Went to the 15th annual Australian Stockbrokers Foundation Awards night last week. A charitable affair. Into the valley of the shadow of the Star City casino rode the 600 (stockbrokers). A lethal combination of bull, bear, Crown Lager, De Bortoli wines and a dance floor.
Mixed in with the awards were some notable displays of charity and a Calcutta stock auction. This involved auctioning eight stocks. The idea was to buy the stock that would perform the best in the next 12 months. Fortescue won last year's Calcutta and Southern Cross Equities promptly re-donated its winnings. The most sought after of the eight was Gindalbie Metals, which fetched a hard-fought $36,000, closely followed by Karoon Gas ($35,000), Sunshine Gas, Nexus, Equinox, Pan Australian, Aquarius Platinum and, bargain of the night, Paladin at $10,000. Total raised $145,000. It seems the broking community has spoken. Resources are the only game in town, with iron ore the obvious play and coal bed methane close behind.
We moved on to the award for Corporate Deal of the Year. A lot to get stuck into here:
■The Marginbet IPO. Raised $2 million for online wagering in September. It was suspended a month later for failing to lodge its accounts and switched to gold exploration in December. Suspended from official quotation six months after listing.
■Bushveld Platinum. Raised $3 million a year ago to explore for platinum in South Africa. Six months later bought a motor vehicle leasing finance business that specialised in extending credit to "people without a credit history or with credit problems". Suspended from official quotation in February.
■In the past year, 70% of IPOs and placements are now trading below their issue or placement price. Just in case you thought IPOs were money for nothing. Worst was Rams Home Loans. Lost 97%.
■On the flip side, the best IPOs or placements were in Linc Energy, up 440%, Coal of Africa, up 166%, Cockatoo Coal, up 166%, Fortescue, up 164%, and Atlas Iron, up 132%.
We also had awards for the Best Operator of the Year. This is heavily contested by the boys and girls that input orders into the market through the ASX ITS computer terminals. Names have been excluded to protect the guilty, which included one operator whose fat fingers dropped the Orica share price from $31.70 to 8.6¢ in one trade, and another who dropped a listed debt security from $94.50 to $3.67, putting it momentarily on a 96.33% yield. Never a dull moment. (All trades cancelled by the ASX).
Research of the Year saw inspired and pitiful luck, particularly in the timing of ABC Learning and Allco Finance Group "buy" recommendations. This included one broker who initiated coverage of Allco with a "buy" recommendation at $9.50, only to later suspend coverage at 47¢, and one broker who removed the "bid premium" from his St George Bank valuation and moved to "underperform" three days before Westpac bid for them.
It all went to reinforce a few established sharemarket principles, including:
■You are only as good as your last recommendation.
■It is always worth sitting on the bid.
■If it looks too good to be true, it is.
■Anything that yields more than 10% in the equity market, probably doesn't.
■If an IPO is any good, you won't be offered it.
■If you get offered an IPO, you don't want it.
■A liar may disappoint you but a product disclosure statement may cost you money.
■You can only lose 100% in the wrong stock. But you can make 440% in the right stock.
And, of course, the unwritten truth about the whole sharemarket, that it is founded on the richest of tapestries, the unknown. Is there any better way to spend the day than in an industry whose core activity is shaping, facilitating, guessing and investing in a future that hasn't been made yet?
Thanks to Danny Dreyfus for his organisation of the Stockbrokers Foundation Awards night and the attending stockbrokers who raised more than $450,000 for charity (a record) and have raised over
$5 million for worthwhile causes (www.stockbrokersfoundation.org.au). Thanks also for creating the colour behind this article.
Marcus Padley is a stockbroker with Patersons Securities and the author of the daily sharemarket newsletter Marcus Today. For a free trial, go to www.marcustoday.com.au
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