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Portfolio construction:

Th o rnt o n Gr o up. Portfolio construction:. Key concepts. Duncan Wiech. Director Thornton Group (Australia) Pty Ltd 20 October 2010. Th o rnt o n Gr o up. Disclaimer.

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Portfolio construction:

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  1. Thornton Group Portfolio construction: Key concepts Duncan Wiech Director Thornton Group (Australia) Pty Ltd 20 October 2010

  2. Thornton Group Disclaimer This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034. This presentation contains general information only. This presentation was produced for informative purposes only without assuming a duty of care. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice. This presentation does not take into account your particular objectives, needs or full financial situation. Before making a decision relating to this presentation you should assess whether the advice is appropriate to your objectives, needs or financial situation. You may wish to make this assessment yourself or seek the help of an adviser. No responsibility is taken for anyone acting on the information provided and anyone doing so, does so at their own risk. No part of this presentation should be used elsewhere without prior consent from the author. Should you wish to obtain personal advice regarding anything in this presentation please contact Anthony Prior on 8561 2400. The information in this presentation is based on our interpretation of relevant laws as at the date of this presentation and is subject to change. 2

  3. Thornton Group Portfolio construction 1 one one RULE: Understand what you’re trying to achieve - not all portfolios are the same

  4. Thornton Group Portfolio construction 2 two two RULE: Know your investment timeframe 10 yrs 3 yrs 5 yrs 1 yr 2 yrs now

  5. Thornton Group Portfolio construction 3 three three RULE: Understand the trade-off between risk and reward high risk / return low

  6. Thornton Group Portfolio construction % % % % % % % % % % % % % % % % % % % % Historical Sector Returns  as at 30 June of each year chasing returns Chasing returns SOURCE: Lonsec, 30-06-10, "Annual Investment Returns to 30 June 2010"

  7. Thornton Group Portfolio construction “ ” If past history was all there was to the game, the richest people would be librarians. Warren Buffett

  8. 2010 Thornton Group Portfolio construction Risk Profiles  Historical characteristics for the 10 year period to 30 June 2010 Growth assets 60% Property : 12% International shares : 14% Australian shares : 34% Growth assets 100% Property : 10% International shares : 30% Australian shares : 60% Growth assets 80% Property : 12% International shares : 20% Australian shares : 48% Chasing returns SOURCE: Lonsec 08-2010, “Risk Profiles: Historical Characteristics”

  9. Thornton Group Portfolio construction Growth stock what is it? “ ” Stock of a company which is growing earnings and/or revenue faster than its industry or overall market. Such companies usually pay little or no dividends, preferring to use the income to finance further expansion. www.investorwords.com

  10. Thornton Group Portfolio construction Property what we look for • Diversified exposure achieved via: • Managed funds, direct, indirect, listed, unlisted, syndicated sectors • Factors considered: • debt structure • structure of cash flow / rental income • quality of tenant & level of tenancy • capital expenditure on the building • green & water ratings • regularity of valuations & timing of rent reviews • physical location of assets

  11. Thornton Group Portfolio construction International shares what we look for • Diversified exposure achieved via: • Managed funds • Factors considered: • preferred economies (mature or emerging) • managers with consistent performance in selected country • management of currency risk (hedged vs. unhedged) • absolute return funds - no index hugging!

  12. Thornton Group Portfolio construction variable risks & opportunities Australian shares what we look for 1 2 Strength of domestic & global economies Environmental factors Appealing sectors Legislative changes 7 Know when to RUN 3 • Strength of companies • barriers to entry • comparative advantages Media sentiment Sector weightings Global influences (trade policies / war) 6 Health of Balance Sheet 4 Reliability of cash flow & profit Australian shares what we look for 5 Monetary policy

  13. Thornton Group Portfolio construction what makes our market

  14. Thornton Group Portfolio construction Example portfolio what we look for Core stocks  “long” “Un-loved” Spreads via listed managed funds & indices Prospective Break-ups Takeover targets Trade stocks  “short” example portfolio what we look for

  15. Thornton Group Portfolio construction Core stocks Popular picks Core stocks  “long”

  16. Thornton Group Portfolio construction Growth stocks what we look for CSL BHP CBA

  17. Thornton Group Portfolio construction 4 four four RULE: If it seems too good to be true... it usually is!

  18. ? Thornton Group Portfolio construction ? Questions ? ? ? ? ? ?

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