Good stock pickers are valuable!

Andrew Bolton has historically done well at stock pickking. That's why lots of investors are throwing money at him for his Chinese ventures.

The trust is attracting widespread interest from investors because of Mr Bolton's spectacular investment track record. More than 12,000 private investors have already registered to be sent the prospectus.

Fidelity is confident of raising $US1bn in what would be a record for a new conventional investment trust in Britain. It will take a 1.5 per cent annual management charge, which equates to $US15m.

Communication

It's important to not just have a good strategy, but to be able to communicate it as well. NAB seems to have doubters on both fronts: The Australian

Key graf:

The question now is whether the NAB narrative is understood.
Mr Clyne believes it is, but admits investors are tough critics who are keen for answers.
"We outlined our strategic view and what's critical to us is that we consistently deliver against that," Mr Clyne said.

Remember too that NAB has better resources than most to try and explain its strategy.

Once again, it's hard to beat the market..

..even if you job is to do exactly that. We're talking about fund managers here; the 'league tables' are out.

James Dunn in The Australian:

According to Phillip Gray, editorial and communications manager at Morningstar Australasia, last year 325 of 609 (or 53.6 per cent) actively managed large-capitalisation Australian share funds outperformed the S&P/ASX 200 Accumulation Index (which counts capital gain plus dividends reinvested.)

Over three years, 262 of 502 funds (or 52.2 per cent) beat the index. Over five years, the winning proportion fell to 41.7 per cent (176 of 422 funds), while 45 per cent (64 of 142 funds) came out in front after 10 years. After 15 years, 33 of 55 funds (60 per cent) were ahead.

This is no great surprise.

Apple's profits

Here's the impact of an accounting change for Apple: a new FASB standard allows them to be more aggressive in the recognition of revenue than was previously the case.

As reported in The Australian. Discussion at Gadgetophilia.com

Apple discusses the matter on the website here.

Woolworths' fails to impress

Woolies' results indicate why you need to consider macro, as well as industry and firm-specific information when looking at ratios over time.

The effects of the stimulus package mean that future sales growth may not match recent growth, as per this report in the Herald suggests:

The percentage sales growth was, however, half the gains it recorded last year when, as Mr Luscombe put it, ''we had all the moons aligned'' - lower petrol prices and interest rates, the Federal Government's stimulus package and people choosing to shop for pricier food over eating out at restaurants.

Woolworths' argument is that retail sales grew at unsustainable rates last year thanks to the stimulus package, and that a two-year growth rate comparison is more valid. Its two-year sales growth average was 6.5 per cent.

What the day traders are up to...

Certainly an alternative investment strategy to trying to identify good businesses that are undervalued, then buying and holding!

From the Sydney Morning Herald.

They are the new breed of derivatives traders: they have no clients, they trade their firm's own money using high-powered computer programs like F1 - Formula One, so-called because it is so fast - based on secret algorithms.

US sharemarket officials and Congress are mulling bans on some of their tricks. And it is so profitable, the big banks are using it. The New York Times and The Wall Street Journal have devoted pages to the dark arts of ''high-intensity'' and ''low-latency'' trading and the world of ''dark pools''.

Credit ratings agencies still under fire for their role in the GFC. Here's the Herald with the latest thoughts.

The essential conflict many of these agencies face is described here:

Critics want the cosy club inhabited by the three big credit ratings agencies to be replaced by a system with more accountability to investors, and less crippling conflicts of interest.

So what can be done to fix the credit rating agencies, seen by many as the unsung villains of the crisis?

Some suggestions include holding the firms responsible for their opinions in the courts, breaking up the oligopoly, and cutting investors' reliance on ratings. None is foolproof but each attempts to address the conflict of interest that was brutally exposed by the credit crisis.

A credit rating from one of the big three firms is virtually indispensable for companies looking to raise debt on the market. But it is now clear the incentives in the current system were skewed to encourage agencies to provide as many ratings as possible, at the expense of good advice.

For decades issuers have paid for the ratings because they need them most, and it has been in the agencies' interest to approve as many ratings as possible. However, the Bank for International Settlements says growth in structured finance - complex bundles of corporate debt - created huge systemic risks for this arrangement.

Explaining your accounts

I have mentioned in class that companies can use voluntary disclosure to explain how the accounting rules impact on their results, and also that we have seen examples of this with the adoption of A-IFRS accounting standards in Australia.

Here's one example - Westpac provided this presentation in April 2007 (note - link to pdf file).

How banks can manage earnings

No surprises, it's the loan-loss reserve. Businessweek with more details.

Inept boards - Krispy Kreme

From the New York Times (2005). Posted as KK is one of the case studies. Also shows the problems of rapid growth and franchising.