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The information contained in this email is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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Good evening,

The ASX 200 had a really nice week, recovering quickly on Monday from the "Trump gets COVID19" sell-off on Friday afternoon last week and since adding another c. 200pts.   The ASX 200 closed flat on the day at 6102. 

This evening's weekly note is bought to you by my third Roku Gin & Tonic, courtesy of my best mate and loyal reader Ashok who bought me a bottle for my birthday back in August (31st for those who want to send me gifts or cash next year!)

Ashok is responsible for half of ANZ Insto Property reading this note each week so many thanks for your ongoing support #darknessbrothers.  If you're in the market for a $500m+ senior debt refinance for your ASX-listed property trust, Ash is the man to talk too.
Small and mid cap stocks had a huge week of outperformance, while the top 50 lagged.  Energy, tech, financials and materials (all the high beta cyclicals) leading the way.  The equity risk premium (ERP) is going lower (as we've discussed ad nauseum.)
I'm telling you once, twice, three times and silent.... this market is going higher

That said, the ASX200 has gone sideways since the start of the financial year.  This is the best stock-picking market I've ever been apart of... if you can't find undervalued companies now you won't ever find them. 
As a result, our SMA model portfolio is doing exceptionally well. 

As of Thursday's close, +10.14% gross returns since inception vs ASX 200 Accumulation Index +3.82% (that's 6.32% outperformance before fees)
We had a huge week of inflows this week, very appreciative of all the clients getting right behind the product and thanks to the new clients for putting their faith in us. 

..... we want more investors!
And let's face it, we are doing pretty well relative to the peer group on a 3 month basis... Here's a chart of every other ASX 200 benchmarked manager in Australia... that's us in blue and the benchmark in pink. Numbers courtesy of our friends at Lonsec.  For the smart arses in the group, Pegana and Ausbil are ahead of us (for now...)
The stock you've all been emailing me about

A nice try by the c.30 people who emailed me trying to get ahead of the curve and find out what stock I think can potentially 10x from last weeks note.   I'd love to do a few "dishonorable mentions" here but I'll refrain.  

I'm going to have to hold you all at bay for another week.  Just trying to finalise the deal for my clients at the deepest possible discount to market prices as I can. 

There's a big institutional super fund investor who just needs go through their internal red-tape/process before we push the button, but should transaction should be finished by Monday so all going well, next week I'll give you the run down.  

Clients, you already know what's going on as per my email this week.
Beginner Investors

I'm getting a lot of emails from novice, beginner and first time share market investors, all with the same questions.  Here's the answers to 4 of the most common questions I've had this week. 

What systems/software do you use?
  • Factset (with a bunch of add-ons) c. $30,000 p/a
  • IRESS Pro with IOS c. $12,000 p/a 
Like all tools, a chisel in my hand is not the same as a chisel in Michelangelo's hand.  

Michaelangelo is not as good at backtesting and non-linear regression as I am. 

Where do you get your information?
  • I don't read newspapers, watch TV or YouTube,
  • I don't subscribe to any newsletters,
  • I don't watch/read Livewire Markets or CNBC/Bloomberg/Ausbiz/Tickr etc. 
  • I don't go on Twitter or HotCopper, ever.
  • I'm not part of Telegram/Whatsapp investor groups (despite being invited all the time)
  • Facebook forums/groups are for people with too much time on their hands and no friends in real life.
I use Google Alerts/Twitter alerts for the stocks/people I'm interested in overnight and then I'm on IRESS all day so I just use the alerts on the live newsfeed function. For my own enjoyment, I read Scott Galloway's weekly, SITALweek & Alvin's Blog because I'm interested in technology. 
 
We try to only use primary sources for information & analysis. 
Qualitatively (not numbers), that means I speak to the company managment and staff, the competitors, the suppliers, the customers or industry/academia experts in that field. 
Quantitatively (numbers), that means I use accounts and financials submitted to the exchange (or a tool like Factset that aggregates and verfies this sort of data).  We have our own 'standards' in terms of accounting, revenue recognition etc so I'll apply those to compare companies on what I consider a like-for-like basis. 

We also have access to most of the broker, investment bank and independant research agency reports on companies, sectors and markets more broadly.  Some of this we pay for, others just come to us because we have accounts, contacts or friends who work at those firms.  We use this to better understand the other opinions in the marketplace (stockmarket 101:  you make money by knowing what most other people think and betting that they are wrong in some way.) 

How do I get started with investing?
What you are really asking here is "how do I make money in the market?"  and there are lots of different ways to make money investing... it just comes down to:
  1.  What can you do?
  2.  How well can you do it?
As you are a novice, you can't do anything and therefore, can't do something well.  You need to focus on small targets and getting good at one thing - comparing fund managers, picking up the basic of derivatives, learning every there is to know about lithium, understanding how a data centre makes money... I don't care but pick a small target and focus your limited time and attention on that topic.  Don't pick FX trading, global macro or rates trading.  Don't trade index futures, don't short, don't use leverage, don't day trade, don't trade commodities and for christs sake, don't trade CFD's. Focus on learning companies/a sector of companies you already have some idea about really, really well. 

Assuming you've got a job, a partner, friends, a sport or musical instrument you like to play and kids, committing 2-3 hours a week to generally improving your stockmarket knowledge at home, unless you are exceptional (you aren't), is pointless.  You'll never broadly catch up unless you are under 25 (without those responsibilities) and are really committed.  

