This $400 Million Deal Screams Market Comeback

Monday, 9th November, 2015
Albert Park, Melbourne
By Callum Newman

  • This $400 million deal screams market comeback
  • Market update
  • Put this company on your watchlist
  • Quant Trader subscribers celebrate one year
  • The biggest growth industry of the next 100 years
  • Special LIVE training event coming soon…

If you ever need proof that the game in financial markets never really changes, you don’t have to look very far.

Just two days ago the Financial Times reported that some key Irish property developers are making a comeback.

The companies these guys ran collapsed alongside Ireland’s property bubble, which peaked in 2007. The cost to Irish taxpayers was billions of euros.

Michael O’Flynn is one of those developers. Five years ago, the ‘bad’ bank Nama took over 1.8 billion euros of debt attached to his property portfolio.

You’d think a loss like that would shut you out for the rest of your life.

Not so. O’Flynn just raised US$400 million in equity from US investors to build 10,000 homes over the next five years.

Ireland needs something to be done. The downturn in the country after 2007 was so savage it now has an acute housing shortage. That’s in places people want to live anyway.

Here’s what’s let O’Flynn back in. Guys like him have the network to access finance.

Money is hard to come by in this sector right now. Irish banks aren’t lending for property development.

According to the FT, the banks lent only 424 million euros in the year ending to June. The country needs 6 billion euros to finance the 30,000 homes a year it needs.

This is probably the key quote of the article…

Irish housing construction used to be almost entirely debt-financed. In the boom years, banks loaned money to developers not just to build houses, but to buy the land on which they were built. Those days are over.’

This is how you know the Irish recovery is secure. It’s the wild expansion of credit that drives economies to their boom level peak.

That’s not happening presently.

In fact, Irish property still has a way to go just to get back to the level it was in 2007. But it’s heading in the right direction.

See for yourself…

Don’t miss the significance of this. It’s when house prices (really land prices) turn down that you really have to worry.

That’s not happening across the board in Ireland, the UK, the US or Australia right now (with a few exceptions depending on the country).

If you’re staying out of stocks or property and waiting around for the next 2008 downturn, you’ll be waiting for a long time, in my opinion.

Over at Cycles, Trends and Forecasts, we’ve said it all year…now’s the time to be building wealth and assets!

We even said it the day after the Aussie market took a nosedive. That was following on from the Dow Jones fall of 12% in one day in late August.

We said at the time…

The current cycle positioning, as it did in every cycle prior to this one, calls for the continued building of a long-term stock portfolio on market ‘panic’ days.

Yes, there will be more panic days. Build on your real estate portfolio as the cycle continues to turn. This week gives you the chance to do that.

The market made a low at 4936 on 25 August.

Last Friday it closed at 5248.

Like we keep saying, you should be building up your wealth and cash flow.

Find out the best way to do that here.

Market update

The market is down slightly as I write.

One stock that looks interesting in the new highs today is Rent.com.au [ASX:RNT].

Rent.com.au is a web portal focusing entirely on property rentals. That’s a point of difference in the competitive online real estate market. It wants to be the website of choice for renters.

RNT is going after market share by offering to list/advertise properties free of charge on their basic package.

Customers can enhance the listing by paying for a premium.

They also allow people to list their own properties on there rather than going through a rental agent.

The company listed on the stock exchange in June.

Let’s take a look at the chart. Here’s the daily…

Source: STEX

[click to open in new window]

You can see the period of no trading activity in May–June. This is because Rent.com.au became a public company via a reverse takeover of Select Exploration.

Select Exploration delisted and then relisted as Rent.com.au.

The Australian Financial Review reported this morning that, ‘Rent.com.au has topped its 12-month unique traffic target less than halfway through the financial year and has flagged moving into complimentary businesses such as removals and insurance.’

Site traffic for October was up 32% on the previous month.

According to a presentation the company did in October, there are seven million renters in Australia. There are also one million landlords that don’t use an agency to manage their property.

According to rent.com.au, if the landlords don’t use an agency, they can’t advertise on the leading real estate portal.

So there’s plenty of market share for them to tap into. Mind you, realestate.com.au [ASX:REA] has a hugely dominant hold over the rental and sales advertising sector.

Real estate buyer’s advocate (and regular contributor to Cycles, Trends and Forecasts) Catherine Cashmore tells me,

As far as I’m aware, RNT is much cheaper than REA, which currently have a monopoly on the real estate advertising market.

‘REA are known for putting their fees up — which, last year, caused a group of agents to threaten to boycott the website and set up their own.  

‘There was a lot of huff and puff about it at the time — however, as far as I’m aware, the plans never amounted to anything serious and REA maintain their lead.  

