fundamental analysis filter - bwts.com.au

Copyright Colin Nicholson. Do not reproduce without permission. 1

Fundamental Analysis Filter This file continues the discussion of the 146 shares that came out of the September 15 2004 fundamental analysis filter that is described in chapter 11 of Building Wealth in the Stock Market.

A I Limited (AIE) ................................................................................................ 5 Abacus Property Group (ABP) .......................................................................... 6

Acumen Capital Property Securities Fund (ACF) .............................................. 7 Adtrans Group (ADG) ........................................................................................ 8 AJ Lucas Group (AJL) ....................................................................................... 9

Alinta (ALN) ..................................................................................................... 10 Alliance Finance Corporation (AFC) ................................................................ 11 Amcom Telecommunications (AMM) ............................................................... 12 ASG Group (ASZ) ........................................................................................... 13

Aspen Group (APZ) ......................................................................................... 14 Atlas Group Holdings (AHS) ............................................................................ 15

Auspine (ANE) ................................................................................................. 16 Austin Group (ATG) ......................................................................................... 17 Australand Holdings (ALZ) .............................................................................. 18

ANZ Bank (ANZ) ............................................................................................. 19 Australian Agricultural Company (AAC) .......................................................... 20

Australian Energy (AEN) ................................................................................. 21 Australian Infrastructure Fund (AIX) ................................................................ 22

Australian Leisure and Hospitality (ALH) ......................................................... 23 Australian Pipeline Trust (APA) ....................................................................... 24

Australian Pure Fruits (AFL) ............................................................................ 25 AV Jennings Homes (AVJ) .............................................................................. 26 Avatar Industries (AVR) ................................................................................... 27

B Digital (BBB) ................................................................................................ 28 Bass Strait Oil Trust (BSO) ............................................................................. 29

Beach Petroleum (BPT) .................................................................................. 30

Becker Group (BKR) ....................................................................................... 31 Berklee (BER) ................................................................................................. 32

Bluescope Steel (BSL) .................................................................................... 33 Boral (BLD)...................................................................................................... 34 Brickworks (BKW) ........................................................................................... 35 Bridgestone (BDS) .......................................................................................... 36 Caltex Australia (CTX) ..................................................................................... 37

Cellnet Group (CLT) ........................................................................................ 38 Centennial Coal Company (CEY) .................................................................... 39 Central Equity (CEQ) ....................................................................................... 40 Challenger Beston Wine Trust (CWT) ............................................................. 42

Citect Corporation (CTL) ................................................................................. 43 CITIC Australia (CAL) ...................................................................................... 44 City Pacific (CIY) ............................................................................................. 45

CMI (CMI) ........................................................................................................ 46


Cockatoo Ridge Wines (CKR) ......................................................................... 47 Concept Hire (CSH) ........................................................................................ 48 Consolidated Minerals (CSM).......................................................................... 49

Cool or Cosy (COS) ........................................................................................ 50 Croesus Mining (CRS) .................................................................................... 51 CTI Logistics (CLX) ......................................................................................... 52 Data#3 (DTL)................................................................................................... 53 Deutsche Industrial Trust (DIT) ....................................................................... 54

Devine (DVN) .................................................................................................. 55 Equigold (EQI) ................................................................................................. 56 Euroz (EZL) ..................................................................................................... 57

Evans & Tate (ETW) ....................................................................................... 58 FKP (FKP) ....................................................................................................... 59 Fletcher Building (FBU) ................................................................................... 60 Fosters Group (FGL) ....................................................................................... 61

Grand Hotel Group (GHG) .............................................................................. 62

GRD (GRD) ..................................................................................................... 63 Great Southern Plantations (GTP) .................................................................. 64 Gunns (GNS)................................................................................................... 65

Hamilton James and Bruce Group (HJB) ........................................................ 66 Henry Walker Eltin (HWE) ............................................................................... 67

HGL (HNG)...................................................................................................... 68 Housewares International (HWI) ..................................................................... 69

Hudson Securities Corporation (HSC) ............................................................. 70 Hugal and Hoile (HUG) ................................................................................... 71 Huntley Investment Company (HIC) ................................................................ 72

Infomedia (IFM) ............................................................................................... 73 ING Office Fund .............................................................................................. 74

IOOF Holdings (IFL) ........................................................................................ 75 Ironbark Capital (IBC) ...................................................................................... 76 JF Meridian Trust (JFM) .................................................................................. 77

Jubilee Mines (JBM) ........................................................................................ 78

Keycorp (KYC) ................................................................................................ 79 Kingsgate Consolidated (KCN)........................................................................ 80 Knights Insolvency Administration (KIA) .......................................................... 81

Koon Holdings (KNH) ...................................................................................... 82 Kresta Holdings (KRS) .................................................................................... 83 Lemarne Corporation (LMC)............................................................................ 84 Lighting Corporation (LCL) .............................................................................. 85 Lindsay Australia (LAU) ................................................................................... 86

Lion Selection Group (LSG) ............................................................................ 87 MacMahon Holdings (MAH) ............................................................................ 88 Macquarie Airports (MAP) ............................................................................... 89

Macquarie Leisure Trust Group (MLE) ............................................................ 90 Macquarie Office Trust (MOF) ......................................................................... 91

Macquarie Prologis Trust (MPR) ..................................................................... 92


Merchant House International (MHI) ............................................................... 93 Metroland Australia (MTD) .............................................................................. 94 MFS Diversified Trust (MFT) ........................................................................... 95

MFS Leveraged Investment Group (MFS) ...................................................... 96 Mincor Resources (MCR) ................................................................................ 97 Mirvac Group (MGR) ....................................................................................... 98 Namoi Cotton Co-operative (NAM) .................................................................. 99 National Australia Bank (NAB) ...................................................................... 100

Netcomm (NTC) ............................................................................................ 101 OFM Investment Group (OFM) ...................................................................... 102 Oil Search (OSH) .......................................................................................... 103

OM Holdings (OMH) ...................................................................................... 104 Optima ICM (OPI) .......................................................................................... 105 Oroton Group (ORL) ...................................................................................... 106 Pacific Hydro (PHY) ...................................................................................... 107

Pacific Strategic Investments (PSI) ............................................................... 108

Pacifica Group (PBB) .................................................................................... 109 PCH Group (PCG) ......................................................................................... 110 Penfold Buscombe (PPR) ............................................................................. 111

Plaspak Group (PPK) .................................................................................... 112 Port Bouvard (PBD) ....................................................................................... 113

Prime Retail Group (PRX) ............................................................................. 114 Qantas Airways (QAN) .................................................................................. 115

Queensland Cotton (QCH) ............................................................................ 116 RCR Tomlinson (RCR) .................................................................................. 117 Rebel Sport (REB) ......................................................................................... 118

Reef Casino Trust (RCT) ............................................................................... 119 Rivkin Financial Services (RFS) .................................................................... 120

Roberts (RBS) ............................................................................................... 121 Rock Building Society (ROK)......................................................................... 122 Ross Human Directions (RHD) ...................................................................... 123

S8 (SEL) ........................................................................................................ 124

Schaffer Corporation (SFC) ........................................................................... 125 Sims Group (SMS) ........................................................................................ 126 Sonnet Corporation (SNN) ............................................................................ 127

Southern Cross Fliers Trust (SCF) ................................................................ 128 SPC Ardmona (SPC) ..................................................................................... 129 Stockland (SGP) ............................................................................................ 130 Streettracks S&P/ASX 200 Fund (STW) ....................................................... 131 Sunland Group (SDG) ................................................................................... 132

TAG Pacific (TAG) ......................................................................................... 133 Tassal Group (TGR) ...................................................................................... 134 Tectonic Resources (TTR) ............................................................................ 135

Thakral Holdings Group (THG)...................................................................... 136 Tomato Technologies (TMO)......................................................................... 137

Tourism and Leisure Trust (TLT) ................................................................... 138


Transfield Services (TSE) ............................................................................. 139 Triako Resources (TKR) ................................................................................ 140 Troy Resources (TRY) .................................................................................. 141

United Overseas Australia (UOS) .................................................................. 142 UXC (UXC) .................................................................................................... 143 Villa World (VWD) ......................................................................................... 144 Wadepack (WPD) .......................................................................................... 145 Wallace Absolute Return (WAB) ................................................................... 146

WAM Capital (WAM) ..................................................................................... 147 Warehouse Group (WHS) ............................................................................. 148 Watpac (WTP) ............................................................................................... 149

Willmott Forests (WFL) .................................................................................. 150 WMC Resources (WMR) ............................................................................... 151


A I Limited (AIE)

Analysis This chart does not resemble either the value or growth models. I would waste no time on it.

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M @ D 031293-150904 AIE - A.I. LTD > -.5 to 15


Abacus Property Group (ABP)

Analysis It is difficult to understand the complex structure of this security. It seems to be part trust and part company. In any event there is very little history to work on and the chart does not look like either the value or growth models. It is outside my investment plan.

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M @ D 141102-150904 ABP - ABACUS PROPERTY GROUP > +1 to 124


Acumen Capital Property Securities Fund (ACF)

Analysis As a trust, it is outside my investment plan.

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120MOV AVS 260(0) day 101.9523

M @ D 080703-150904 ACF - ACUMEN CAPITAL PROPERTY SECURITIES FUND > Steady 106


Adtrans Group (ADG)

Analysis This is clearly a growth model chart, having a series of mark up phases interrupted by substantial consolidation phases. I have successfully bought into the last two mark up phases (1996/97 and 2002/03). Profits have grown fairly consistently, with a couple of slips, then recovered the following year PE Ratio 12.2, which is just below our filter criterion and below the market average of 15.2 Dividend Yield 5.57%, which is attractive, compared to the market average of 3.74% Assessment Growth model chart that appears to be in a consolidation phase. Conclusion I sold out of this share when it hit my sell stop. It would become interesting again if it broke upwards above the highs of the present consolidation phase. It will come up on the technical analysis filter at that time.

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500MOV AVS 260(0) day 375.9154

M @ D 160890-150904 ADG - ADTRANS GROUP > +2 to 377


AJ Lucas Group (AJL)

Analysis This appears to be a value model chart that has completed a distribution phase and is in a rally during a mark down phase. Profits Only five years of data available. Profits have been fairly erratic PE Ratio 9.0, which is attractive, compared to the market average of 15.2 Dividend Yield 4.26%, which is above the market average of 3.74%. Conservative payout ratio has allowed dividend per share to be gradually increased Assessment This is a potentially rewarding value model chart that is in the wrong phase to be of immediate interest. Conclusion Of no immediate interest unless it were to rally above the top of the last distribution phase. In that case it would be picked up by the technical analysis filter.

