Strategy Summary Every quarter (at the start of January, April, July and October), Rivkin Local will recommend a strategy of ten stocks to be held for 12 months. We simply tell you what to buy, at what price, and when to sell. The strategy behind the selection of companies that populate these portfolios is based on an adaptation of a popular US strategy, which we have modified and back-tested for the top 50 stocks in the Australian market. Over the long term, this strategy has outperformed the Australian market. A similar strategy tested in the UK, Hong Kong and Japan has also produced outperformance. The performance of the past strategies is listed on page 5. Implementation If you are ready to participate in the strategy, the best course of action is to wait until the commencement of the next quarter, be it January, April, July or October, and then, via Rivkin Local, we will advise members on which stocks make up the portfolio. Members can then buy those stocks at the prevailing market price. Once you have invested in the portfolio of stocks, simply hold the portfolio for 12 months at which point we will recommend any changes to be made at rebalance time. Occasionally there will be action required during the 12 month period, such as a takeover offer for one of the stocks. We advise members when these events occur and the action to take. Other Considerations: For individuals and super funds, consideration should be given to holding stock for 365 days to potentially obtain the relevant CGT discount If you select the rebalancing date in early July, the profits obtained may not be taxed until 12 months later (conversely losses are not deductible until the following year too) On average, the portfolio will only turn over roughly 50% of the stocks each year It is suggested that any dividends are taken as cash payments. If you were to participate in a dividend reinvestment plan, it may be possible that you are left with an unmarketable parcel of shares if you sell out of a stock. 2
Background Rivkin Local introduced the strategy on 1 July 2008. The strategy is ideal for those wanting a low maintenance strategy of blue-chip companies paying strong dividends over the medium to long-term. Rivkin Local modified and tested a strategy based around the The Dogs of the Dow for the Australian market. We analysed 22 years of historical data, manually entering roughly 45,000 data points. We made adjustments for share splits, takeovers, company name changes, imputation tax changes and the conglomeration of individual state-run stock exchanges. Results from our testing Over the long term (10, 15 and 22 years), the strategy outperformed the All Ordinaries Accumulation Index and a good share of fund managers too. It is important to note that this is a long-term strategy and periods of underperformance are to be expected in the shorter term. In the never-ending search for the latest hot sector, we often forget the simple, consistent and proven strategies. Benjamin Graham summed it up perfectly when he said Wall Street people learn nothing and forget everything. Figure 01. Rivkin Blue Chip Strategy actual performance since inception Portfolio Our Strategy All Ords Accumulation (p.a.) Out Performance Jan 2009 to Jan 2015 16.81% 11.52% 5.28% Apr 2009 to Apr 2015 15.59% 10.88% 4.72% Jul 2008 to Jul 2015 8.23% 6.14% 2.09% Oct 2008 to Oct 2015 7.94% 5.58% 2.36% Average 12.14% 8.53% 3.61% *Past performance is no guarantee to future returns. Compound growth rates applied Brokerage and taxes have not been included. In addition to the above actual results, during 22-year period that we back-tested this strategy, the markets experienced the 1987 stock market crash, the bankruptcy of entrepreneurial companies in 1989 (remember Bond Corp and Bell Resources?), the recession we had to have, the oil crisis of 1990, 17% interest rates, the recession of a major trading partner (Japan), two Gulf Wars, the dot.com boom (and subsequent bust), the Asian economic crisis and the September 11 terrorist attack, the strategy still outperformed the All Ords. Accumulation Index by 1.6% per annum. In the US, the Dogs strategy outperformed the S&P 500 Index over a 76-year period (12.2% p.a. versus 9.7% p.a for the S&P500). Similar outperformance of the indices has been observed over 20-year periods in the UK (24.1% versus 16.5% for the FTSE 100), Japan (20.1% versus 13.4% for the Nikkei) and Hong Kong (22.7% versus 21.6% for the Hang Seng). Past performance is no guarantee of future returns, but there are few strategies that have shown the resilience of this one. 3
Figure 02. Rivkin Blue Chip Strategy performance since inception Portfolio Period Our Strategy All Ords Accumulation (p.a.) Out Performance January Jan 2009 to Jan 2010 46.11% 41.99% 4.12% Jan 2010 to Jan 2011 13.94% 2.17% 11.77% Jan 2011 to Jan 2012 0.48% -8.71% 9.19% Jan 2012 to Jan 2013 23.62% 17.63% 5.99% Jan 2013 to Jan 2014 24.11% 19.69% 4.42% Jan 2014 to Jan 2015 13.30% 5.30% 8.00% Jan 2015 to Jan 2016-3.90% 2.60% -6.50% Jan 2016 to Present -2.83% -1.20% -1.63% Summary Return Since Inception 271.53% 193.98% 77.55% April Apr 2009 to Apr 2010 44.81% 41.00% 3.81% Apr 2010 to Apr 2011 4.42% 3.44% 0.98% Apr 2011 to Apr 2012-0.32% -6.69% 6.37% Apr 2012 to Apr 2013 33.12% 18.17% 14.95% Apr 2013 to Apr 2014 13.71% 14.73% -1.02% Apr 2014 to Apr 2015 24.12% 13.20% 10.92% Apr 2015 to Present -10.70% -7.70% -3.00% Summary Return Since Inception 252.89% 143.37% 109.52% July Jul 2008 to Jul 2009-14.94% -22.59% 7.65% Jul 2009 to Jul 2010 13.34% 14.39% -1.05% Jul 2010 to Jul 2011 10.07% 13.75% -3.68% Jul 2011 to Jul 2012 6.48% -7.04% 13.52% Jul 2012 to Jul 2013 24.84% 24.30% 0.54% Jul 2013 to Jul 2014 19.35% 21.80% -2.45% Jul 2014 to Jul 2015 13.51% 6.10% 7.41% Jul 2015 to Present -6.83% -1.60% -5.23% Summary Return Since Inception 178.05% 148.00% 30.05% October Oct 2008 to Oct 2009 2.84% 0.42% 2.42% Oct 2009 to Oct 2010 8.83% 5.22% 3.61% Oct 2010 to Oct 2011-6.06% -8.92% 2.86% Oct 2011 to Oct 2012 27.23% 14.54% 12.69% Oct 2012 to Oct 2013 28.88% 24.48% 4.40% Oct 2013 to Oct 2014 8.99% 5.93% 3.06% Oct 2014 to Oct 2015-7.65% -1.45% -6.20% Oct 2015 to Present 0.47% 4.40% -3.93% Summary Return Since Inception 174.34% 151.75% 22.59% *Past performance is no guarantee to future returns. Figures exclude the positive value of franking credits. Brokerage and taxes have not been included. Figures accurate as of 22 March 2016 4
Contact us DISCLAIMER: Rivkin aims to provide clear and simple information to those reading this ebook. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else s, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or CFDs ) carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades over the counter with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office or go to www.rivkin.com.au to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802. 1300 748 546 info@rivkin.com.au www.rivkin.com.au @RivkinLive /RivkinSecurities 5