User Manual
Introduction
The User’s Manual is a guide for Members explaining how to understand and apply the Stock Resource report. The manual also contains important information regarding the website, archives and how to access the weekly reports.
The weekly Stock Resource report makes extensive use of graphics to assist Members in quickly identifying key attributes of a particular stock and our trading recommendation. The following is a list of the main symbols.
Diversified Resources
A stock that generates its earnings by producing a broad range of commodities which often includes bulk commodities like iron ore and coal, eg. BHP Billiton, Rio Tinto.
Base Metals
A stock that predominantly generates its earnings by producing a select number of base metal commodities eg. aluminium, copper, nickel, lead, zinc.
Precious Metals
A stock that predominantly generates its earnings from precious metals i.e. gold, silver, platinum group metals.
Energy
A stock that predominantly generates its earnings from energy related products i.e. oil, gas, coal.
Explorer
A stock that is seeking to discover economic resources through exploration activity.
Steel
A stock that predominantly generates its earnings from production of raw materials or finished products for the steel industry!
Mineral Sands
A stock that predominantly generates its earnings from production of industrial minerals.
Utilities
A stock that generates its earnings via the distribution, ownership and/or maintenance of infrastructure projects, such as gas or electricity networks.
Sector Overview
An article on a non-stock specific issue. This covers commentary on a wide variety of possible subjects that effect the resource sector including; commodities, currencies, sectoral trends, macro economic trends, corporate activity, and financial market events.
The User’s Manual also establishes the ground rules for the Stock Resource Portfolio, and what happens after a recommendation is made. Every recommendation made by Stock Resource can be easily referenced in the Stock Resource archive section of the Members area. It is our intention to make our recommendations as transparent and accountable as possible, regardless of whether a stock is profitable or not.
Access to the Members Area is gained by clicking on the ‘Enter’ button in the sidebar of the website, and then entering your registered e-mail address and password.
Stock Resource Predictions
This section displays all past and present recommendations in the Stock Resource Portfolio. Stocks under the heading ‘New Recommendations’ are companies we have covered in the most recent issues.
The ‘Stock Resource Portfolio’ contains all open recommendations previously made to Members. Open recommendations are stocks which we have not yet sold (or closing out the position). Each recommendation indicates which reports they are contained in, along with the relevant risk profile, current action (i.e. Buy, Hold or Sell) and the most recent issues that the stock has appeared in. In the event that a particular stock is listed as a current Buy, you will also notice a recommended buying price limit. When a stock is trading above our Buy price limit we will automatically assign it a Hold recommendation.
Once a Sell recommendation has been made, the stock is removed from the Stock Resource Portfolio and placed in the Past Recommendations table. In the event that the recommendation is to Sell ‘half’, the stock will remain in the Portfolio and will continue to be covered in future reports. Past recommendations include all stocks that Stock Resource has covered since inception, in which Buy and Sell recommendations have been made (including Sell Half). The table includes reference to dates when we originally recommended the Buy, and the subsequent Sell.
Please note subsequent Buy recommendations are generally not included.
Archive
In the Current Stock Resource Issues section you have access to the complete history of every Stock Resource report published (simply use the “click for more” tab to access archived reports). The reports are listed numerically and have the date of publication, and the stocks covered clearly marked. Each report can be accessed by clicking once on the corresponding link.
Search Function
The search function is located under the Member logon button in the sidebar. To search for a stock, simply enter the stock code or company name. All references to this stock since the inception of Stock Resource in June 2003 will be displayed. Other articles can be found manually by scanning the respective issue summaries in the Archive.
Recommendations
It is worth highlighting that Buy recommendations are only made when the right opportunities surface. In the event of there being no suitable stock ideas for a given week, no recommendation will be made. Being patient and waiting for the right opportunity is important in successful investing in shares.
When a Buy recommendation is made a price level will always be given where we think the stock should be bought up to. This level represents the maximum price that Members should pay when placing Buy orders. If you are unable to Buy the stock at the recommended level we suggest leaving a bid with the broker and being patient.
Most stocks will trade above and below the recommended Buy price over the short term. With patience however, in most situations Members should be able to purchase stock at the recommended price. Once a Sell recommendation is made, Members should aim to Sell as closely as possible to the recommended price.
