Saturday, February 11, 2006

Portfolio matters: completed with two speculative small-caps

The nominal share portfolio I want to trade as an exercise is, to this point, boring. One investment company, one mining conglomerate and one beef exporter. These are unlikely to get me rich although they should track the All Ords fairly well.

I want to add a couple of smaller firms that offer the chance of better returns though at the cost of additional risk.

First, I want to add some Hostworks Ltd which manages IT operations, hosts large scale web sites and provides IT consulting services. It has only been around for a few years but has recently landed a few decent contracts. It did pay a dividend last year and is growing quite rapidly but sells at a current P/E ratio of about 43. It has some prospects but looks speculative. I will buy 50,000 at 27 cents (last Friday's closing price) and charge myself $50 brokerage. Thus this costs me $13,550.

Second, I want to add a speculative biotech company based at the Australian National University, Biotron Ltd. This is working on several projects but its main claim to fame is BIT225 which has been shown to have synergistic effects in improving the effectiveness of anti-HIV therapies. I will buy 30,000 Biotron at 31 cents costing me $9350.

These are interesting businesses that I have followed for a while, but they are a dimension more risky than the rest of the nominal portfolio. Overall my holdings and their current values are now:

1o,000 Gowings worth $27,800
15,000 Australian Agric worth $24,900
1,000 BHP-Billiton worth $24,750
50,000 Hostworks worth $13,500
30,000 Biotron worth $9,300
I owe the bank -$650

The value of my portfolio is $99,600 and I have exhausted my initial assumed investment resources of $100,000.

Again, my objective to beat the All Ords.

Disclaimer: This is a fun exercise and not advice on stock purchases. I want to play a trivial (public) game to see if I can beat the market over the following year. I may trade, and/or hold, some of the stocks in this nominal portfolio.

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