Merkin Investor Signals Hong Kong – 2016
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Investor Signals Pty Ltd is a portfolio management company based in Australia and The Merkin Group and Leon Hinde have a Hong Kong joint venture to promote the company in Hong Kong &Asia subject to licensing. See http://www.investorsignals.com.hk
Investment Objective – to outperform the S&P/ASX Top 50 Index, (post fees), on a rolling 5 year basis.Investment – a carefully selected portfolio of Australian Equities and the use of Exchange Traded Options to seek enhanced risk adjusted returns.
Australian Equities Investment Strategy – growth at a reasonable price, (GARP), is the investment philosophy that will be applied to stock selection. Positions will be established in approximately 8 – 14 S&P/ASX Top 50 listed companies, (although selective exposure outside of the S&P/ASX Top 50 will occassionally occur), and are selected on the basis of their return on equity and solid earnings per share growth profile. Investment selection within the ASX Top 50 provides exposure to industry leaders, a thematic that will result in investing outside the ASX Top 50 will most often be predicated by potential corporate action.
Other determinants of stock selection include:-
Strong cash flow;
Strong cash conversion;
Low debt; and
Sector and technical trends.
Given these criteria, the research will tend to identify companies with pricing power, revenue growth and steady, to improving margins.
The entry price to be paid to establish a position in each stock will be determined by its expected growth and target price, (i.e. dividend yield and price earnings ratio are not the only selection criteria). Investments can be made in any sector. Derivatives will be used in the construction and management of the portfolio.
The Use of Derivatives in the Portfolio Construction and Portfolio Management – The performance of the portfolio will typically depend on three factors:
Stock Selection: Based on the investment strategy outlined in the Investor Signals’ Mandate;
Portfolio Construction: Acquisition of selected stocks through the use of derivatives where this results in a more favourable risk / return outcome, than investing in the stand alone stock; and
Portfolio Management: Management of each stock position to maintain the optimal risk / return profile at any point in time.
Used in conjunction with the Equity Portfolio, Exchange Traded Options have the potential to:-
Reduce Risk: Buying Put options or selling Call options reduces volatility and beta risk;
Generate Additional Returns: Selling Call options for income in return for capping a long stock upside;
Reduce Market Impact Cost of Buying / Selling Stock: Synthetic exposure via options;
Reduce Transaction Costs: Synthetic exposure via single stock options rather than a long stock position; and
Manage Capital Gains Implications: Synthetic exposure via single stock options rather than realising a capital gains event by buying / selling a stock.
The Exchange Traded Options strategies that will be used in the Portfolio construction and Portfolio management phases of the investment include:-
Long Calls, Long Puts, Collars, Stock Repairs, Long Call and Put Spreads, and Long and Short Iron Condor strategies
Note: The notional exposure of the cash holdings will not be exceeded in this portfolio. The Global Equity Management Mandate is not designed to be used as a leveraged vehicle. There is no cash holding requirement for this portfolio over and above the notional value requirement. The Covered Call is a strategy in options trading whereby Call options are written against a holding of the underlying security. Using the Covered Call option strategy, the investor gets to earn a premium, writing Calls whilst at the same time appreciating all benefits of the underlying stock ownership, such as dividends and voting rights, unless he is assignd an excercise notice on the written Call and is obligated to sell their shares. See http://www.investorsignals.com Investor Signals is currently a CAR of D2MX Ltd. Leon Hinde and Sean Rothsey formed a joint venture Advisor Plus Pty Ltd which is an AFSL entity.
The Merkin Group sold its interest to Leon Hinde in June 2016 and Sean is no longer a director or ASIC licensed Responsible Manager.