail in the original post and it is when the share price rises out of the wedge pattern. The top of the wedge downtrend line should be drawn for a period of at least 3 months and connect at least 2 (and preferably 3) descending high points.

This pattern has the potential to be a trend “reversal” – Lets see how it has performed over 12 months for the Slack Investor bought stocks. The first 3 are all still in the portfolio.

CSL – Commonwealth Serum Laboratory

This great company share price was consolidating a year ago but has recently boomed with a 71% gain.

COH – Cochlear

*Weekly Chart for COH – from* incrediblecharts.com – **40% gain.**

RHC – Ramsay Health Care

*Weekly Chart for RHC – from* incrediblecharts.com – **37% gain.**

In the January 2019 post, ALU, APX, CAR, CCP, FPH, SEK, and A2M were also mentioned as breaking the wedgie pattern. All of them have made very good gains since the breakout from “the wedgie”. Gains of 73%, 64%, 48%, 76%, 74%, 29% and 25%, respectively – from January 18, 2019 to February 10, 2020. Slack Investor thinks that, so far, the Wedgie is working in most cases! – but, it has no guarantee – vigilance is required.

The Wedgie does not always work, CGC – Costa Group –

Weekly Chart for CGC showing two distinct wedge patterns. The first one showed promise then the price quickly turned south after some earnings downgrade announcements. The second wedgie looks worthy of investigation – from incrediblecharts.com

CGC was not mentioned in the original post and clearly the first break of the downtrend in November 2018 lost a bit of steam due to drought and supply problems – Slack Investor was, sadly, an investor in this stock at the time – and it was a loser! This is an example of the wedgie pattern NOT working. However, for all of 2019, CGC has been in a long-term downtrend but the pattern is starting to get interesting again as the longer the downtrend line the more bullish it will be when the stock breaks above the trendline.

As always, however great the pattern may look, Slack Investor is interested in the fundamentals of this stock before he will invest. Wisetech (WTC) is also breaking its Wedgie. Using marketscreener.com, CGC has a good 2021 forecast PE and yield, but the 2021 ROE is too low (<15%). WTC has good Return on Equity (ROE) but the 2021 forecast PE is too high for me (Slack Investor likes the forecast PE to be less than 40-50) … So, despite good looking technical patterns, it is no investment from Slack Investor for these two.

SI Wedgie 2020		P/E 2021	Yield % 2021	ROE % 2021
Costa Group	CGC	17	3.3	9
Wisetech	WTC	82	0.2	21

Let’s visit CGC and WTC in 12 months for the sake of curiosity. Long live the Wedgie!