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M @ D 100899-150904 AJL - AJ LUCAS GROUP LTD > -1 to 188


Alinta (ALN)

Analysis With only just on four years of data, this may be a growth model chart, or a value model chart, in a strong and sustained mark up phase. Profits Short history, but growing strongly PE Ratio 11.2, which is just below our filter criterion and below the market average of 15.2 Dividend Yield 4.84%, which is above the market average of 3.74%. Dividends have been increased substantially each year since listing Assessment This is exactly the kind of share I am looking for. It shows good growth in the business, is in a strong uptrend and is available at a price that represents good value. Many shareholders were unsettled by the sharp drop after the capital raising in early 2004 and it would probably have hit sell stop levels. However, it has since gone on to new highs for the trend and should have been repurchased if it was sold into the drop. Conclusion Alinta will look very attractive to buy if it consolidates around current prices for six months or so and then breaks upward again, allowing a purchase closer to the 260-day moving average.

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M @ D 171000-150904 ALN - ALINTA LTD > -11 to 744


Alliance Finance Corporation (AFC)

Analysis With just on two years of history, there is not enough information to say which model this chart falls into. However, it could be that we are looking at a value model chart that has completed a mark down phase, followed by an accumulation phase and that is now in a mark up phase. Profits Only two years available, but showed growth PE Ratio 9.1, which is attractive, compared to the market average of 15.2 Dividend Yield 5.96%, which is attractive, compared to the market average of 3.74% Assessment This chart meets my criteria of being in an uptrend and representing good value. However, it is a small company and somewhat thinly traded. I did not add it to my portfolio because I already had two such small thinly traded shares in my portfolio. To some extent the good PE ratio and dividend yield represent a premium for risk for liquidity risk and specific risk, it being a consumer finance company. Conclusion I would like to see it get clearly above the highs of the listing month, which

represent a resistance area. If it does, it will come up on the technical analysis filter. It will be then well worth considering as a risky and perhaps therefore minor position in my portfolio.

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M @ D 250602-150904 AFC - ALLIANCE FINANCE CORPORATION LTD > Steady 52


Amcom Telecommunications (AMM)

Analysis This is clearly a value model chart. It appears to have completed an accumulation phase in 2003, but gone into a higher level accumulation phase since then. It may also be one of those trends that unfolds in a series of trading ranges as described in Dow Theory as “lines”. See also the Sims Group case study in Chapter 14. Profits Losses, followed by a small profit in 2003/04 PE ratio AFR ratio seems to be based on an incorrect EPS. Aspect Huntley Equity Review shows the PE ratio is over 40 Dividend Yield 1.4% which is well below the market average of 3.74% Assessment This chart would be interesting if it broke out upwards above the present consolidation/accumulation phase. However, it is very speculative on its fundamentals and is therefore outside my investment plan as not affording a margin of safety. Conclusion Too speculative at present, but it might become more interesting if it can make consistently good profits.

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M @ D 150999-150904 AMM - AMCOM TELECOMMUNICATIONS LTD > +1 to 17.5


ASG Group (ASZ)

Analysis Since listing in 2000 this chart has been in a mark down phase. It could be forming an accumulation phase, but this could be wishful thinking. Profits Made large losses until 2003/04 when also paid first dividend PE Ratio 10.4, which is below market average of 15.2 Dividend Yield 5.19% which is attractive, compared to the market average of 3.74% Assessment This is a speculative situation in an unseasoned company. It may be on the verge of proving its business model, but it does not afford a margin of safety. The attractive fundamental ratios are probably a reflection of the greater risk. Conclusion This could turn out to be a company just coming of age. In that case it will come up on the technical analysis filter when it completes the potential accumulation phase and moves above the 2003 peak. It may look a better match to my investment plan then and can be re-evaluated at that time.


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M @ D 100100-150904 ASZ - ASG GROUP LTD > Steady 38.5


Aspen Group (APZ)

Analysis Insufficient history to make any judgement. It is possible to speculate on it being about to break out above an accumulation phase. This is a stapled security and as such it is not a straight-forward share and outside my investment plan.

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Atlas Group Holdings (AHS)

Analysis There is insufficient historical data to form a view on this chart. Again, it could be speculated that this is an accumulation phase. Profits Only two years available. However, this is not a new company and it is not a small business PE Ratio 9.3, which is attractive, compared to the market average of 15.2 Dividend Yield 6.9%, which is attractive, compared to the market average of 3.74% Assessment This is a steel distribution business that was listed for many years, taken over and now has been floated again. If it were to begin to clearly trend upward above $1.20, we could assume that it has completed an accumulation phase and is in a mark up phase. Conclusion Well worth considering if and when it begins to trend. PS. Subsequent to writing this, I purchased this share, when it broke above $1.20.

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M @ D 230603-150904 AHS - ATLAS GROUP HOLDINGS LTD > +1 to 113


Auspine (ANE)

Analysis This share also came up on the 23 June technical analysis filter. It is clearly a value model chart that has already travelled some way in a strong mark up phase. I have little to add to the previous assessment. My updated assessment, which should be read in conjunction with my earlier remarks is: Profits Patchy, but made a profit in nine of the last ten years PE Ratio 7.5, which is attractive, compared to the market average of 15.2 Dividend Yield 5.09%, which is attractive, compared to the market average of 3.74% Assessment The low PE ratio and high dividend yield probably reflects the level of cyclical risk. From a chart viewpoint, Auspine is nearing the $4 to $5 band where heavy resistance might be expected from buyers at the top of the last cycle in 1994 and 1995. Conclusion It is worth reviewing, if it can break above the 1995 peak, and if it still represents good value at that time, so affording a margin of safety.

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M @ D 070890-150904 ANE - AUSPINE LIMITED > Steady 403


Austin Group (ATG)

Analysis This is clearly a value model chart. It seems to be forming a distribution phase. Profits Very erratic, though the last three years have been solid PE Ratio 9.9, which is attractive, compared to the market average of 15.2 Dividend Yield 8.96%, which is more than double the market average of 3.74% Assessment The low PE ratio and high dividend yield probably reflect the erratic history and doubts about the prospects for this company. This is also suggested by the lack of progress in the share price over the last year and a half. It is possible that Austin Group could evolve into another growth phase rather than sink into a mark down phase. In that case it will break upward out of the current trading range and come up on the regular technical analysis filters. Conclusion This share is not of interest with the chart suggesting that it is in a distribution phase. If that changes it will come up on the technical analysis filter and can be reassessed at that time.

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M @ D 051093-150904 ATG - AUSTIN GROUP LIMITED > Steady 67


Australand Holdings (ALZ)

Analysis This looks like a chart in a very sluggish mark up phase as evidenced by its failure to stay above the 260-day moving average. It is also a stapled security, so is outside my investment plan.

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ANZ Bank (ANZ)

Analysis This is a chart that is difficult to classify with any certainty at this point. There are two ways to look at it. Since 1993, it has been more like a growth model chart than a value model chart, with a series of mark up phases and consolidations. However, prior to that it was more like a value model chart. It is not that unusual for companies to break out of a value model pattern into a growth phase and later revert to a value model chart. This means that the present trading range could be a consolidation phase in an ongoing growth model chart or a distribution phase in a value model chart. Profits Solid and with consistent growth in recent years PE Ratio 12.2, which is just inside our filter criterion, but moderately below the market average of 15.2 Dividend Yield 5.24%, which is higher than the market average of 3.74% Assessment The ratios are not outstanding for a bank, which is inherently more risky than an industrial company. Of more concern is that we could be looking at a distribution phase on the chart. Conclusion I would want evidence that it is a growth model chart in the form of a very clear and decisive breakout above the present trading range on the chart. Until then, the suspicion is that it is a value model chart at the top of its cycle.

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M @ D 040183-150904 ANZ - AUSTRALIA & NEW ZEALAND BANK > -1 to 1871


Australian Agricultural Company (AAC)

Analysis There is not very much history, but this share traded in a downtrend after listing in 2001 and is now clearly trending up. I would see all the price action until mid 2003 as an accumulation phase on a value model chart or a consolidation phase on a growth model chart. As this is company is in the primary industry sector, its business is likely to be cyclical and therefore I would presume it to be a value model chart in a mark-up phase. Profits Only three years available, which were inconsistent. I noticed that sales were up much more than profits in the 2003/04, which suggests a squeeze on margins PE Ratio 12.3, which just inside our filter criterion, but moderately below the market average of 15.2 Dividend Yield 4.35%, which is higher than the market average of 3.74% Assessment The ratios are not outstanding for a primary industry company, which has significant risk areas compared to an industrial company e.g. commodity prices, currency and weather. This makes valuation by PE ratio and dividend yield inappropriate as the earnings stream is not maintainable and will be highly variable unless there is extensive diversification by product and geography. Conclusion This type of share is outside my investment plan – see also Namoi Cotton Co-operative later.


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M @ D 100801-150904 AAC - AUSTRALIAN AGRICULTURAL COMPANY LTD > -1 to 138


Australian Energy (AEN)

Analysis There is just enough history to see a clear pattern on this chart. There appears to be a mark-down phase after listing in 2001, which was followed by an accumulation phase from mid 2001 through mid 2003. A mark-up phase seems to be in progress. Profits Three years of losses, followed by two years of strongly growing profits PE Ratio 11.6, which is quite close to the filter criteria, though below the market average of 15.2 Dividend Yield 2.22%, which is well below the market average of 3.74% Assessment This seems to be an electricity utility company. Utilities are a specialised area and are usually characterised by reliable earnings streams and are essentially like a fixed interest investment. This means it is probably outside my investment plan. The dividend yield is also rather low, so it is not really worth my while investigating further. Another issue is that the rate of ascent has slowed back to the 260-day moving average. This sometimes happens just before a mark-up phase resumes, but in this case it is also possible that the mark-up phase may have moved into a distribution phase. A move to new highs is needed to make it of any interest. Conclusion Not of interest, so move on.


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M @ D 250101-150904 AEN - AUSTRALIAN ENERGY LTD > +4 to 90


Australian Infrastructure Fund (AIX)

Analysis This is a stapled security of a trust and a company. As such, it is outside my investment plan. It does seem to be in a mark-up phase, though for anyone whose investment plan includes this type of security.

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M @ D 060397-150904 AIX - AUSTRALIAN INFRASTRUCTURE FUND > -2 to 200


Australian Leisure and Hospitality (ALH)

Analysis This company was under a protracted takeover offer. It was a potentially profitable arbitrage situation which paid off well when a three-way battle ensued. However, arbitrage plays on takeovers are outside my investment plan.