‘Domain are their closest competitor. It’s a brave real estate agent who decides to boycott the most commonly searched real estate website — thereby risking that their vendor’s property will fly under the radar.’

However, note one thing: the stock has continued higher after the recent positive news announcement about site traffic numbers. The stock price has broken over previous tops.

That’s usually bullish.

RNT is certainly one for the watch list.

Incidentally, my colleague Terence Duffy and I will be doing more charting analysis for Port Phillip very soon.

Stay tuned.

Quant Trader subscribers celebrate one year

Jason McIntosh ran the numbers on Quant Trader’s first year of performance on Friday.

Here’s what they revealed:

How does the back-testing stack up 12 months later?

‘First, here are the performance numbers from back-testing.

‘These are the ones in the excerpt above. This is our ‘then’ period…

These are good numbers. But you know that already. The question is whether real life can live up to the past.

Okay, let’s see what ‘now’ looks like…

This is a great result. The live signals are in line with the back-testing. The system is doing exactly what it’s supposed to do. In fact, the payout ratio is higher than in testing.

Now, let me explain a few things about these numbers. The first table shows the results of closed long trades. It covers the period from 1 January 1993 to 31 October 2014.

The second table is the year from 17 November 2014, the day live signals began. It includes all open and closed trades. I’m including open trades as they currently make up the majority of signals.

You’ll notice the average profit is lower for live signals. This is partly because many positions are still open. Some may rally a lot further. This would increase the average over time. I also expect the average loss will ultimately rise.

The numbers from back-testing include a number of large bear markets. The future will also have its share of downturns. But differences aside, the live signals are meeting the standard set in testing.’

If you like the look of that, you can find out more about Quant Trader here.

The biggest growth industry of the next 100 years

Revolutionary Tech Investor Sam Volkering recently flew from London to Singapore to attend the exclusive Sibos conference.

This is one of the world’s premier financial services events.

Sam recently joined me on my podcast to tell me all about it — and what it means for our money (literally).

Tune in to discover which industry Sam thinks will be the biggest growth industry of the next century.

Not only that, you’ll discover why the banks’ fundamental business model is changing. And hear Sam’s take on the potential for the major tech companies like Apple, Google and Facebook to encroach into finance and payments as well…

You can tune into the show for FREE on iTunes here or Android here.

Special LIVE training event coming soon…

Kris asked me to mention a new live training event that’s coming up on 17th November.

You’ll read more details on this tomorrow. But here’s what Kris told me in an email earlier this morning:

We recently launched the Options Trader service with great success. It helped fill an “advice gap” that we had with our other trading services.

That is, we knew there were a lot of people who wanted to earn a regular income from stocks, but they didn’t want to “day trade” or speculate on risky stocks.

The Options Trader service fills that gap by showing investors how to “scalp” the market for regular income, two, three, four, or five times or more per month.

However, we also know that options are a new concept for many investors. While the options market is mature and well traded in the US, it’s less well known here. And based on the feedback we’ve received, the lack of awareness about the benefit of options trading has meant folks demand more information before they go any further.

That’s why next week we’re holding our first ever LIVE training event. In the lead up to the LIVE event we’re also making available a series of videos that will act as a primer. In those videos, Options Trader editor, Matt Hibbard will take viewers through the basics of trading options and setting up an options account.

Then, next Tuesday evening, Matt will be the guest of honour at the LIVE training event. Matt will go into his options trading strategy in more detail and answer any questions that you may have.

Remember, it’s a LIVE event, so you get to be a part of it. You can ask questions of Matt on the night, and he’ll make an effort to answer every one of them.

Best of all, this LIVE event is free. All you need to access it is a computer, internet connection and speakers or a headset.

This is a first for Port Phillip Publishing, but we believe it’s the best way to introduce investors to what I believe is one of the best wealth-building strategies on the market.

We’ll provide our subscribers with details of how to register for the training series tomorrow.

You heard Kris. Look out for details in your inbox tomorrow.

Cheers,

Callum Newman

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End of day market data

If you have any ideas about what you would like us to include in our end of day market data drop us a line at letters@portphillipinsider.com.au, and type ‘Market data’ in the subject line.

52-week highs: 32 stocks, including APN Outdoor Group Ltd [ASX:APO], Ellex Medical Lasers Ltd [ASX:ELX], 1300 Smiles Ltd [ASX:ONT], and Smart Parking Ltd [ASX:SPZ].

52-week lows: 25 stocks, including Australia & New Zealand Banking Group Ltd [ASX:ANZ], Cabcharge Australia Ltd [ASX:CAB], National Australia Bank Ltd [ASX:NAB], and Vmoto Ltd [ASX:VMT].