What A Life, Shaping The Future

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What A Life, Shaping The Future

Sydney Morning Herald

Saturday June 28, 2008

Marcus Padley

I went to the 15th annual Australian Stockbrokers Foundation Awards night last week. A charitable affair. Into the Valley of the shadow of Star City Casino rode the 600 (brokers). A lethal combination of Bull, Bear, Crown Lager, De Bortoli Wines and dancing.

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 their winnings. The most sought after of the eight was Gindalbie Metals which fetched a hard-fought $36,000, closely followed by Karoon Gas, 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 have spoken. Resources are the only game in town with iron ore the obvious play and coal-seam gas 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 $2million 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 $3million 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 per cent of IPOs were trading below their issue or placement price, just in case you thought IPOs were money for nothing. Worst was RAMS Home Loans. Lost 97 per cent.

* On the flip side, the best IPOs or placements were Linc Energy, up 440 per cent, Coal of Africa, up 166 per cent, Cockatoo Coal, up 166 per cent, Fortescue, up 164 per cent, and Atlas Iron, up 132 per cent.

We also had awards for the best operator. This is heavily contested by the boys and girls who input orders to the market through the ASX SEATS terminals. Names have been excluded to protect the guilty, including one operator whose fat fingers dropped the Orica share price from 3170c to 8.6c in one trade and another who dropped a listed debt security from $94.50 to $3.67, putting it momentarily on a 96.33 per cent 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 Centres and Allco Finance Group "buy" recommendations, including one broker who initiated coverage of Allco with a "buy" recommendation at 950c, only to later suspend coverage at 47c, and one who removed the "bid premium" from his St George Bank valuation and moved to "underperform" three days before Westpac bid for them.

It all reinforced a few established stockmarket principles like:

* 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 appears to yield more than 10 per cent in the equity market, probably doesn't.

* If an IPO is good you will not be offered it.

* If you are 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 per cent. But you can make 440 per cent in the right stock.

And of course the unwritten truth about the market, that it is founded on the richest of tapestries, the unknown. Is there a better way to spend a day than in an industry whose core activity is shaping, facilitating, guessing and investing in a future not yet made?

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 more than $5million for worthwhile causes. Thanks also for creating the colour behind this article.

Marcus Padley is a stockbroker with Patersons Securities and author of the daily stockmarket newsletter Marcus Today.