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M @ D 071103-150904 ALH - AUSTRALIAN LEISURE & HOSPITALITY GROUP LTD > -2 to 289


Australian Pipeline Trust (APA)



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Australian Pure Fruits (AFL)

Analysis This is clearly a value model chart in a mark-up phase. Profits Losses in four of the last six years, but a good profit in the last year PE Ratio 8.7, which is attractive at about half the market average of 15.2 Dividend Yield 1.5%, which is well below the market average of 3.74%. Note this was in the first half of the last year and no dividend was paid in the second half Assessment The first concern is that this is a very thinly traded share. It took over three years to get 260 days of trading for the moving average. However, the level and frequency of trading has picked up in 2004 and is now satisfactory for my investment plan. This is clearly a difficult situation to assess without a lot of research. There is no solid history of profits, so it is a pure speculation. The PE ratio is attractive, but may indicate an expectation that the profit achieved last year will not be repeated. The failure to pay a second half dividend heightens that suspicion. Conclusion This is one of those fascinating ones that I leave to the glory seekers. There are plenty of easy ones without spending a lot of time on a situation that is ultimately only going to be an informed gamble. If it really comes good, it will come up on future filters and can be reconsidered then.


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AV Jennings Homes (AVJ)

Analysis This seems to be a value model chart. There is a multi-year accumulation phase, followed by a strong mark-up phase that is still in progress. Profits Uneven - large swings from year to year, but recent good growth PE Ratio 5.8, which is attractive at less than half the market average Dividend Yield 5.91%, which is attractively above the market average of 3.74% Assessment The low PE ratio and high dividend yield is typical of companies in the residential housing development market, which is perceived to be at a cyclical peak and to therefore represent high risk. The risk is that if the profit falls by, say, 50%, as has happened in the past. This is quite possible in a housing slump. Then the PE ratio will not look too good and the dividend is likely to be reduced. This is not therefore a normal industrial company and requires expert knowledge of the industry to play in such a risky field near the presumed top of its cycle. I was interested in this stock a few years ago and actually owned it for a while. There was an effective takeover by a Singapore company which owned 95% of the shares, so it became illiquid. That shareholding has now been distributed to shareholders of the Singapore company and it is liquid again. Conclusion While superficially attractive, a quick check of the Aspect Huntley Equity Review website pointed to its apparent under valuation really being a premium for risk.

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Avatar Industries (AVR)

Analysis Without knowing anything about a share, if it has fallen from over $8 to under 20c it should suggest that it has had a near-death experience. It is a classic value model chart, but without so far forming much of an accumulation phase. If the business recovers quickly, it may not form a very wide accumulation zone. Alternatively, it may form a wider accumulation pattern, now that it has had an initial bounce off the lows. Profits Very variable, with losses in three of the last five years PE Ratio 7.4, which is attractive at about half the market average of 15.2 Dividend Yield 6%, which is attractively above the market average of 3.74% Assessment This strikes me as being one of those companies whose share price was driven to ridiculous heights in the 1990s boom. The likelihood is that its recovery will take quite a while. It has already largely missed the bull market that began in March 2003. Many similar situations in the past have resulted in the company essentially missing the next bull market. Conclusion Although the ratios are attractive, and it may be in a mark-up phase, this is not a sound and healthy business with a good track record. It may be a recovery story, but my investment plan is to look for a margin of safety which is not present here in the form of a consistently solid business.

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B Digital (BBB)

Analysis This is clearly a value model chart. A sickening mark-down phase that took it from about 90c to 7c led into an accumulation phase and it is now in a strong mark-up phase. Profits Three years of losses, followed by three years of profits, which were strong in the last year PE Ratio 11.5, which is not too far below our criterion for the filter, but reasonably below the market average of 15.2 Dividend Yield 2.9%, which is well below the market average of 3.74% Assessment This dividend yield needs to be interpreted in the light of it being the very first half-year dividend from a business that has been gradually growing to a sustainable size. The chart is right on what I am looking for in my investment plan. This is a share that is well worth considering under my criteria. If the business keeps developing, the ratios will improve. Conclusion There may well be better opportunities on balance in the present market, but this one would be worth an initial investment and then building the position if its results and especially its chart keep confirming its growth.


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Bass Strait Oil Trust (BSO)


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M @ D 070797-150904 BSO - BASS STRAIT OIL TRUST > -1 to 222


Beach Petroleum (BPT)

Analysis This is one of those charts that simply does not fit either the value model or the growth model. When it broke upward in late 1999/early 2000, it looked as though it may have been a value model chart. However, it has just lost its way since then. If anything it is forming a huge distribution phase. Conclusion I would not waste time on it, especially as it is also a resources share, so the PE ratio and dividend yield measures are inappropriate.

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Becker Group (BKR)

Analysis This is clearly a value model chart. It seems to have broken out of an accumulation phase, but needs to move above the 2004 highs to confirm a clear mark-up phase. Profits After three years of substantial losses, it has clawed its way back into profits over the last four years PE Ratio 9.2, which is attractively below the market average of 15.2 Dividend Yield Has not paid a dividend since 1997 Assessment This is a company that has been recovering from a bad period. On an earnings multiple basis it looks reasonable value, but the lack of a dividend makes it questionable for my investment plan. Conclusion It is worth watching for signs of further improvement, but is not quite what I am looking for at this point.

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M @ D 140296-150904 BKR - BECKER GROUP LTD > +3 to 34.5


Berklee (BER)

Analysis This seems to be a value model chart. It seems to have broken down from a distribution phase. Profits No losses, but profits are quite variable. The last three years have shown steady improvement PE Ratio 8.0, which is attractively below the market average of 15.2 Dividend Yield 5.71%, which is attractively above the market average of 3.74% Assessment The ratios are attractive. However, the share is thinly traded and this could explain their apparent value. However, more likely the market is expecting a slip in profits, which is also suggested by the chart. Conclusion If it was able to reverse the breakout downwards and go to new highs for the mark-up phase, it would be worth looking at again. In that case it will come up on the 52-week new highs filter.

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Bluescope Steel (BSL)

Analysis This is clearly a mark-up phase. We cannot say from the chart whether it is a value model or growth model chart. However, by reference to its industry, which is cyclical, it should be assumed to be a value model chart without evidence to the contrary. Profits Since listing, two years of large profits and good year on year growth PE Ratio 10.7, which is below the market average of 15.2 Dividend Yield 3.61%, which is just below the market average of 3.74% Assessment This is a very solid business. It passes all of my investment plan tests except for a high dividend yield, but that would be exceptional in such a strongly growing big industrial company. Conclusion This is a strong candidate for my portfolio. It is not currently in it, because I have found some excellent smaller companies.

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M @ D 150702-150904 BSL - BLUESCOPE STEEL LTD > -11 to 832


Boral (BLD)

Analysis We have evidence of what may be part of an accumulation phase on a value model chart or a consolidation phase on a growth model chart at the beginning of the chart, followed by a strong mark-up phase. It is impossible from the chart to identify which model it belongs to at this stage. However, since the company is in a cyclical industry, we might have a working assumption that it is a value model chart. Profits Since 1999 there is a strong pattern of increasing profits PE Ratio 10.8, which is below the market average of 15.2 Dividend Yield 4.35%, which is moderately above the market average of 3.74% Assessment The low PE ratio and higher dividend yield may reflect the cyclical risk in Boral’s industry, rather than undervaluation. Nevertheless, this is an extremely strong chart and fits my investment plan. Conclusion I did own this stock in 2001 and made a good gain, but sold when it hit a stop-loss level. I did not repurchase it when the trend reasserted itself because of concerns about the industry being near a peak. So far that fear has not been borne out. See also Brickworks below.


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Brickworks (BKW)

Analysis This is an interesting one. It clearly used to be a value model chart from 1990 to 2000. However, since then, it has been in a mark-up phase that has taken it right out of the range of previous cycles. It could be seen as a growth model chart now. However, it is not that unusual for a value model chart to have such strong mark-up phases, so I am inclined to treat it as a value model chart until it proves to us that it is a growth model chart, by perhaps forming a long consolidation and breaking higher. Profits Solid and growing, especially in the last two years PE Ratio 10.1, which is below the market average of 15.2 Dividend Yield 2.09%, which is well below the market average of 3.74% Assessment The chart is trending strongly and the PE ratio is low. However, the low dividend yield makes it less attractive on a margin of safety basis. I have been extremely wary of companies tied to the fortunes of the building industry which is towards the end of a multi-year boom. Conclusion This chart almost fits my investment plan. However, I have passed it up in favour of situations with a better margin of safety and less vulnerable industries. See also Boral above.

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Bridgestone (BDS)

Analysis This is almost a text-book perfect example of a value model chart. It seems to be in a mark-up phase that is finding resistance in the vicinity of the last distribution phase. Profits Follow a cyclical pattern, flattening out in the last year PE Ratio 7.7, which is attractively below the market average of 15.2 Dividend Yield 4.17%, which is moderately above the market average of 3.74% Assessment The fundamental ratios are reasonably attractive, but will partly reflect the cyclical nature of the business and the low liquidity in the shares. The chart appears to be in danger of starting to form a new distribution phase. Conclusion We have probably missed the mark-up phase in this share. However, if it were to break upwards strongly, it would call for a re-assessment. In that case it will come up on the technical analysis filter at that time.

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Caltex Australia (CTX)

Analysis This is clearly a value model chart. Profits Patchy. Fell sharply in 2000 and made loss in 2001. Strong since then PE Ratio 5.5, which is attractively way below the market average of 15.2 Dividend Yield 2.39%, which is well below the market average of 3.74% Assessment This has been a turn-around situation, which has richly rewarded a trend follower. In hindsight this would have been a very good share to have bought late in 2002 after it returned to profit in the year ended June 2002 and broke above a good accumulation area. Despite looking at it many times, I could not bring myself to accept the risk. The lack of a dividend at the time put it outside my investment plan. Conclusion The PE ratio has improved remarkably since the time of the technical analysis scan. Maybe I just do not understand this situation. However, when in doubt, I stick to the plan and let it go. It looks as though I missed a great investment in hindsight. Hindsight is a wonderfully accurate system.

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M @ D 010890-150904 CTX - CALTEX AUSTRALIA > +1 to 920


Cellnet Group (CLT)

Analysis This is a difficult one to classify. There are two ways to look at it:

1. We appear to be looking at a mark-down phase. There is a lower trough in 2001, a lower peak in 2002, a lower trough in 2003 and the 2004 upswing is still below the 2002 peak. The sequence of lower peaks and lower troughs is unbroken and suggests that we have to say it is still in a downtrend. There is no sign of an accumulation phase.

2. The more optimistic view is that the trough in 2003 is an accumulation phase and we are now looking at a mark-up phase. I am inclined to regard this as speculative until the 2002 peak is exceeded.

Profits Makes widely fluctuating profits PE Ratio 7.9, which is attractively below the market average of 15.2 Dividend Yield 7.99%, which is attractive at double the market average Assessment The very low PE ratio and high dividend yield suggest that the market is worried that the profit will dip sharply again. Conclusion It has attractive ratios on the surface. There is a possible view of the chart to say it is trending up. I would re-assess this chart if it rose above the 2002 peak in the present uptrend, which would suggest the second view in the analysis section above was more tenable.

