DONNELLY'S INVESTING DIGEST by Austin Donnelly 1997 EXTRACTED INVESTMENT INDICATORS RULES RULES ELEMENT OPERATOR ELEMENT 1 a stock representing a negligible proportion of total capital invested + consolidate portfolio 2 ability to face market risk due to changes in own situation in relation to income or dependants + time to sell 3 ability to make selling decisions + preservation of profits 4 ability to make selling decisions + protection of capital 5 ability to make selling decisions + availability of funds for investments 6 able to meet unexpected cash demand - losses due to forced sales of investments at adverse prices 7 absolute figures - indicator of future developments 8 accuracy of timing + investment results 9 adequate income from other sources + larger proportion of capital can be placed in market-based investments 10 adverse traffic changes + time to sell real-estate 11 adverse zoning changes + time to sell real-estate 12 All Ordinaries Index either below long term trend, or only a little above it + time to buy shares 13 attachment to medium to long-term results + investment results 14 attachment to short-term results - investment results 15 attractiveness of the higher return on the more reasonably priced stocks + buying support for the more reasonably priced stocks 16 average dividend yield < 4% - time to buy shares 17 average dividend yield > 4.75% + time to buy shares 18 averaging down when prices decline (same stocks cheaper) - quality of assessment 19 bank deposits + assured return of capital 20 business expansion + time to buy real-estate 21 buying decisions - psychological difficulty 22 cash reserves + able to meet unexpected cash demand 23 cash reserves + tactical reserves 24 commercial & industrial property + investment return for individual investor 25 commercial & industrial property + ease of management 26 commercial & industrial property + income return 27 commercial & industrial property + amount of required investment 28 commercial & industrial property + eggs in one basket 29 commercial property investment - tenant turnover 30 commercial property investment - possibility of difficult tenants 31 commercial property investment - reliance on increase in market value 32 commercial property investment + management task < residential property 33 commercial property investment + rental income 34 competitive new sources of property + time to sell real-estate 35 complexity of capital gains calculations + accounting costs 36 considering strata title investment + check committee meeting minutes to look for management problems or legal actions 37 considering strata title investment + compare body-corporate charges 38 considering strata title investment + need for engineers reports on structure 39 considering strata title investment + need to check if any problems with resident managers 40 cost of difference between rate of return and higher rates available elsewhere + opportunity cost 41 demand for offices, shops and other property + time to buy real-estate 42 dividend per share covered by earnings per share ~ 1.25 + buy the stock 43 dividend re-investment up - investment results 44 dividend re-investment up + complexity of capital gains calculations 45 dividend re-investment up + brokerage cost advantage 46 dividend yield - risk 47 dividend yield of a stock reasonable in relation to the rest of the market + buy the stock 48 dollar cost averaging - quality of assessment 49 easy money conditions + time to buy shares 50 easy money conditions + time to buy real-estate 51 ensuring tax credits not wasted if marginal rate < 36% + invest in fixed-interest 52 excessive speculation + share prices` 53 excessive speculation + sharemarket operating as a casino (a markino) 54 fixed-interest investment with a view to capital gain + only need to get ONE thing right - the interest rate forecast 55 fixed-interest investments - protection from inflation 56 fixed-interest investments - scope for capital gain 57 fixed-interest investments - reward for extra risk (ie, unsecured) 58 fixed-interest investments + definite rate of income 59 fixed-interest investments + safety 60 fixed-interest investments + assured rate of return 61 fixed-interest investments + assured return of capital 62 higher vacancies + time to sell real-estate 63 improvements in productivity & technology + time to buy shares 64 improvements in productivity & technology + time to buy real-estate 65 improving local and world conditions + time to buy real-estate 66 inability to pass on rising costs + time to sell real-estate 67 income return (in shares, the dividend yield) - risk 68 individual property prices are reasonable in relation to cyclical patterns and the long-term trend of values in the past + time to buy real-estate 69 individual stock prices reasonable in relation to cyclical patterns + time to buy shares 70 individual stock prices reasonable in relation to the long-term trend + time to buy shares 71 individual stock prices reasonable in relation to the normal trading range + time to buy shares 72 interest rate high & forecast low - buy fixed-interest investment with a view to capital gain 73 interest rates + adverse effect on markets 74 interest rates high + with weighted average place more funds in the 4 & 5 year terms 75 interest rates low + with weighted average place more funds in the 1 & 2 years terms 76 invest in fixed-interest (short-term) + capacity to invest in shares & property in recovery phase from slump 77 investing in so-called growth stocks - investment results 78 investing in so-called growth stocks - long-term performance 79 investment in leading stocks (blue chips) - investment results 80 jumping from one market to another chasing profits without due analysis - investment results 81 large increase in value of one stock in portfolio - benefit to overall portfolio if many stocks held 82 local and world economic conditions (improving/worsening) + time to buy/sell shares 83 loss on sale of fixed-interest investment prior to maturity - investment results 84 low income return compared to commercial property + volatility of investment 85 margin between interest rates and dividend yields + relative cost of stocks 86 margin between interest rates and net income return (relative cost of property) - time to buy real-estate 87 market decline + attractiveness of the higher return on the more reasonably priced stocks 88 maturity date arriving + review 89 mortgage investment =<50% of valuation in normal times + safety 90 mortgage investment =<65% of