cyclical investing presentation
DESCRIPTION
Cyclical Investing. 1. Identifying the Cycle • Determine the market cycle using Coincide CMV • Market Cycles are Key to Investment Strategy Success 2. Asset Class Selection • Identification of the asset classes that will perform the best at a point in the cycle. 3. Determine Investment strategy • Formulate and enable the investment strategy based on the cycle indicators • Current investment universe is large cap Australian equities, considered leverage and risk management techniques. 4. Manage the strategy to create returns: • Considered leverage particularly for new investors then leverage up on capital gains. • Manage investment risk using futures and options • De-risk client portfolios by paying back part of the initial capital along the way (4-5 years). This frees up the original capital to allocate to other asset classes whilst maintaining original invested capital in Australian equities.TRANSCRIPT
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Cyclical investing
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1. Identify the Cycl
e
• Determine the market cycle using Coincide CMV• Market cycles are key to investment strategy success
2. Asset
class
selectio
n
• Identification of the asset classes that will perform the best at a point in the cycle
3. Determine investment strategy
• Formulate and enable the investment strategy based on the cycle indicators• Current investment universe is large cap Australian equities, considered leverage and risk
management techniques
4. Manage the strategy to
create
returns
• Considered leverage particularly for new investors then leverage up on capital gains• Manage investment risk using futures and options• De-risk client portfolios by paying back part of the initial capital along the way (4-5 years). This
frees up original capital to allocate to other asset classes whilst maintaining original invested capital in Australian equities.
Discretionary Managed Equity Account (DMEA)
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The objective for the Kennedy Investment™ DMEA is to create
high absolute investment returns for the Australian equity
component of an investors portfolio. Large cap Australian stocks, considered leverage and risk management strategies are
used and clients pay a performance based fee.
The investment is open to individuals, companies, trusts and self-managed
superannuation funds with a minimum investment of $500,000.
Actual Performance on $100,000 Equivalent Investment from January
2004 to April 2013.
Kennedy Investments Recent Performance
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Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-1390.00
95.00
100.00
105.00
110.00
115.00
120.00Kennedy Investments
XJOAISince February
2013 the KI DMEA has
produced 15.16% return compared to the ASX200 accumulation index (XJOAI)
that has returned 5.06%.
Cyclical Investing – How cycles work
XAO annual cycle
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Dec Jan
Feb
Mar Apr
May Ju
n JulAug
Sep OctNov Dec
100
101
102
103
104
105
106
107
108
XAO Average monthly returns Jan 1942 – Dec 2012
Average price index returns for each month for the last 72 years indicate that 72% of Decembers and 71% of Januarys have positive
returns.
Cyclical Investing – How cycles workAverage annual returns 1936 -2011
1 2 3 4 5 6 7 8 9 10
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
This chart shows the average return of the XAO price index for each year in the
decade from 1936 to 2011.
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Along with monthly cycles there are also yearly cycles within the decade – more than 80% of 3rd, 5th, 6th and 9th years in the decade produce positive
returns.
Cyclical Investing – How cycles workDecade Cycle Jan 2011 – December 2020
2011 2012 2013 2014 2015 2016 2017 2018 2019 202090.00
110.00
130.00
150.00
170.00
190.00
210.00
Based on All Ordinaries Index 1/1942 – 6/2012
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There is a high probability that the market will bottom every second year based on the monthly and decade cycles as seen
here in the all ordinaries index.
Cyclical Investing – Coincide CMVThe Decade Cycle in Australian equities
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Decade low buy signals occur when the cycle low coincides with the momentum.
Identifying the optimal entry point:1. Beginning of a
major bull market2. Point of no return3. Optimal entry point
(no better entry after this point)
The momentum and cycle indicators have an 85% success rate and combined there is an even higher probability of high returns.
July 2012 was the last point when these indicators coincided and identified the start of the bull market
ASX Share Market Decade Returns
*28 year rise except for 22% correction 6/1914 to 12/1916
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Kennedy Investments Prediction: The ASX All Ordinaries Index (XAO) will go to between 9,500 to 10,000 by 2017, it is currently at 5,241.
Considered Leverage & De-risking the Portfolio
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In a bull market as identified in July 2012, it is highly likely that the market will increase by 20% within a three year period.
In this example - column 5, there is equity of $2.2m and gearing of $2.8m and the market would need to drop by 24.60% before it starts to affect
the initial client capital.
US Equity Prices & Bond Yields Since 1900
• The Dow Jones Industrials & long term US Treasury yields back to 1900
• Every equity breakout from a long term trading range has coincided with a secular inflection point in the bond market.
• A new secular bull market in equities in coming years therefore requires a secular bear market in bonds and a ”good” rise in interest rates
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Appendix 1: US Cycle
Dow Industrials 10 Year Decennial Pattern
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Appendix 1: US Cycle
S&P 500 Decade Cycle
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Appendix 1: US Cycle