Life In Australia

The Aussie stock market reached a new record high last night, and my paltry 3.3 percent capital gain over the last six-and-a-half months is slightly less paltry now, at 4.9 percent – giving an annualised return of around 9 percent. Much more encouraging than the position on Friday afternoon of 6 percent annualised.

I don’t normally rush to check stock prices each day, but given the market had hit a new high, I thought I’d have a quick peek. So all I need over the next few months is another few percent gain and I’ll have comfortably beaten any return I could have got from an interest-bearing security.

As of the close of the ASX on Monday afternoon, prices were:

• Compass Resources CMR at $5.13 per share
• BHP Billiton BHP at $31.18 per share
• Oxiana OXR at $3.30 per share
• Kagara Zinc KZL at $6.18 per share

I thought it was about time I updated my stock market activity. In May last year I wrote about how I had grown $100,000 to $373,800 in a year by investing in mining stocks.

After that I got cold feet and took my cash out of the market, missing out on more tidy profits. I’d been reading Martin Zweig’s Winning on Wall Street and I was concerned about having a lot of cash in the market while interest rates were rising.

On the other hand, watching prices continue to rise was irritating. Furthermore, the Chinese economy, which in large part is responsible for the mining stocks’ boom was continuing to grow at a ferocious rate. I decided to go back into the market, taking heed of Zweig’s advice not to commit all of my funds because of my uncertainty about the effects of interest rates on the stock market. I decided to do as I had done before and invest $100,000 into the same four ASX stocks – I did this on November 2 last year. I bought:

• Compass Resources CMR at $4.52 per share
• BHP Billiton BHP at $27.31 per share
• Oxiana OXR at $3.22 per share
• Kagara Zinc KZL at $6.90 per share

As of the close of the ASX on Friday afternoon, prices were:

• Compass Resources CMR at $5.00 per share
• BHP Billiton BHP at $30.71 per share
• Oxiana OXR at $3.24 per share
• Kagara Zinc KZL at $6.18 per share

Overall that’s a 3.3% gain, or 6% annualized. I’d have been as well keeping the money in the bank. We’ll see how things pan out over the next few months.

I thought I would revist my stock market exploits. In May I wrote about how well I had done by investing in mining / resource stocks in the previous 12 months, growing $100,000 to $373,800. I sold my shares, looking for other opportunities. I wrote that I hoped it wouldn’t prove to be a case of “a fool and his money are soon parted”.

For the many who can’t be bothered reading my previous post, let me remind you that I initially had $100,000 to invest, which I split it into four $25,000 chunks and bought:

• Compass Resources CMR at $0.54 per share
• BHP Billiton BHP at $16.30 per share
• Oxiana OXR at $0.83 per share
• Kagara Zinc KZL at $1.19 per share

I sold all of my shares in May for:

• Compass Resources CMR at $3.60 per share
• BHP Billiton BHP at $28.65 per share
• Oxiana OXR at $2.95 per share
• Kagara Zinc KZL at $3.54 per share

Today these shares closed at:

• Compass Resources CMR at $4.20 per share
• BHP Billiton BHP at $25.05 per share
• Oxiana OXR at $2.69 per share
• Kagara Zinc KZL at $4.92 per share

If I had held my shares for another 3.5 months, my $100,000 would have grown to $417,249. The shares I sold increased in value by 11.6% in 3.5 months. That’s an annualised gain of about 40 percent.

So although this fool and his money have not been parted – I’ve been too cautious to do anything with the money – this fool would have done better if he had not sold his shares at the first hint of trouble.