valuation in normal times + safety 91 mortgage trusts - security of investment 92 need to protect capital after market boom + invest in fixed-interest (short-term) 93 no significant evidence that any of the favourable indicators have already been over-anticipated by increase in property prices as the result of speculation and over-enthusiastic buying - time to buy real-estate 94 no significant evidence that any of the favourable indicators have already been over-anticipated by increase in share prices as the result of buying recommendations based on those factors + time to buy shares 95 number of stocks in portfolio + chores & associated costs 96 office property - investment return for individual investor 97 office property - ease of management 98 on the normal cyclical pattern a cyclical slump does not appear to be due or overdue + time to buy shares 99 on the normal cyclical pattern a cyclical slump does not appear to be due or overdue + time to buy real-estate 100 overall market decline - investment results (even though investment spread over a number of different stocks) 101 overall market decline + low-yielding investments tending to decline further 102 overall market position reasonable in relation to cyclical patterns + time to buy shares 103 overall market position reasonable in relation to the long-term trend + time to buy shares 104 overall market position reasonable in relation to the normal trading range + time to buy shares 105 overall property market position is reasonable in relation to cyclical patterns and the long-term trend of values in the past + time to buy real-estate 106 oversupply of property in area - market value 107 past record and reasonable estimates of future earnings and dividends indicate an above average rate of growth in those areas which could also produce above average increase in share prices + real growth stock 108 placing undue reliance on just one indicator - investment results 109 possibility of difficult tenants + costs & possible repairs 110 possibility of difficult tenants + costs & possible repairs 111 prices - market decline 112 prices at unrealistic levels + time to sell real-estate 113 prices showing signs of recovery after a significant slump + time to buy shares 114 property investing - liquidity 115 property investing - impossible to step sell 116 property investing - definite rate of income 117 property investing + control of management 118 prospects of relatively high inflation ahead + time to buy real-estate 119 provision of liquid reserve + able to meet unexpected cash demand 120 provision of liquid reserve + invest in fixed-interest (short-term) 121 quality of assessment + investment results 122 quality of assessment + investment results 123 real growth stock + investment results 124 reduction in rental income due to changes in supply & demand + time to sell real-estate 125 relative cost of stocks - time to buy shares 126 relative size of higher interest change + loss on sale of fixed-interest investment prior to maturity 127 remaining time to maturity of fixed-interest investment + impact of interest change 128 rent-producing property - volatility of investment 129 residential property investment - rental income 130 residential property investment - investment return for individual investor 131 residential property investment - ease of management 132 residential property investment + tenant turnover 133 residential property investment + possibility of difficult tenants 134 residential property investment + low income return compared to commercial property 135 residential property investment + management task > commercial property 136 residential property investment + reliance on increase in market value 137 resort investment + volatility of investment 138 resort investment + allowable deductions for taxation 139 return on equity (the earnings after tax and any preference share dividends as a percentage of net equity or shareholder's funds ~+ 11% + buy the stock 140 sale of fixed-interest investments before maturity with interest rates higher than when bought + capital loss 141 sale of fixed-interest investments before maturity with interest rates lower than when bought + capital gain 142 selling decisions + psychological difficulty 143 share investing - control of management 144 share investing + liquidity 145 share prices > 30% above long term trend - time to buy shares 146 share prices` + inevitability of serious decline in the market 147 sharemarket operating as a casino (a markino) - time to buy shares 148 spreading funds over a number of different stocks - risk (except during overall market decline) 149 step selling (initially selling a portion of shareholding and then watch) + investment results 150 stock being closely followed by institutional investment analysts - investment results 151 strata title investments - risk (except for overall market decline) 152 strata title investments - management control 153 strata title investments + affordability 154 strata title investments + diversification 155 strata title investments + reliance on body-corporate to manage 156 tactical reserves + ability to take advantage of opportunities 157 taking risks + higher returns (if all goes well..) 158 temporary build-up of funds rather than buy over-priced stocks + invest in fixed-interest (short-term) 159 temptation to invest in debentures + need for thorough analysis 160 tenant turnover + costs & possible repairs 161 tenant turnover + costs & possible repairs 162 tight money + adverse effect on markets 163 times of high inflation - tax on capital gains 164 times of high inflation + rate of property value increase 165 Treasury Bonds + safest fixed investment 166 trend in figures + indicator of future developments 167 unsecured fixed interest investments + risk 168 vacant land + volatility of investment 169 value of the corporate share of GDP + business expansion 170 value of the corporate share of GDP + demand for offices, shops and other property 171 value of the corporate share of GDP + time to buy shares 172 weighted average period to maturity ~ 2.5 years (money spread equally 1yr,2yrs,3yrs,4yrs,5yrs) - impact of possible loss on sale of fixed-interest investment prior to maturity 173 weighted average period to maturity ~ 2.5 years (money spread equally 1yr,2yrs,3yrs,4yrs,5yrs) + ability to take advantage of higher rates 174 your property value - consider locking in a capital loss offset against tax from other income 175 your property value + consider locking in profit before a slump