Risk Profile
Risk is a critical element when deciding whether a particular recommendation is possibly suited to you. We recognise that a number of our Members are comfortable taking on some higher risk situations and believe that Members should create a portfolio of stock selections and risk profiles that suit their individual circumstances.
There is always a likelihood that high-risk ideas will experience a significant degree of volatility. We feel the best approach for less experienced Members (and those who dislike the likelihood of extreme volatility) is to limit themselves to the low and medium risk ideas.
Please take note that there are significant risks involved when investing directly on the stockmarket and it is imperative that an investor has full comprehension of their own risk profile. We strongly suggest seeking the professional opinion of an investment advisor if you have any doubts over the suitability of a recommendation to your individual situation.
In order to make differentiating between the different risk profiles easy we use four self explanatory symbols; low, medium, high risk and speculative.
Publishing Times
Stock Resource is published on Wednesday evenings. The report is available in the Members area of the website after the close of business with delivery being aimed for between 6.00pm and 7.00pm Australian Eastern Standard Time. We publish approximately 49 times a year.
Allocating Capital
With respect to allocating capital towards each recommendation, we believe the best approach is for Members to establish a broad portfolio of stocks in order to diversify risk. The greater the risk rating of the stocks in the portfolio means the greater the need for diversification. We also recommend diversifying exposure among a number of the various Resource sub-sectors, so as to avoid placing all eggs in the one basket.
It is important to remember that there is no pressure to buy the first recommendations that are made. We suggest being patient and taking some time to get an understanding of the Stock Resource methodology. This will help ensure that the recommendations you choose to follow are the most suitable for you.
In order to help you identify the key attributes of a recommendation, we ‘label’ each individual stock. We also illustrate what we perceive to be the underlying risk factor although investors should appreciate that there is always an element of risk in stock market investments.
Low Risk
A low risk category generally reflects an investment in a large company (above $1b market capitalisation) with a strong balance sheet and stable and generally diversified earnings and cash flows.
Medium Risk
A medium risk category generally represents an investment in a mid-sized company (say $100m to $1b market capitalisation) which has operating earnings and cash flows from normally more than one operation.
High Risk
A high risk category generally represents a company that is reliant on cash flows from perhaps one operation or where an investment return is reliant on the success of several exploration programs on a number prospective exploration properties.
Speculative Risk
A speculative risk category is used where investment success is generally reliant on an early stage exploration program on a limited number of prospective exploration tenements.
Can I ask for additional stock advice?
As a rule we do not provide advice outside of the report. Each of our recommendations is thoroughly researched and this takes up a significant amount of time and resources. Unfortunately from a time perspective we are simply unable to extend this to providing general advice on stocks not covered within the Stock Resource Portfolio.
We encourage feedback about the report, and if there are any questions relating to a particular edition please email your query through to us. However please understand that we cannot comment on individual stocks outside of the Stock Resource Portfolio.
Hypothetical Portfolio Methodology
The following criteria have been applied when calculating the period performance rate for the Stock Resource Hypothetical Portfolio Performance:
1) All investment purchases and short sales are deemed to be of equal amounts, (e.g. $1000 for a purchase – the ‘theoretical value’). The theoretical value should be applied to determine the notional number of shares acquired (to 2 decimal places);
2) Include all open and closed recommendations. The notional number of shares held at period end should be marked to market on a consistent basis. The notional number of shares recommended to be sold (or bought back in the case of prior short sale recommendations) during the period should be valued at the market price prevailing at the date of the recommendation on a consistent basis. Market valuations should be obtained from independent sources;
3) Where a stock has been recommended on multiple occasions it will not be included as having been recommended on multiple occasions for any performance calculation unless the recommendation specifically states it is to all members, including those that have previously purchased the stock;
4) Where part sales are recommended the remaining notional number of shares will continue to be carried at the market value and their performance included in the portfolio;
5) Investment recommendations should take into account time-weightings of the theoretical value invested, or provided from, the sale of an investment; and
6) Where a company which is an open recommendation pays a dividend, the dividend rate should be applied to the notional number of shares held and treated as a cash payment.
Definitions
Open recommendations – these relate to those stocks that have been recommended as a ‘Buy’ but have not subsequently had equivalent ‘Sell’ recommendations.
Closed recommendations – these relate to those stocks that have been recommended as a ‘Buy’ and have subsequently had equivalent ‘Sell’ recommendations.