Sorry to burst your bubble but I'm 34, with a partner who works as hard as I do and no kids.  I work at improving 5-10 hours per day, 5-6 days a week, but I'm improving from a base that started investing when I was 17.  I've got a bachelors and a masters degree in finance and I've been trained, 8hrs a day, 5 days a week, for more than 10 years by some of the best brokers, traders and corporations on the planet. 

Start shooting 1000 jump shots a day for the rest of your life, chances are you'll never be better at shooting jump shots than the person who's been shooting 2000 a day since they were 5.

Scary thing is, there's heaps of people WAY better than me at investing money and who work MUCH harder than I do.  Every time you sell, its someone like me (or worse) most likely stealing those shares off you because they know something you don't/your stupid stock forum doesn't.  Everytime you buy, its someone like me selling you that overpriced trash.  The market is a zero-sum game.  How confident are you, that you know more about the stock you're about to buy or sell, than the person on the other side of the trade?  Trust me, the smart money doesn't bother posting their ideas on the internet for everyone to see (more on that later).

My advice:  Get advice. Pay someone to invest for you, they might not be the best, but they'll probably be better than you after fees.  If you think I'm a bald-headed dickhead, fine... In no particular order, give your money to Tom & John @ VP, Beamo @ Endeavour, Stephen @ Aoris, Nick @ Fairlight, the team at GQG... these guys are so smart, so much better at investing than you ever will be. 
OR
Just be average, buy an index fund and dollar-cost average (something like this, MSCI All World).  To be honest, do that consistently and you'll likely do better than giving your money to most finacial advisers and stockbrokers that I know/have worked with previously. 

Why can't I just follow your investment ideas from this note?
Why do you put so much trust in me? I could just be pumping up stocks to benefit my clients and inflate the price... or pandering to management to try and get a fat corporate fee!  In this game, if you dont pay someone to act in your best interests, it's safer to assume they don't.  

Do you actually think I give away all my best investment ideas for free?  You realise I've got to pay people's wages, my rent, pay for all those fancy systems each month, right?  As one the best clients I've ever had said to me this evening, I've gotta put milk on my Wheaties tomorrow morning!" (g'day Alan, you're a legend!)

Do you ask your lawyer to prepare employment contracts for free?  Or your accountant to do your tax return for free? Or your landscaper to mow your lawn for free?

A good investment idea takes weeks (sometimes months) of specific work, usually leveraging years of experience, relationship building and training.  Sometimes securing enough stock to make it all worthwhile requires buying coffees, beers and lunches for a whole host of people, just for the chance to make an investment that has no guarantee of working out. 

I'm running a business here people! One that is very grateful for the clients who pay for our intellectual property, our service and care.  Why would I undermine all those legends and give my best ideas away for free to a bunch of people I don't know? 

Remember, "if you aren't paying for the product, you are the product."

And FFS, open an account, invest in the SMA Model Portfolio ($20-25k min) or put your trading through our desk... support the small businesses who's opinion you clearly value.  
Wealth management platforms

Netwealth (NWL) has put on over 100% in the past 12 months, competitor Hub24 (HUB) has put on 72%.  My mates at Praemium (PPS) have only gone up 30%. 

A bit like everyone abandoning credit cards for BNPL, in the investment administration landscape, the exodus is just getting started.  AMP is imploding, IOOF is a baskcase, these guys are going to be losing market share to the 3 stocks listed above for a long time to come. 
Praemium however, is undoubtedly the one to watch.  They've just bought Powerwrap, which is a shitshow, but has a few redeeming features (its execution desk & international nominee).  Praemium has the best technology and without a doubt is, from an investment managers perspective, the best platform to use.  They've also got a unique and distinct opportunity with their Unified Managed Account offering to grab market share, merging custodial and non-custodial asset reporting with a capable execution desk... if you were leaving a Morgan Stanley, a Macquarie or any other buldge-bracket broker to start a boutique... you wouldn't be using shitty Netwealth or Hub24. Leave that for the suburban financial planners who tell tradies with $150k to open an SMSF, families to buy $10m worth of life insurance for $1m in assets, and think 2 Magellan LIC's and AFIC is "boutique investment advice"... please.
Media watch
Movers & Shakers

Nice to see the Zip Co boys doing well this week. (Z1P... call me a traditionalist but I despise all ASX codes with a number in it)

Elsewhere gold stocks, mining services, energy and building materials did well. Generally, its a cyclical rally... just like we've talked about recently.
Nothing really to speak of in the red.  My friend and loyal reader of the weekly note Beamo was on Ausbiz plugging Bravura (BVS) (login required).  As I mentioned, I reckon the team at Endeavour are pretty damn good at picking stocks and making money for their investors, so if you've got a few spare bones, you could do a lot worse.  However, as a client and user of Midwinter, I don't like BVS... they couldn't sell water in the desert. 
Looking forward to the NBA Finals tomorrow lunchtime, though I think the Heat will lose, I hope they win.  As for the AFL, I'd rather watch the Wallabies... that is saying something! I'm still seething from last week. Collingwood supporters... go and invest in WeWork or something!
Have a good weekend, 
LL
Luke Laretive
CEO & Investment Adviser

T  +61 3 8639 1601  |   M  0451 122 656 | lukel@senecafs.com.au
Level 2 Professional Chambers
120 Collins Street Melbourne VIC 3000 
AFSL No. 492686
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