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M @ D 171199-150904 CLT - CELLNET GROUP LTD > +4 to 144


Centennial Coal Company (CEY)

Analysis This is clearly a value model chart which has a very strong mark-up phase in progress. Profits Growing strongly over the last four years PE Ratio and Dividend Yield are not appropriate for a resources company Assessment This is a solid coal producer which is benefiting from a price and volume boom driven by China and a high oil price. It is a great chart. Conclusion This is the kind of resources chart that I would buy – the earlier in the cycle the better – but it is never too late to join a great uptrend if the market still looks to be orderly. These trends have a habit of going further and for longer than we imagine. Nevertheless, I am inclined to leave it to the resources experts at this point, because I am not short of good opportunities in the industrial sectors where the shares fall well inside my investment plan.

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Central Equity (CEQ)

Analysis This is not quite so easy to classify, but I see it as a value model chart. The price action since 2000 could be a big distribution phase. However, I am more inclined to see it as a shallow cycle and now possibly forming a distribution phase. This is a little clearer if we change the chart from a semi-log to a linear scale:

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Profits Reasonably consistently growing profits PE Ratio 5.3, which is attractively below the market average of 15.2 Dividend Yield 6.34%, which is attractively above the market average of 3.74% Assessment The low PE ratio and high dividend yield are typical for property developers, which have a long chequered history and are operating in a very heated market. In other words the risk is high. The chart is not currently attractive either, unless it were to break strongly higher. Conclusion There is not a margin of safety here and the chart is quite unattractive. If the property crash risk passes and it breaks higher, it would call for a re-assessment. It would come up on the technical analysis filter at that time.


Challenger Beston Wine Trust (CWT)


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Citect Corporation (CTL)

Analysis We seem to be looking at an incomplete mark-down phase in a value model chart. It would appear to be heading lower at the end of the chart. Unless this move stops above 80c, and an accumulation phase forms, it looks a very negative chart. Profits After consistently making profits between $5m and $10m, it lost $2m last year, due to a large write-off, but this was after almost $5m operating profit PE Ratio (calculated on operating profit) 11.1, which is moderately below the market average of 15.2 Dividend Yield 5.91%, which is attractively above the market average of 3.74% Assessment The profit analysis above was quite straight-forward from the Aspect Huntly website, however, a fundamental view of this company is a job for the experts. What is possible though is that the present price action does not go much lower and turns out to be an accumulation phase. For that view, it needs to break above the last peak on 2003. Conclusion Of no interest unless the downtrend ends as described above.

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M @ D 170797-150904 CTL - CITECT CORPORATION LTD > -1 to 93


CITIC Australia (CAL)

Analysis There is not very much history here, but we seem to be looking at a mark-up phase. There is no way to gauge whether it is a value or growth model, but it will be one or the other, because there has been an uptrend going on. Profits Consistent profits in the three years available. Big increase last year PE Ratio 6.0, which is attractively way below the market average of 15.2 Dividend Yield 7.62%, which is attractive at double the market average of 3.74% Assessment This is a trading company – mainly with China. It looks cheap, but that may be because China is booming and it is as good as it gets. Who knows? The chart is not very convincing – there is not enough history and the uptrend is looking fragile. The monthly bar chart also conceals that it is rather thinly traded. Conclusion This could be an interesting situation if it kept coming up on the fundamental filter and started to trend much more strongly. On balance, there are plenty of better situations right now.

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City Pacific (CIY)

Analysis This appears as though it could be a growth model chart. There is a strong mark-up phase from listing into the 2002 peak. That was followed by a consolidation phase into mid 2003, which has been followed by another mark-up phase. Profits Rising very rapidly each year since listing PE Ratio 8.2, which is attractively below the market average of 15.2 Dividend Yield 6.95%, which is attractively above the market average of 3.74% Assessment The chart is just what I am looking for. I am seeing it as a growth model chart on the evidence, but my concern is that it may be a value model chart, based on the cyclicality of the property development industry which it finances and manages investments in. This cyclical risk could account for the low PE ratio and high dividend yield. i.e. they represent a discount for risk. Conclusion We have only seen this company perform in a boom market. It is therefore not a seasoned business and will therefore be questionable with respect to margin of safety. It fits my investment plan, but I would build a position cautiously, or await opportunities in the next cycle, when it will be a more seasoned operator.


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CMI (CMI)

Analysis This is probably a value model chart. 1994-96 look like a clear mark-down phase. Then it becomes very choppy until a clear mark-up phase begins in 2002-03 and continues to the end of the chart. It is possible that all the action 1995 through 2002 is a big accumulation phase. It could also be simply a chart that does not match the models. Profits Rather erratic and probably cyclical PE Ratio 8.7, which is attractively below the market average of 15.2 Dividend Yield 5.22%, which is attractively above the market average of 3.74% Assessment The poor profit record is a major count against this company. The favourable ratios, probably represent a discount for risk of more cyclical problems. The present upswing is also barely above the 260-day moving average, suggesting a lack of real momentum compared to the best opportunities. Then again, we could be looking at the start of a company transformation. Conclusion This one is certainly worth keeping an eye on, but there seem to be much better opportunities available.

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Cockatoo Ridge Wines (CKR)

Analysis This is a sad one. It seems to be in a clear mark-down phase over the full history of the chart. It is not possible to say which model it might be, if either. Profits Doubled in 2003, but flat in 2004 PE Ratio 9.6, which is attractively lower than the market average of 15.2 Dividend Yield 5.45%, which is attractively above the market average of 3.74% Assessment Nothing about this chart attracts me. It is falling in a bull market. Conclusion No interest.

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Concept Hire (CSH)

Analysis This looks like a value model chart. There is a clear distribution phase in 1999-2001, followed by a mark down phase in 2001-02. This led into an accumulation phase in 2002-03 and a mark-up phase is in progress at the end of the chart. Profits Look cyclical with a fall in 2001, loss in 2003 and then a strong recovery with the economy PE Ratio 9.8, attractive compared to the market average of 15.2 Dividend Yield 5.31%, attractive compared to the market average of 3.74% Assessment Concept has moved safely above the previous distribution range, which is positive, because it means that resistance associated with that price zone has been overcome. It is possible to imagine a distribution phase is being formed, but this is highly speculative and unduly negative. It could easily be no more than a pause in a strong mark-up phase. The test is for Concept to make a new high, which would be very bullish. The favourable ratios may be suggesting ongoing cyclical risk, which the company is clearly exposed to. Conclusion This is an attractive situation if it breaks to new highs, confirming the mark-up phase is continuing.

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Consolidated Minerals (CSM)

Analysis At first sight this is a mark-up phase. On closer inspection there are elements of the growth model chart in the tendency to drift sideways in consolidation, rather than any true dips. However, as a resources share, we have to suspect that it will be cyclical and therefore turn out to be a value model chart that is in a prolonged mark-up phase. Profits Four years of losses, followed by erratic profits PE Ratio and Dividend Yield are not appropriate for a resources company Assessment The key thing about the chart is that despite its clear trend, the price has trouble staying above the 260-day moving average, which I like because it indicates strong momentum. However, there is clear evidence of stronger momentum towards the end of the chart. Maybe this company is just getting its act together. Then again, it could be just the last stages of a resources boom. Conclusion If there were not so many strong industrial charts, I would be more interested in resources shares. I see a lesser margin of safety in this sector. Also, this is a company with an erratic profit record.

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Cool or Cosy (COS)

Analysis There is not much to go on, but there is clear evidence of a mark-up phase. It is impossible to say which model. Profits Rose in the second year, but I noticed that the earnings per share and profit margin fell PE Ratio 8.4, attractive compared to the market average of 15.2 Dividend Yield 5.82%, attractive compared to the market average of 3.74% Assessment Interesting chart, especially if it can confirm the trend by breaking above 60c. However, it does not seem to be a seasoned business and therefore does not represent a margin of safety. I would want to research its antecedents for evidence of a good record prior to listing (start with the prospectus which is easily available from the ASX Aspect Huntley Equity Review websites). It is also involved in the construction industry and therefore probably cyclical. That would not disqualify it, but give additional cause for thought. Conclusion The chart and ratios are interesting and I may research its history prior to listing if I have time in case it breaks above 60c. However, I am not short of opportunities and am fully invested at present, so there is no pressing need to put time into it.


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Croesus Mining (CRS)

Analysis This chart is very difficult to classify as one of the two models. There are some elements of the value model. Profits Highly variable PE Ratio and Dividend Yield are not appropriate for a resources company Assessment I have great difficulty making any sense out of this one. Conclusion Some of the shares that come out of the filters do not fit the models and are just too difficult to make sense of. This is one of them.

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CTI Logistics (CLX)

Analysis This is clearly a value model chart. It seems to be trying to break upward from an accumulation phase. Profits Very erratic and not the least bit interesting PE Ratio 8.8, attractively lower than the market average of 15.2 Dividend Yield 3.64%, which is below the market average Assessment The chart is interesting and suggests that there is a prospect of a mark-up phase developing. It cannot be dismissed that good management could turn things around and transform the company. However, that is highly speculative and its record does not demonstrate a margin of safety. Conclusion Leave this one for the punters.

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Data#3 (DTL)

Analysis This is clearly a value model chart, which is in an increasingly stronger mark-up phase. Profits Rather variable, including a couple of years of losses PE Ratio 10.2, attractive compared to a market average of 15.2 Dividend Yield 6.65%, attractive compared to a market average of 3.74 Assessment Everything is in place here awaiting a confirmation of the break above the latest trading range. There are two negatives: The somewhat uneven profit record and the proximity of the all-time high, which is likely to be a resistance level. Conclusion A clear move to new highs for the trend would increase interest in this share. PS. Subsequent to writing this analysis, I began building a position in this share. It has begun moving up. The overhead resistance will be a severe test. One consideration for me was that I wanted to have some exposure to the IT sector and my only other position had been closed out on a stop-loss (Sonnet [SNN]).

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Deutsche Industrial Trust (DIT)


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Devine (DVN)

Analysis This is clearly a value model chart. It appears to be forming a distribution phase in the general price range of previous distribution zones. Profits Highly variable PE Ratio 5.4, which is very low compared to the market average of 15.2 Dividend Yield 10.53%, very high compared to the market average of 3.74% Assessment The chart and the ratios all suggest that this share has had its run and is due for a fall. Conclusion I have owned this share in the past, but this is not the time to be holding it unless the chart changes dramatically by surging to new all-time highs.

