trading & investing expo - making smart money in 2014

Invast Insights

Week Commencing March 31, 2014

www.invast.com.au | 1800 468 278

Editor’s note: This week’s Invast Insights report is very different in nature, it has

been written to provide our recent stock screens. Next week’s report will return

to the original format

We may have met some of you recently at the Trading, Finance and Property

Expo in Melbourne last week. For those in other cities, we plan to see you in

the coming months. Some of you may have come across Invast at the Trading

& Investing Expo - we recently exhibited in both Sydney and Melbourne. Our

main stage presentations were around what the smart money is doing in 2014

- feedback from discussions with large, sophisticated and often wealthy

investors. We speak to a lot of these type of people throughout the year and

we find expos and conferences a great opportunity to relay feedback back to

ordinary investors. The presentation was very similar to one which we held in

Melbourne last October but the stocks that we have chosen in this report are

updated.


For those who missed the presentation, here are a three of the slides

summarising our view. The total presentation contained more than 20 slides.

For the full presentation, please call through and speak to an Invast Private

Client staff member and they will send the full document across.


We hoped our presentations passed on the basic message that investing is

becoming more difficult and a well thought out investment plan needs to

consider international exposure and the new breed of emerging companies

which are often neglected by many investors. In this report we run through

some names of smaller and emerging companies which we think every

portfolio investors should at least read through. We don't necessarily rate

these all as buys nor do we think it is adequate buying all of them as a

diversified strategy. Instead, our aim is to get these on your watch-list and see

if they fall within your overall scan.

Our scan was built on a few different variables. First we thought stocks

between $20m-$150m are well placed to benefit from the next bull market

rally which has probably emerged and will last around a decade. Again, these

are the same parameters we ran last year. The exact timing is debatable but

many will agree that the index representing smaller companies is now near

record low levels when compared to the broader market and many smaller

stocks will become beneficiaries of bull market behaviour when the big

names become too expensive or grow less. With record low interest rates in


Australia, improved political confidence and an economy which is still healthy

by developed world standards, we felt that a $20m-$150m business should be

well placed to benefit from a turnaround.

We then excluded mining & energy stocks intentionally - the Australian

market is very heavily focused on this space and we just feel that there are

plenty of other avenues to find emerging mining stocks. More importantly

though, most mining stocks have run out of cash and so any rally in

commodity prices will probably see a huge flood of capital raisings from

ordinary shareholders which will make upside potential a little more

complicated. We stuck to businesses that are growing their revenue and have

the prospects of putting together some nice earnings.

The real types of businesses we wanted to find were those with a competitive

advantage - a niche, something different to the rest of the market - not just

another prospective gold/iron ore/nickel mine or oil/gas prospect that needs

hundreds of millions in drilling expenditure and billions in infrastructure


spending before it starts to produce. Because of this, we then added some

other stocks with this niche aspect.

We bet if 9 out of 10 people reading this report right now would probably

have never heard of the stocks that we have listed below but around the

same amount of people would all have heard of Fortescue. Why is it that

many hidden gems, as we have called them in this report, aren't well known

businesses? Here are some reasons:

• Most of the hidden gems that we are about to show you are smaller

businesses and so won't get the same attention as larger stocks like

Fortescue - which is completely understandable.

• Most mining stocks need shareholders to bankroll their expansion, which

means raising money by capital raisings. Brokers know this and because

brokers and investment banks are usually the ones that undertake these

capital raisings and make a lot of money out of them, they will usually

focus their research on stocks which they can generate future business


• Most analysts are equally too lazy to spend time on small companies

which are barely making money and could blow up, so a red line is often

drawn at the top 200 stocks whereby many smaller opportunities get

neglected, particularly during a challenging market as has been the case

since the GFC.

• Many fund managers who invest in smaller companies have limitations

around the size of company they invest in. This is because they often have

large sums of money and if they are trying to buy into a small company,

the limited amount of shares on issue will complicate them going in and

out of the stock. This is called liquidity. Luckily, ordinary shareholders

managing their own wealth don't really have this problem and so an

opportunity opens up.

• Because the market is dumb. That's right, we see many investors

particularly those who start out in investing take the advice of brokers

and analysts as gospel but that is just plain wrong. Many analysts try their

best to build a comprehensive framework around their recommendations.

Many brokers try their best to find money making opportunities for their

clients.


