Managed Funds The unofficial Navra performance tracking thread

Sim, how does being on holidays for a couple of months help the performance of the stock market. The system has obviously been running on auto pilot while Steve has been away! I would not mind a few months away each year - nice work if you can get it.

I hope being "very, very, happy" translates to a bumper performance for the unitholders for the first quarter then we too can be "very, very, very happy little vegemites". Last time I looked we were still in negative territory, even though the system might have been buying on the way down, and a bit of selling on the way up, still remains to be seen who much distribution there will be. We are only half way through the quarter yet.

 

Ahhh.... the system does not run on auto pilot at all - there is a dedicated and very hard working group of people who run the fund. While Steve is the face of NavraInvest, there are actual, real people behind the scenes who do a fantastic job.

Mark

 

As I understand it the buy/sell signals on the selected stocks are automated, so it doesnt matter if Steve is away.

As for selecting the stocks to put in or take out of the navra system, I believe there are regular meetings where the fundamental value of the stocks are determined.

 

MW: The out-performance % will decrease because in general they should be selling as the price goes up.

May I ask what is your formula for the % calculation in the spreadsheet?

Craig.

 

Interesting MW, cheers for that.
I wonder if it would be an easier for them just to do a DCT system on the index, it seems to follow it pretty closely - would be less transaction costs and perhaps less risk of individual company performance?

 

Yes I would certainly assume that there is a well trained team at Navra that could cope quite well in Steve's absence. You would certainly not expect any well run organisation to be solely dependant on one person. You'd never let them travel again for fear of something happening to them! I'm sure there are well oiled systems in place with Steve there to monitor and guide if necessary.

 

When I did the Navra course (some time ago), someone asked how 'the system' would run if anything dire was to happen to Steve.

Steve gave assurance that there are capable people that would keep the ship running, so to speak.

 

Simple, its the current price (unit price or ASX200 closing price) over the opening price on day 0.

The only trick is that I add back distributions to get the cumulative unit price for Navra so I can compare apples with apples with the ASX growth over the time period.

So, for Navra the opening price was 1.1884 on 29/3/2007. Since then there has been two distributions (4.5c and 9.2c) which I add back. The current unit price on 21/8/2007 is 1.0867, so the cumulative unit price with those dividends added back is 1.2239.

So, returns for Navra from 29/3/2007 until 21/8/2007 is (1.2239/1.1884 - 1) = 3.0% total return.

The ASX200 over the same period is (5989.4/5960.9 - 1) = 0.5% total return. Note I don't track the XJOAI as I'm not considering dividend re-investment. I'm just concerned with the ASX200 index as this is what Navra benchmarks against.

So the relative return shows a 2.5% outperformance by Navra over that time period. I'm interested in how much of this lead they hold on to by the time the ASX200 catches 6400 again. I'm hoping a lot but fearing very little...

Cheers,
Michael

 

Now, if I were to assume he's also happy because Navra has generated a lot of trading profits I'd be getting nervous. Seriously!

So far this quarter we're well and truly in the red. Opening unit price was 1.1219 on the 2/7/2007 and the last reported unit price is 1.0867 on the 21/8/2007. i.e. the fund has reduced in value and eroded my net worth.

As a result it has stretched my LVR to its limit. Now, if the fund has also generated a nice big trading profit kitty and is considering distributing this then we're in real trouble. That would further reduce my LVR and also result in a tax liability.

I'd much rather it distributed zero this quarter, and to be honest I think it would be better if it only ever distributed less than its value growth in a period regardless of how much trading profits it acquires through transactions.

So, given we're negative value growth this period, that should be a zero cap on the distribution. Not too much to ask is it?

Cheers,
Michael.

PS Before you start, I know a lot will argue "intent of the fund = income", but that presumes it at least preserves your capital right. Otherwise, as I've posted before, it could do nothing and distribute your capital back to you in 10 tranches over 10 years at 10% pa on your initial investment and you'd be happy right? Wrong, methinks. It has to generated a profit to cover those distributions before I'd be happy...

 

Perhaps we could split off a capital growth focussed fund or even make an election?