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Equigold (EQI)

Analysis This is probably a value model chart. There is a clear accumulation phase followed by a mark-up phase in a resources company, which is in a cyclical industry. Profits Except for a big drop in 1998, the picture is one of steady, but unspectacular growth PE Ratio and Dividend Yield are not appropriate for a resources company Assessment The failure to trend clearly above the 260-day moving average is the only negative here. It reflects the lack of profit momentum. Conclusion This is an interesting situation, if only it was more dynamic. There are better charts at present, or it might be worth building a position.

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Euroz (EZL)

Analysis The picture in 1999-2000 is unhelpful. However, since then, there is the suggestion of a value model chart which has completed an accumulation phase and started trending up. Profits Highly variable PE Ratio 7.1, attractively below the market average of 15.2 Dividend Yield 14.89%, extremely high and unrealistic if the market thought the last profit and dividend were repeatable Assessment I have no idea what is going on here. The company is a stock broker. The ratios suggest market expectation that there has been a one-off windfall profit and/or high dividend, which is not likely to be repeated. Broking is a very cyclical business and profits are not maintainable unless conditions are favourable. This renders PE ratio and Dividend yield ratios poor guides, much like resources shares. Conclusion This one is too difficult for me without a lot of research work, and then it may be inconclusive. If there is a good situation here, it will make more new highs and come up on the technical analysis filters, when it can be re-assessed.

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Evans & Tate (ETW)

Analysis This chart does not fit either of the models. Profits Steadily increasing PE Ratio 12.3, which is just inside the filter criterion Dividend Yield 3.6%, a bit lower than the market average of 3.74% Assessment While the profit picture looks good, the shares are fairly well priced on the ratios and the chart is giving us no signals with respect to the models. Conclusion This one is far from clear in terms of my investment plan. No action.

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FKP (FKP)

Analysis This is clearly a value model chart. The present mark-up phase has taken it well above the range of the previous cycles. It appeared as though it may have been forming a distribution phase, but it has now broken to new highs, confirming the trend may have further to go yet. Profits Have been variable, but strong in the last three years PE Ratio 10.7, which is attractive against the market average of 15.2 Dividend Yield 4.55%, is moderately above the market average of 3.74% Assessment This is an interesting chart and the ratios are moderately attractive. My only concern is its exposure to the property development industry, which seems to have passed its peak. However, this company has strong exposure to the retirement sector, which might hold up rather better than general housing. Conclusion This is one of the better situations that has exposure to property development. I am reluctant to invest in it at this late stage in the cycle.

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Fletcher Building (FBU)

Analysis This chart is in a clear mark-up phase. There is insufficient history to say whether it is a value or growth model chart, but the involvement of the company in the cyclical building industry would suggest a working assumption that it will be a value model chart. Profits Very variable, but strong in the last two years PE Ratio 10.3, attractive compared to the market average of 15.2 Dividend Yield 5.53%, attractive compared to the market average of 3.74% Assessment This is a foreign company and outside my investment plan, except that NZ is a very similar and familiar jurisdiction and therefore might be considered in a strong case. There remain tax and currency considerations. Conclusion The situation is not sufficiently compelling for me to venture outside the investment plan, especially when there are so many good Australian situations available at present.


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Fosters Group (FGL)

Analysis This could be seen as a growth model chart, However, I am aware of the prior history which was of a big mark-down phase from the 1987 high. A good way to check these situations is on www.yahoo.com.au, which on the finance page allows you to see a chart, in this case, back to 1980. Profits Variable, but always substantial profits PE Ratio 12.2, which is just inside the filter criterion Dividend Yield 4.1%, a bit higher than the market average of 3.74% Assessment Seems to be forming a distribution phase. The fundamentals are far from compelling. Conclusion Would call for a reassessment if it broke upward to new highs and so suggested that it could become a growth model chart.

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M @ D 010890-150904 FGL - FOSTERS GROUP LTD > -2 to 470

http://www.yahoo.com.au/


Grand Hotel Group (GHG)

Analysis As a trust, or stapled security, it is outside my investment plan.

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GRD (GRD)

Analysis This is clearly a value model chart. Profits Variable, including losses 1997 and 1998, but strong in the last two years PE Ratio and Dividend Yield are not appropriate for a resources company, or in this case, a company with resources exposure Assessment This is a difficult one because it is a services and resources company. It seems to be in a very strong uptrend, but is a bit too complicated for me unless I did further research on it. Conclusion In view of the abundance of easier to understand situations, I would pass this one up.

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Great Southern Plantations (GTP)

Analysis This is a textbook-perfect value model chart. It is in a strong mark-up phase, though it is being challenged by resistance at the old all-time high. Profits Variable, but very strong in the last two years PE Ratio 7.1, very attractive against a market average of 15.2 Dividend Yield 3.26%, not so attractive against a market average of 3.74% Assessment It looks as though I may have missed the value model cycle this time around. Conclusion There is too much risk that it is forming a distribution phase. It could be reassessed if it broke strongly to new all-time highs.

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M @ D 050799-150904 GTP - GREAT SOUTHERN PLANTATIONS LTD > +6 to 307


Gunns (GNS)

Analysis A value model chart that has been enjoying a fantastic mark-up phase. Profits Previously cyclical but there have been five years of great growth PE Ratio 11.7, below the market average of 15.2, but not wildly attractive Dividend Yield 3.41%, rather below the market average of 3.74% to be attractive Assessment This one has been a super stock that I wish had been in my investment portfolio. However, it looks as though I may have missed the value cycle. The recent move to new highs suggests that it may be too late, but I have not seen it as better than the shares currently in my fully invested portfolio. Conclusion Remains on my short list, but not the highest priority.

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Hamilton James and Bruce Group (HJB)

Analysis This one looks like a value model chart. There is a clear mark-down phase in 2000-2001, followed by a long accumulation phase. Profits There was a very large loss in 2002 and smaller, but increasing profits since then PE Ratio 11.3, which is not all that attractive compared to the market average of 15.2 Dividend Yield 6.17%, which is quite attractively above the market average of 3.74% Assessment There are signs that the price wants to break out of the accumulation phase, but not convincingly so far. The high yield seems to be aimed at keeping investors interested, but the PE ratio is not screaming that it is undervalued. Conclusion There are much stronger charts on other companies (Catalyst Recruitment Services and Integrated Group) in this sector. This one is a laggard, which might be pulled up on the coattails of the good ones. It is best to avoid this kind of situation.


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Henry Walker Eltin (HWE)

Analysis This is clearly a value model chart. After six years of mark-up phase it has spent a similar period in the doghouse. There is no clear sign of an accumulation phase being near completion. Profits A very troubled picture in the last five years PE Ratio 9.0, which is attractive compared to the market average of 15.2 Dividend Yield 1.65%, which is way below the market average of 3.74% Assessment This is a basket case, that may be turning the corner, but that is pure speculation. Conclusion Not interesting until we can see a completed accumulation phase.

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HGL (HNG)

Analysis This is looking increasingly like a growth model chart. Profits After a flat period, increasing again PE Ratio 6.6, very attractive against the market average of 15.2 Dividend Yield 4.39%, moderately attractively higher than the market average of 3.74% Assessment This could be what I am looking for. However, there are two ways to look at it. It could be a value model chart forming a distribution phase, which is very negative. Then again, it could be a growth model chart, in which case the present sideways pattern is a consolidation zone. If it can move to new highs, it fits my investment plan. Conclusion I did own this share for a while, but sold it when it hit a stop-loss. It is on my hot list to buy back if it can make new highs and I have funds available.

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Housewares International (HWI)

Analysis This chart fits the growth model. However, it lacks momentum, seen by the way the price has trouble staying above the 260-day moving average. Profits Uneven, but growing slowly, but consistently, in recent years PE Ratio 10.8, which is moderately attractive against the market average of 15.2 Dividend Yield 4.95%, which also is moderately attractive against a market average of 3.74% Assessment Growth model shares will rarely be very cheap on the fundamental ratios. The chart lacks momentum. Conclusion There would seem to be other, better opportunities than this one – especially in its sector, where I already own Noni B and Colorado.

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Hudson Securities Corporation (HSC)

Analysis This share is too thinly traded to fall within my investment plan.

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Hugal and Hoile (HUG)

Analysis This appears to be a value model chart. There is a mark-down phase in 1999-2001, followed by an uncompleted accumulation phase. Profits A four-year descent into losses and slowly climbing back to small profits PE Ratio 7.0, which is very attractive against a market average of 15.2 Dividend Yield 3.57%, rather unattractive considering the risk, against a market average of 3.74% Assessment This one is not ready to buy. It may take a while yet. Conclusion Move on.

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Huntley Investment Company (HIC)

Analysis As a listed investment company it is outside my investment plan.

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Infomedia (IFM)

Analysis This one looked like a value model chart that had completed a mark-down phase and was forming a wide accumulation phase. However, it has now broken on the downside. Profits Rising nicely PE Ratio 10.4, which is moderately attractive against a market average of 15.2 Dividend Yield 5.76%, which is very attractive against a market average of 3.74% Assessment The fundamentals look OK, but the market thinks something bad is in prospect for this company. The chart should always have priority over the fundamentals which describe the past, whereas the chart describes expectations. Conclusion The chart is screaming to stay well clear of this one. I wrote a warning story in BRW.


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IOOF Holdings (IFL)

Analysis This could easily be a growth model chart in the making on the evidence to date. Profits Only two years, but an increase PE Ratio 10.0, moderately attractive against a market average of 15.2 Dividend Yield 1.39%, rather rich against the market average of 3.74% Assessment The chart looks good, but we are being asked to rely heavily on capital gain with little dividend contribution to total return. This can be OK for a genuine growth story. Conclusion This is a strong candidate for my portfolio if funds are available and there are no better prospects. My preference will be for a similar chart, but a bigger margin of safety, especially in dividend yield.

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Ironbark Capital (IBC)


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JF Meridian Trust (JFM)


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Jubilee Mines (JBM)

Analysis This was a value model chart, but now looks more like a growth model chart. My inclination, though, is to regard it with suspicion, since mining is cyclical and I assume we are seeing just a very strong mark-up phase since 2000. Profits Growing very strongly over the last 4 years (losses before that) PE Ratio and Dividend Yield are not appropriate for a resources company Assessment I was very close to buying this share when it broke upward in early 2003, so it met all the requirements of my investment plan. I did not buy it because there were more attractive charts at the time. In hindsight, it was a good one missed. Conclusion It would now have to break to new highs to interest me again.

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Keycorp (KYC)

Analysis This is clearly a value model chart. It is just breaking out of an accumulation phase. Profits Very erratic – more losses than profits PE Ratio 10.0, only moderately attractive against the market average of 15.2 Dividend Yield 1.5%, very poor against the market average of 3.74% Assessment The only thing going for it is the completion of an accumulation phase. However, it is coming a year and a half after the market started an uptrend. Conclusion I will leave this to the would-be-heroes who want to be able to say they picked a great recovery (or else who never mention the share again).

