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Portfolio performance proving a struggle

WITH the current climate of fear and loathing, a portfolio update is probably the last measure a manager would provide to reassure nervous investors. At present, most investors are closely watching the Dow Jones Industrial Index, with a prevalent fear apparent on both local and international investments.

The truth, however, is that now is the best time to be looking at equities. Especially when the herd is running the other way, the adage ‘buy in gloom, sell in boom’ has never been more apt. A case in point is the rumours of Australia’s great bargain hunter, Kerry Packer, cashing up for opportunities.

At the start of this calendar year I was asked to recommend a ‘hypothetical’ portfolio of Western Australian companies that were listed on the ASX. This was done when the All Ordinaries was 3360; it is now 3034. The timing could have been better now, but timing is one thing that all market players wish for. Evidently, January was not a great time to be buying Western Australian equities for the next six months.

The portfolio consisted of the following Perth-based companies: Wesfarmers; Woodside Petroleum; Foodland Limited; Burswood Casino; Futuris Corporation; Hill Fifty Gold; and Dolomatrix International. They are mostly ‘blue chip’ in stature, with a couple of additional speculative stocks thrown in.

During the past six months most of these companies would have provided their shareholders with a dividend payment and imputation credits.

The only gold stock in the mix has been taken over, and the speculative stocks have performed poorly. The blue chip companies have performed spasmodically, with Wesfarmers down 13 per cent since January, Woodside down 3.9 per cent over the same period, and Foodland up a staggering 42 per cent since January 1 2002.

This is representative of the share market over the period, with some big winners but a very high number of losers.

It has been pretty tough to pick the winners. The speculative stocks in particular have been shocking performers. Indicative of this has been the performance of Dolomatrix International, which is down 49 per cent since January.

The most disappointing share in the portfolio has been Futuris Corporation, whose share price has fallen from $1.85 at the start of the year, to a current price of $1.14. This represents a fall in capital of 38 per cent, and with this I would cut my losses and liquidate this stock in my portfolio.

Keeping this in mind, and with my portfolio leaning to the longer term, some pruning is required at this review time.

Selling Futuris and accepting the takeover of Hill Fifty Gold would leave me with some capital to re-invest.

I would be happy to hold Wes-farmers, Woodside, Foodland, Burswood and Dolomatrix for the next six months.

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