I know, at this stage of life, I would prefer growth to income but don't wish to leave the fund.

 

Thanks for the explanation, I think I'm on the same page at least.

I agree with you and I think your fear is on the money, at some point there they will cross given that Navra is [like] a fraction of asx200.

Craig.

 

Not really, in fact quite the opposite...

Make a profit (as shown in the unit price) and distribute it to me with a bit left over in the unit price to offset my capitalised interest on my ML portion.

That's it. Very simple really.

At the moment, I see only red in the unit price, no black. If I get a distribution now, then its only going to be giving me money back that isn't part of a realised profit represented in the unit price. I don't get too hung up on the methodology or the trading profits portion of the unit price or any of that complexity. Just keep me in the black and pay me 10% pa. Not much to ask really is it?

I'm a simple man.

Cheers,
Michael.

 

I think you know that I know how it operates and how it will react to certain market conditions.

I was just observing that capital preservation should be a pre-requisite to distributing income. I don't like my net worth being distributed back to me, I want the growth in my net worth distributed back to me.

I know which way the fund plays this, hence my observation that this could be an issue this distribution. I know it distributes trading profits regardless of whether the fund has gone down or up in value. Its the distributions whilst decreasing in value that will really stretch LVRs.

I'm not going to fill out a dividend re-investment form, but I will take that distribution and pay it straight off my ML to keep my LVR to a minimum. But the tax imposte on that profit sucks a bit. It would be better if it were growth at the moment and not income. I don't need the cash flow and I do want to protect my LVR. This period, I wish I could elect for a zero distribution, which if it were growth only, I obviously could by electing not to sell any units.

Ah well, on balance I still prefer this fund. Just this period is shaping up to be a less than ideal financial outcome regardless of the level of trading profits achieved through the correction.

Cheers,
Michael.

 

MK
If NI does not make a good distribution this quarter would you persevere waiting for 6400 - it might not come soon, it might be next week! I tend to agree with you on having your net worth distributed back to you and being taxed, but I can see where Sim's view comes from.

However at the end of the day if you have been in for 4 years, as an example, and your average buy price is $1.12, you have invested the distributions back at prices above and below the $1.12 mark but still averaging $1.12, but the price is now $1.08, so you lose even after receiving the distributions on which you pay tax. You have more units but they are still worth less than you paid for most of them!!!

Sim, where is the growth in this equation? If you had bought BHP at the same time as NI, reinvested the dividends, you would of course have more shares, but you also would have received a healthy capital growth, whereas NI is below par on this equation. Now maybe if you wanted regular income you would not have gone with BHP, but after four years of tracking and if reinvestment was the go BHP would have been a far better equation and more tax effective.

 

Hmmm.....

Interesting. OK, let me explain a bit further.

If the fund paid a distribution of say 2c today which represented the trading profits accumulated since the 2/7 when the unit price was 1.1219 until today then what I proposed is exactly what would happen.

i.e. We're currently in the red, down from 1.1219 to 1.0889 yesterday (just updated). The distribution would drop the unit price to 1.0689.

So, instead of distributing the increase in my net worth as indicated by a unit price increase ABOVE 1.1219, it would be distributing from a net worth reduction position. i.e. It would not be "distributing the increase in my net worth" to me, but would in fact be eroding my net worth and still distributing a portion of my now reduced net worth back to me.

If however the unit price had appreciated to 1.1419 then it could pay the 2c distribution out of the "increase in my net worth" and the post distribution unit price would be back to 1.1219, or exactly where it started the period. My net worth is preserved and I receive a nice distribution of a touch under 2%. I'm not even factoring retained growth to cover ML capitalised interest into this. Just simple net worth preservation as well as distributions.

The fund's stated intent is to distribute >10% in income and retain 2% odd in growth pa. I'm just arguing that the primary focus should be the latter to protect LVRs. Only when the fund performs >0.5% growth in value in a quarter (2% annualised) should it consider distributing some of that price appreciation as income. Distributing when losing value is a nasty imposte on LVRs

Clearer?

Cheers,
Michael.