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Kingsgate Consolidated (KCN)

Analysis There are elements of both the growth and value model charts here. On balance, I would treat it as a value model chart considering that it is a mining share and that sector tends to be cyclical. On that basis we must suspect it is forming a distribution phase. Profits Seven years of losses, then three of profits, but the last one down PE Ratio and Dividend Yield are not appropriate for a resources company Assessment This was a difficult one, except in hindsight, when it should have been bought in 2001 based on the chart, but with rotten fundamental history. It would never have made the grade on my investment plan. There was a potentially good chart, but no margin of safety. Conclusion Too difficult. It would have to make new highs before I would bother reassessing it.

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Knights Insolvency Administration (KIA)

Analysis There is insufficient history to make a judgement here. Profits Only two years, but with a good growth in the second PE Ratio 10.5, which is moderately attractive against a market average of 15.2 Dividend Yield 6.72%, which is very attractive against the market average of 3.74% Assessment The problem here is the lack of history. It could be OK if research showed a seasoned business prior to listing (check the prospectus as a first step). Someone at the ASX had a sense of humour in giving an insolvency firm this ASX code! Conclusion If it made a new high for the chart, it would prompt me to look into it a bit further. If it could demonstrate a margin of safety prior to listing, it could fit my investment plan.

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Koon Holdings (KNH)

Analysis As a foreign company it is outside my investment plan.

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Kresta Holdings (KRS)

Analysis This is clearly a value model chart. The company survived a near-death experience, but has had a great mark-up phase. It may just be resting, or it could be forming a distribution phase. Profits Six years of nightmare, followed by a three-year recovery. However, the latest year was down PE Ratio 10.5, which is moderately attractive against a market average of 15.2 Dividend Yield 16.04%, which is almost too good to be true against a market average of 3.74%. In fact, it was a mistake in the AFR and the real yield is around 6.6%, still quite attractive. Shows that unusual figures should always be checked out Assessment This share did fit my investment plan and I owned it profitably for a while before selling when it hit a stop-loss level. Conclusion It would become interesting again if it made a new high for the mark-up phase, rather than completed a distribution phase.

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Lemarne Corporation (LMC)

Analysis This share is too thinly traded to fit my investment plan.

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Lighting Corporation (LCL)

Analysis This is a rubbish chart so far that does not match either of the models. Profits Gradually increasing PE Ratio 11.7, which is only moderately attractive compared to the market average of 15.2 Dividend Yield 4.55%, which is moderately above the market average of 3.74% Assessment The chart does not fit my models and the fundamentals are far from tempting. Conclusion Move on.


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Lindsay Australia (LAU)

Analysis Again, there is not enough history to categorise this chart. Profits Only two years available – nice increase in the second PE Ratio 11.0, which is only moderately below the market average of 15.2 Dividend Yield 3.77%, which is not that attractive against a market average of 3.74% Assessment The chart does not fit either of the models yet and the fundamentals are not exciting. Conclusion Move on

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Lion Selection Group (LSG)

Analysis As an investment company – actually a Pooled Development Fund - it is outside my investment plan.

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MacMahon Holdings (MAH)

Analysis There are some elements of a value model chart here, but it is far from conclusive. Profits Three years of moderately increasing profits after three years of big losses PE Ratio 9.4, which is moderately attractive against the market average of 15.2 Dividend Yield 1.52%, which is distinctly unattractive against the market average of 3.74% Assessment This is a dog of a chart, with unattractive fundamentals. Any investment here would be a speculation or an exercise in hope. Conclusion Move on quickly

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Macquarie Airports (MAP)

Analysis As a stapled security, this is outside my investment plan.

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Macquarie Leisure Trust Group (MLE)


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Macquarie Office Trust (MOF)


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Macquarie Prologis Trust (MPR)



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Merchant House International (MHI)

Analysis As a foreign company it is outside my investment plan.

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Metroland Australia (MTD)

Analysis This one is not easy to categorise on the semi-log chart because of the huge percentage swings. It could be either model, or neither. Profits Very patchy PE Ratio 3.4, which is remarkably low compared to the market average of 15.2 Dividend Yield 8.7%, which is remarkably high compared to the market average of 3.74% Assessment This is a property developer that does not have a maintainable earnings stream and is therefore unsuitable to be valued on PE ratio and dividend yield. This one is too difficult. Conclusion Move on

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MFS Diversified Trust (MFT)


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MFS Leveraged Investment Group (MFS)


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Mincor Resources (MCR)

Analysis Although this could be a growth model chart, its position in the resources sector suggests that it would be better to regard it as a value model chart. It could be forming a distribution phase. Profits Four years of profits after five of losses, but not outstanding growth PE Ratio and Dividend Yield are not appropriate for a resources company Assessment This could be of interest if it was to pick up the growth again. However, with resources in a boom, we need to be suspicious of its recent price action. Conclusion I would not be interested unless it made a new high, suggesting continued mark-up.

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Mirvac Group (MGR)

Analysis As a stapled security, it is outside my investment plan.

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Namoi Cotton Co-operative (NAM)

Analysis This is clearly a value model chart. It is in a mark-up phase, although it has become very volatile in the last year. Profits Erratic PE Ratio 5.8, which is attractive against a market average of 15.2 Dividend Yield 5.32%, which is attractive against a market average of 3.74% Assessment This company processes and markets cotton. Agricultural businesses are beholden to weather and world prices, which tend to be cyclical. However, it is much like a miner in that the earnings are not a maintainable stream, but will be highly variable. This makes valuation using PE ratio and dividend yield inappropriate. The attractive ratios will tend to be a discount for risk. Conclusion Does not fit my investment plan.

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M @ D 060498-150904 NAM - NAMOI COTTON COOPERATIVE LTD > -1 to 47


National Australia Bank (NAB)

Analysis This has been a growth model chart for a long time. However, other major bank charts have in the past exhibited elements of the value model. Banks are essentially cyclical, but have enjoyed a long upswing in the 1990s into the first decade of the new century. NAB also avoided a cyclical downswing suffered by other major banks after the 1980s boom. However, this time around it may be NAB that is going to suffer. The end of the chart shows clear signs of completion of a distribution phase, rather than a consolidation in a growth model chart. However, time will tell. Profits Consistent growth with a few slips PE Ratio 9.9, which is attractive compared to the market average of 15.2 Dividend Yield 6.19%, which is also attractive compared to the market average of 3.74% Assessment The attractive ratios partly reflect known risk that NAB will struggle to maintain profits in the next year or two as it sorts out its problems. The ratios are also reflecting the higher than normal financial risk in banks compared to industrial companies. Bank investors always demand a risk premium against the market average. Conclusion The chart looks like a distribution phase being completed. I would not be interested unless it broke to new all-time highs.

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Netcomm (NTC)

Analysis This seems to be a value model chart. It has already enjoyed an upswing in a mark-up phase. It is now trading sideways, which begs the question whether it is a consolidation or a distribution phase in formation. Profits Six of the last ten years were losses. The last three years have shown improving profits PE Ratio 10.7, which is moderately attractive against the market average Dividend Yield 4.48%, which is moderately attractive against the market average Assessment The fundamental ratios are not outstanding, but are interesting if the uptrend were to continue. The key is whether we are looking at a consolidation or a distribution phase in formation. Conclusion I would not be interested in this one unless it broke to new highs for the trend. In that case, it will come up on the technical analysis filter and can be reassessed then.

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M @ D 211293-150904 NTC - NETCOMM LTD > Steady 29


OFM Investment Group (OFM)

Analysis There is not much to go on here. It may be an uptrend, but it is not fast enough to keep above the 260-day moving average. Profits Fluctuating PE Ratio 10.5, which is moderately attractive against a market average of 15.2 Dividend Yield 5.45%, which is nicely above the market average of 3.74% Assessment Initially, I thought this was an investment company and therefore outside my investment plan. However, it seems to be a manager of funds rather than an investor with its own capital. Conclusion The chart is not that compelling. However, it may be worth reassessing if it were to break to an all-time new high. It would in that case come up on the technical analysis filter.

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M @ D 260302-150904 OFM - OFM INVESTMENT GROUP LTD > +2 to 202


Oil Search (OSH)

Analysis This is clearly a value model chart. It seems to be part way up a mark-up phase. Profits Very variable, but growing strongly in the last two years. PE Ratio and Dividend Yield are not appropriate for a resources company Assessment This is an existing oil and gas producer, but is based in New Guinea, so there is some sovereign risk. It is also dependent for its future on planned developments that are in the hands of others. For me this would be an interesting situation that is nevertheless outside my investment plan. Conclusion If it broke to new highs for the trend in the face of a world oil price that had passed its peak, I would be interested. However, I would have to depart from my investment plan to buy it, so I would in all likelihood resist the temptation.

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OM Holdings (OMH)

Analysis This seems to be a value model chart that is in a strong mark-up phase. Profits 2003 was the first reasonable profit in several years PE Ratio and Dividend Yield are not appropriate for a resources company Assessment Clearly this one used to be too thinly traded to fit my investment plan, but is now probably OK. I do not see a margin of safety here. Conclusion Outside my investment plan.

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Optima ICM (OPI)


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Oroton Group (ORL)

Analysis This is clearly a value model chart. It has enjoyed a very strong mark-up phase. The momentum of the uptrend has slowed appreciably. It is possibly forming a distribution phase. Profits Six years of good growth after three years of losses, but the last year was steady PE Ratio 10.6, moderately attractive against a market average of 15.2 Dividend Yield 4.42%, moderately attractive against a market average of 3.74% Assessment If ORL was to break downward from the present sideways pattern, it will probably be completing a distribution phase and I will lose all interest. However, it is currently on my watch list, because I owned it earlier, but will only be considered for purchase if it can move strongly up out of the present sideways trading range. Conclusion Maintain a watch on it, in line with my policy of monitoring shares I have sold out of when they hit stop-loss levels in case the trend resumes – See Chapter 11 Re-Entry Guidelines.

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M @ D 130890-150904 ORL - OROTON GROUP LTD > +7 to 260


Pacific Hydro (PHY)

Analysis This is a more difficult chart to analyse in terms of the two models. The easy solution is to dismiss it as falling outside the two models. However, on balance, I am inclined to give it the benefit of the doubt and say that it is probably a value model chart. This is based on the depth of the declines in 1995 and the most recent one. On this basis, we could suggest that it is probably in an accumulation phase. Profits Strong profits in the last four years PE Ratio 11.1, which is moderately attractive against the market average of 15.2 Dividend Yield 1.52%, which is unattractive against the market average of 3.74% Assessment This company is involved in so-called “green” energy production. This gives it an emotional following from people who are allowing their hopes to triumph over the tough realities of business. For it to be interesting for me it needs to clearly complete an accumulation phase and show an ability to trend strongly. Conclusion No interest until it completes accumulation.