But everybody in markets has their limitations and so your own individual

circumstances & preferences are more important than what a certain analyst

or broker thinks at that point in time. There is a common saying that the

financial services industry is the only profession where people riding the bus

or train to work are the ones advising those who drive a Rolls Royce on how

to invest their money. The above is important to get through before we show

you the list, just in case you are wondering why we have chosen the stocks

here. So with all this in mind, here are our hidden gems.


After running the above scan, we decided to make some exceptions to the

$20-$150m market cap criteria which we had set ourselves. We wanted to find

some even larger businesses which had the potential to do well over the next

few years but that are already large in size. We decided to pick three key

stocks, most likely businesses which will keep taking market share in their

respective industries. For the below stocks, we are trying to f ind businesses

similar to Seek or TPG – stocks which have always looked good but the


market always under estimates their ability to beat expectations. We looked

for businesses that are unique and again stayed well clear of mining, mining

services or energy companies which often suck cash out of their share

holders. The list looks a little something like this.


Most Invast Insights reports go to clients only but because of the Melbourne

expo last week, there are many receiving this week’s report that are not yet

Invast clients. We have organised to run through the above stocks in an online

seminar (webinar) which is reserved for Invast clients only. We will be

touching on which of the stocks above we think are buys at the moment,

which stocks we think might come down slightly and become buys or for the

remaining stocks which levels are important to watch before each stock

becomes a buy.

It is imperative that you register into this client only information session

(webinars). We plan to speak to the CEOs of several of the stocks above and

we will only articulate what they have told us about their businesses in the

webinars. We will not be publishing their comments in writing – only Invast


clients will have the privilege to see what these CEOs have told the Invast

analyst team. The webinar is also a fantastic opportunity for you to ask Chief

Market Analyst, Peter Esho, any questions that you may have. Webinars are

held in the comfort of your own home and you can simply type your question

while Peter answers it live for all the attendees to see.

Because of technology restrictions, the webinar for this particular report is

restricted to the first 100 clients who secure their place. To register visit

www.invast.com.au/webinars. It is imperative that you secure your space

quickly, Peter’s last webinar in February had more than 224 attendees

registered. There’s no doubt that this webinar will be even more popular with

many investors in the market looking to find these smaller company

opportunities to add to their portfolios.

http://www.invast.com.au/webinars








Trading, Property & Franchise Expo in Melbourne

It was great to be involved in the first Trading, Property & Franchise Expo

(www.TPFExpo.com.au) in Melbourne over the weekend. The main guest

speaker was Jack Schwager, author of the Market Wizards series of books.

Below is a photo of the team and it was great to speak to so many like-

minded trading enthusiasts over the 2 days. If you are based in Sydney,

Brisbane or Perth, be sure to go to www.TPFExpo.com.au for when the expo is

next near you.

http://www.tpfexpo.com.au/















7.0 Disclaimer

Please note that you are receiving this report complimentary from Invast Financial Services Pty Ltd (AFSL 438 283). Invast staff members may from time to time purchase securities which are included in this or future reports. The authors of this report may or may not be holding a position in the securities mentioned. Please note that the information contained in this report and Invast's website is of a general nature only, and does not take into account your personal circumstances, financial situation or needs. You are strongly recommended to seek professional advice before opening an account with us.

General Disclaimer: This newsletter contains confidential information and is intended only for the person who downloaded it. You should not disseminate, distribute or copy this newsletter. Invast does not accept liability for any errors or omissions in the contents of this newsletter which arise as a result of downloading this newsletter. This newsletter is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any financial product. Invast Financial Services Pty Ltd is regulated by ASIC (AFSL 438 283 | ABN 48 162 400 035).


Risk Warning: It's important for you to read and consider the relevant Product

Disclosure Statement, and any other relevant Invast Financial Services Pty Ltd

documents before you decide whether or not to acquire any financial

products listed in this email. Our Financial Services Guide contains details of

our fees and charges. All these documents are available here on our website,

or you can call us on +612 8036 7555. CFDs and Foreign Exchange are

leveraged products and carry a high level of risk and you can lose more than

your initial deposit so you should ensure CFD and Foreign Exchange trading

meets your personal circumstances.

General Advice Warning: Being general advice, this newsletter does not take

account of your objectives, financial situation or needs. Before acting on this

general advice you should therefore consider the appropriateness of the

advice having regard to your situation. We recommend you obtain financial,

legal and taxation advice before making any financial investment decision.

*Distributed with the permission of Invast.com.au

trading & investing expo - making smart money in 2014

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