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Pacific Strategic Investments (PSI)


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Pacifica Group (PBB)

Analysis This is clearly a value model chart. The cycles have been rather short compared to other charts we have looked at. If readers want to argue with this and say it is not either model, they would not get much of an argument from me. Profits Very variable and quite unpredictable PE Ratio 12.3, which is barely inside our filter criterion Dividend Yield 6.03%, which is attractive against a market average of 3.74% Assessment The high dividend yield appears to me to be an attempt by management to hold shareholder support. Pacifica simply does not seem to me to have the kind of consistent performance that would lead to the kind of chart I am looking for. Conclusion No interest, so move on quickly to the next chart.

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M @ D 010890-150904 PBB - PACIFICA GROUP LIMITED > Steady 365


PCH Group (PCG)

Analysis This is clearly a value model chart. I owned this share in 1999, but sold out when the trend failed. It has traced out a good mark-up phase, but may be forming a distribution phase. Profits Somewhat erratic, swinging from profits to losses PE Ratio 7.2, which is attractive against the market average of 15.2 Dividend Yield 2.94%, which is rather less attractive against a market average of 3.74% Assessment I am not too worried about the low dividend yield, because this sort of company may be looking to conserve capital for expansion. My main concern is that the mark-up phase may have finished now and a distribution phase is being formed. Conclusion If it breaks to new highs, it would be worth re-assessment.

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Penfold Buscombe (PPR)

Analysis This one looks to be a value model chart. It is in a strong mark-up phase. Profits The present uptrend seems to be being driven by one good profit in the last five years PE Ratio 10.6, which is moderately attractive against the market average of 15.2 Dividend Yield 4.04%, which is only marginally better than the market average of 3.74% Assessment I don’t detect a margin of safety here. Conclusion Move on – this one is too difficult.

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Plaspak Group (PPK)

Analysis This is a surprisingly difficult one. At first glance it is a value model chart. However, the 2002 decline could be considered quite moderate, more like a growth model chart. My suspicion is that it is only a pause in a mark down phase. However, the possibility must be considered that it is a consolidation in a growth model chart. Profits The profit was growing alright and then more than halved in 2003, only to recover to a new peak in 2004 PE Ratio 9.7, which is moderately attractive against a market average of 15.2 Dividend Yield 6.5%, which is very attractive against a market average of 3.74% Assessment My clear thought is that the market suspects the 2004 profit will not be repeated or improved, hence the consolidation awaiting confirmation one way or the other. My thought is that the first indication one way or the other will be from the chart, which will break upward or downward in line with the profit movement expected by insiders. Conclusion This one was on my watch list for a while, then an attempted breakout upward failed. I will not be interested in it again unless it can break above the sideways trading range. In that case it will come up on the technical analysis filter and I can re-assess it at that time.

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Port Bouvard (PBD)

Analysis This is clearly a value model chart, It could be forming a distribution phase. Profits Very strong in the last two years, but before that erratic, with several significant losses PE Ratio 3.3, which is extremely cheap against the market average of 15.3 Dividend Yield 12.82%, which is extremely attractive against a market average of 3.74 Assessment This is a specialist property developer which is on a roll. There is no guarantee it will continue. There is therefore no margin of safety. It is a short term trading opportunity, rather than an investment grade share. This is not meant to be critical, it is simply saying that it does not fit my investment plan. Conclusion Move on quickly before succumbing to temptation to have a go at a speculation.

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Prime Retail Group (PRX)

Analysis As a stapled security, it is outside my investment plan.

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Qantas Airways (QAN)

Analysis This is a rubbish chart that does not fit either model. Profits Rather variable, but good for an airline, many of which around the world are skating on thin ice holding off the liquidators PE Ratio 9.6, which is attractive against a market average of 15.2 Dividend Yield 4.99%, which is moderately attractive against a market average of 3.74% Assessment I would not touch an airline with the proverbial. It helps that the chart is rubbish and the fundamental ratios are not outstanding. Their attraction is probably a partial discount for risk. Some patriotic readers are going to be incensed by my negative view of what is probably one of the most profitable airlines in the world. Sorry, folks, but the business of investing has no place for sentiment. I fully realise that some readers are going to throw these words in my face in future years if Qantas turns out to be a great investment. Conclusion Only if Qantas can make a strong all-time new high will I be tempted to re-assess this one, which could become a growth model chart if the gods smile on the industry in a way I can’t imagine at the present time.

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Queensland Cotton (QCH)

Analysis This is clearly a value model chart. It seems to be starting a mark-up phase. Profits Gently declining and small PE Ratio 9.4, which is attractive against a market average of 15.2 Dividend Yield 2.27%, which is rather unattractive when the market average is 3.74% Assessment This is another agricultural company – see previous comments on Australian Agricultural Company and Namoi Cotton Co-operative. The chart is attractive, the fundamental ratios less so and it is really outside my investment plan. Conclusion Move on to the next chart without much delay.

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RCR Tomlinson (RCR)

Analysis This seems to be a value model chart. The preset mark-up phase is rather more volatile than is ideal, failing to stay consistently above the 260-day moving average. Profits Three consistent years after four losses and a break-even result. Nothing spectacular PE Ratio 8.2, which is attractive against a market average of 15.2 Dividend Yield 3.75%, which is right on the market average of 3.74% Assessment The momentum of the trend is poor and the fundamental ratios are not exciting. I don’t detect a margin of safety or an outstanding business here. Conclusion Unattractive - move on to the next chart.

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Rebel Sport (REB)

Analysis At first sight this could be taken to be a growth model chart. However, on examination of the extent of the decline into the 2001 low, I am inclined to think it is a value model chart. Of course, it could become a growth model chart, but I would like it to prove its case before I agree. Profits Very strong profits in the last two years after many lacklustre years PE Ratio 12.5, which is not that attractive as it has just satisfied the filter criterion and against the market average of 15.2 Dividend Yield 3.38%, also not outstanding as it is less than the market average of 3.74% Assessment The ratios would be attractive if we could be sure it was a growth model chart, but they are not very tempting for a value model chart. Conclusion Not of interest unless it can make a new high, in which case it will come up on the technical analysis filter and can be re-assessed at that time.

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Reef Casino Trust (RCT)


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Rivkin Financial Services (RFS)

Analysis Sinking into oblivion. Profits Three years of losses, a small profit, then a better profit PE Ratio 5.1, very attractive against a market average of 15.2 Dividend Yield 9.3%, which is almost unbelievable against a market average of 3.74% Assessment The market does not believe this company is going to repeat last year’s profit. This looks like a company in trouble, the cheap ratios only indicating potential failure. Conclusion Move on quickly to the next chart.


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Roberts (RBS)

Analysis This looks like a growth model chart at first glance. However, I am not so sure on further examination. There is a big mark-up phase, but before that the growth was not very dynamic between consolidations – see the 260-day moving average. Profits Strong growth in the last three years, but unspectacular before that, including a loss in 1997 PE Ratio 10.9, which is moderately attractive against a market average of 15.2 Dividend Yield 5.64%, which looks good against a market average of 3.74% Assessment A new high would indicate the uptrend had further to go. Conclusion However, I doubt if it will win out over the other good trends that are already in my fully-invested portfolio.

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Rock Building Society (ROK)

Analysis Yes, it qualifies as a growth model chart, but the trend momentum leaves a lot to be desired – look at the 260-day moving average. It could develop momentum in the future though. Profits Steady, but unspectacular PE Ratio 10.2, which is moderately attractive against a market average of 15.2 Dividend Yield 5.62%, which is attractive against a moving average of 3.74% Assessment Building societies are really banks. They borrow short and lend long, with high gearing, so they carry high financial risk. Their fundamental ratios should look attractive against the market average, because they need to discount the risk. Conclusion Not particularly attractive. Move on.

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Ross Human Directions (RHD)

Analysis This looks as though it is a value model chart, which is currently in a mark-up phase. Profits Short history, but quite variable PE Ratio11.9, which is not compelling against the market average of 15.2 Dividend Yield 4.32%, which is only moderately better than the market average of 3.74% Assessment The chart appears to be in the early stages of a mark-up phase. However, it is lagging some other companies in the same sector. Also the fundamental ratios are not indicating a strong margin of safety. Conclusion Pass it up in favour of stronger shares in the same sector – Integrated Group and Catalyst Recruitment Systems.


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S8 (SEL)

Analysis There is not really enough to go on here to classify this one as one of the two models. Profits Three years only, but growing solidly PE Ratio 10.6, which is moderately attractive against a market average of 15.2 Dividend Yield 5.86%, which is attractive against a market average of 3.74% Assessment This could be of interest under my investment plan if it can move above the early 2002 highs and start trending strongly. However, I do have reservations about property services companies at this late stage of the cycle. Conclusion Re-assess it if it comes up on the technical analysis filter.

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Schaffer Corporation (SFC)

Analysis This one looks to be a growth model chart. It seems currently to be forming a consolidation phase. However, I am a little concerned about the length of the 1994 to 1999 consolidation. That is a very long time to sit through a consolidation. Profits Surprisingly variable considering the chart, with a loss in 1999. Profit before abnormal items is more consistent PE Ratio 11.7, not compelling against the market average of 15.2 for a value model chart, but OK for a growth model chart Dividend Yield 7.11%, outstanding against the market average of 3.74% Assessment It could be that the high dividend yield has held this share’s price up when it might otherwise have been a value model chart. If it is a growth model chart it will break upward from the present consolidation. However, if it is a value model chart, the present sideways pattern could be a distribution phase. Conclusion Re-assess is it breaks out upward, in which event it will come up on the technical analysis filter.

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Sims Group (SMS)

Analysis This is not all that easy to pick at first glance, but I am seeing it as a value model chart. Profits Declined for five years to a loss, then has risen for five years PE Ratio 10.2, which is moderately attractive against a market average of 15.2 Dividend Yield 5.3%, which is attractive against a market average of 3.74% Assessment The attractive ratios suggest some discount for cyclical risk. However the chart has looked good since the breakout upward in 2002, when the ratios were quite attractive. Conclusion This stock has been in my portfolio for some time and has now more than doubled in price.

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Sonnet Corporation (SNN)

Analysis This one appears to be a value model chart that is in a strong mark-up phase. Profits Variable including some large losses, but very strong recovery in the last two years PE Ratio 7.4, which is very attractive against the market average of 15.2 Dividend Yield 13.24%, which is outstanding against the market average of 3.74%. In part it reflects the payment of three dividends in the last year, instead of two Assessment Sonnet seemed to have a large margin of safety as well as being in a strong uptrend. Conclusion It was in my portfolio (a small position) at the time of this filter. Subsequently the uptrend failed and I sold out.

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Southern Cross Fliers Trust (SCF)


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SPC Ardmona (SPC)

Analysis This looks like a growth model chart, except that the uptrend lacks any real momentum – see the way it fails to stay above the 260pday moving average. Profits Growing steadily, but unspectacularly in the last seven years PE Ratio 11.3, which is moderately attractive against a market average of 15.2 Dividend Yield 4.14%, which is just above the market average of 3.74% Assessment This one is just interesting in each consideration above, but is really a poor performer. Conclusion Not interested.

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Stockland (SGP)

Analysis This is a stapled security and as such it is outside my investment plan.

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Streettracks S&P/ASX 200 Fund (STW)



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Sunland Group (SDG)

Analysis This one also has some aspects of a growth model chart. However, I am inclined to treat it as a value model chart, or perhaps neither. My main concerns are the depth of the fall to the 2001 trough and the general lack of momentum across the whole chart as evidenced by the inability to stay above the 260-day moving average. This one also used to be very thinly traded, but is a bit better now. Profits Except for a dip in 2001, it shows a strongly growing profit picture, especially in the last two years PE Ratio 4.3, which is extraordinary value against the market average of 15.2 Dividend Yield 4.55%, which is of moderate attraction against a market average of 3.74% Assessment My feeling about the low PE ratio is that the market is not expecting the company to repeat the last profit. It is a property developer, so there is also some risk, along with the likelihood that profits could be lumpy. Conclusion This one is potentially interesting. However, I am inclined to consider it too risky in the late stages of the property boom.

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TAG Pacific (TAG)


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M @ D 240890-150904 TAG - TAG PACIFIC > +1 to 30


Tassal Group (TGR)

Analysis There is insufficient history to categorise this chart. Profits Only one profit is available PE Ratio 7.2, which is very attractive against a market average of 15.2 Dividend Yield 2.0%, which is rather unattractive against a market average of 3.74% Assessment There is not much to assess here. Conclusion No conclusion can be usefully drawn for such a new listing. If it makes a new all-time high, it will come up on the technical analysis filter and can be re-assessed at that time.

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M @ D 121103-150904 TGR - TASSAL GROUP LTD > +5 to 100


Tectonic Resources (TTR)

Analysis This is fairly clearly a value model chart. It has had a good mark-up phase and may be starting to form a distribution phase. Profits Many years of losses, but good profits in the last two years PE Ratio and Dividend Yield are not appropriate for a resources company Assessment This is a difficult one to assess. My feeling is that I am not interested unless it can make a new high for the uptrend, which will suggest the trend has further to go. Conclusion Re-assess it if it comes up on the technical analysis filter by making a new high.

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M @ D 101293-150904 TTR - TECTONIC RESOURCES NL > -.5 to 29.5


Thakral Holdings Group (THG)

Analysis This is a stapled security and as such it is outside my investment plan.

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M @ D 170694-150904 THG - THAKRAL HOLDINGS GROUP > -3 to 69


Tomato Technologies (TMO)

Analysis This looks as though it is a value model chart that is just starting a mark-up phase. Profits Very variable, from loss to profit PE Ratio 11.0, which is not that interesting compared to the market average of 15.2 Dividend Yield 8.65%, which is highly attractive against the market average of 3.74% Assessment The chart looks interesting, but there is no margin of safety here. See my web site Ask Colin/Software for answers about Blue Chip Trader and Star Trader, which point to Pierpont columns on this company. Conclusion In view of Trevor Sykes’ opinion in the Pierpont columns, I would move on to the next chart.


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M @ D 100101-150904 TMO - TOMATO TECHNOLOGIES LTD > Steady 52


Tourism and Leisure Trust (TLT)


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M @ D 070897-150904 TLT - TOURISM AND LEISURE TRUST > Steady 75


Transfield Services (TSE)

Analysis This seems to be a growth model chart, but the limited history could be misleading, especially as a construction firm could be expected to be cyclical. If it is a growth model chart, it appears to be just starting a new mark-up phase. Profits After a loss in 2001 (after abnormal items only – still a loss) it has good profit growth in the following three years PE Ratio 11.0, which is only moderately interesting for a value model chart, but quite interesting for a growth model chart, against the market average of 15.2 Dividend Yield 2.95%, this is lower than the market average of 3.74% Assessment This is what I am looking for. It is either a quite reasonably priced growth model chart or value model chart in a strong uptrend. The main risk area is its exposure to the very cyclical construction sector. Conclusion Has been on my watch list, but has just been beaten by better prospects when funds were available.


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M @ D 030501-150904 TSE - TRANSFIELD SERVICES LTD > Steady 542


Triako Resources (TKR)

Analysis This was a rubbish chart until 1997, but now looks like a value model chart that has enjoyed a strong mark-up phase and may be forming a distribution phase. Profits Solid but variable profits in the last five years PE Ratio and Dividend Yield are not appropriate for a resources company Assessment I am more interested in resources shares closer to the start of their mark-up phase. Conclusion I would pass this by, with the proviso that it would be worth re-assessing if it moved to a new high for the trend, in which case it will come up on the technical analysis filter.

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M @ D 020890-150904 TKR - TRIAKO RESOURCES > Steady 150


Troy Resources (TRY)

Analysis I am seeing this one as a value model chart, but one where the present mark-up phase has good growth model characteristics. The negative is the lack of momentum, evidenced by failure to trend strongly above the 260-day moving average. Profits Fluctuating profits in the last five years after five years best forgotten PE Ratio and Dividend Yield are not appropriate for a resources company Assessment I am more interested in resources shares closer to the start of their mark-up phase. Conclusion I would pass this by, with the proviso that it would be worth re-assessing if it moved to a new high for the trend, in which case it will come up on the technical analysis filter.

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M @ D 010890-150904 TRY - TROY RESOURCES > -1 to 280


United Overseas Australia (UOS)


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M @ D 290591-150904 UOS - UNITED OVERSEAS AUST > +3 to 108


UXC (UXC)

Analysis This is a value model chart in a wide accumulation phase. It looked as though it would get going in 2003, but fell back. Profits Horrendous loss in 2001, but reasonable profits in the last two years PE Ratio 12.0, which is not very attractive against the market average of 15.2 Dividend Yield 6.25%, which is rather attractive compared to the market average of 3.74% Assessment This is of no interest unless it starts to trend upward out of the accumulation phase. In that case, it will come up on the technical analysis filter and may then have a greater margin of safety. Conclusion Move on to the next chart.

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M @ D 291298-150904 UXC - UXC LTD > -1 to 80


Villa World (VWD)

Analysis This is a value model chart. It appeared to be forming a distribution phase, but has broken out upward. Profits Very variable from profit to loss, but strong growth in the last three years PE Ratio 6.6, which is very attractive against the market average of 15.2 Dividend Yield 8.67%, which is also very attractive against a market average of 3.74% Assessment Although it has broken out upward, VWD still has to clear resistance from the 1993 highs. The highly attractive ratios are probably partly a discount for risk considering VWD’s position in the late stages of a housing boom and that the market is doubtful that it can repeat last year’s result. Conclusion It may be worth re-assessing if it can well break above the 1993 highs. If so, it will keep coming up on the technical analysis filter.

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M @ D 080890-150904 VWD - VILLA WORLD LTD > -3 to 150


Wadepack (WPD)

Analysis This one has many characteristics of a growth model chart, except that it has a lack of momentum, evidenced by a failure to trend strongly above the 260-day moving average. Profits Good growth over time, but with some nasty slips PE Ratio 10.9, which is not outstanding value against the market average of 15.2 Dividend Yield 4.81%, which is only moderately attractive against the market average of 3.75% Assessment Considering the profit was down in the last year, these ratios may be a bit more attractive if thought of in terms of the margin of safety working for us. Conclusion This one could be quite interesting if it breaks to a new high, in which case it will come up on the technical analysis filter. A re-assessment at that time may show improved ratios.

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M @ D 060990-150904 WDP - WADEPACK LTD > -1 to 187


Wallace Absolute Return (WAB)

Analysis As a listed investment company it falls outside my investment plan.

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M @ D 280103-150904 WAB - WALLACE ABSOLUTE RETURN LTD > Steady 100


WAM Capital (WAM)

Analysis As a listed investment company it falls outside my investment plan.

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M @ D 120899-150904 WAM - WAM CAPITAL LTD > -1 to 164


Warehouse Group (WHS)

Analysis This is most probably a value model chart. It seems to be in a clear mark-down phase. Profits Quite variable PE Ratio 21.6, which is way above our criterion, so there is clearly an error in the data used for the filter. At this point, I double checked the ratio from a couple of sources and came up with above 20 in each case. This confirmed that the share should never have been selected. Conclusion Move on to the next chart.


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M @ D 221100-150904 WHS - WAREHOUSE GROUP LTD > -1 to 391


Watpac (WTP)

Analysis This one needs close inspection, but is clearly a value model chart. It is currently in a very strong mark-up phase. Profits Rather erratic, but steadier in recent years PE Ratio 9.0, which is moderately attractive compared to the market average of 15.2 Dividend Yield 5.28%, which is also attractive compared to the market average of 3.74% Assessment This is a construction company enjoying good results in a boom period. It looks as though I am a bit late now, but it is definitely worth keeping in mind. It is basically what I am looking for, except I would like a greater margin of safety in terms of the industry cycle. Conclusion It will continue to come up on the technical analysis filter while the mark-up phase continues and can be constantly re-assessed if funds are available.

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M @ D 010890-150904 WTP - WATPAC LTD > Steady 109


Willmott Forests (WFL)

Analysis This looks from the evidence, which only covers a short period, to be a value model chart that is in a strong mark-up phase. Profits Suffered a severe slip in 2002 and 2003, but the last year seems to have got it back on track PE Ratio 12.4, which is right on our filter criterion, so only moderately interesting in a value model chart against the market average of 15.2 Dividend Yield 1.63%, which is very low compared to the market average of 3.74% Assessment This and some of its competitors have come up repeatedly on my technical analysis filters. My concern has been the many problems in the forestry industry. Conclusion This one does not present the margin of safety I am looking for.


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M @ D 201200-150904 WFL - WILLMOTT FORESTS LTD > -2 to 246


WMC Resources (WMR)

Analysis This is a new listing as a result of a corporate split. It appears to be in a slow uptrend. There is no evidence to suggest a model, but being a resources share, it is likely to be cyclical and therefore a value model chart. Profits A small loss, followed by a reasonably good profit. Not much to go on. PE Ratio and Dividend Yield are not appropriate for a resources company. Assessment This one lacks context to know how far we are through the mark-up phase. In any case it lacks momentum at this stage. Subsequent to the filter, it became the subject of a takeover offer. Conclusion There is not enough for me to judge at this stage. However, if it was to start trending more strongly, it would come up on the technical analysis filter. In the event a takeover has since intervened.

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M @ D 041202-150904 WMR - WMC RESOURCES LTD > +2 to 496

fundamental analysis filter - bwts.com.au

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