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The scary strategy to snowball your funds - Snowball Investment Fund

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					   SNOWBALL INVESTMENT FUND
          Choose the safest way to invest in bluechip stocks




Graeme Little and Andrew Little
                                  Phone: 0419 369 252
Investment Managers
        You
decide which is the
    safest way
    to invest in
 blue chip stocks
    Graeme Little and Andrew Little
        Investment Managers
      Snowball Investment Fund

              June 2011
CONTROL


         Do you know WHERE
         your super funds are?
          Do you know WHO
     is managing your superfund?
          Do you know HOW
    your superfund is performing?
    What would it take
     for you to switch
  some of your super into
Snowball Investment Fund?
      “Switch” Factors to consider
•   Who is managing the fund?
•   Who else is investing?
•   What is the track record of the fund?
•   What is the investment strategy?
•   How does the Fund go in up markets?
•   How does the Fund fare in downturns?
•   How are risks managed?
•   How do I get my money back?
•   What fees are payable?
  Five key
propositions
 to address
your factors
             Five key propositions
            to address your factors

•   Snowball has significantly outperformed
•   Using a unique investment strategy
•   Underpinned by a long term research study
•   With a highly competitive fee structure
•   We say the safest way to invest in blue chips
      1A.
Snowball has
 significantly
outperformed
 the market
Snowball Gross V ASX 200
     6 Sep 2010 - 27 July 2011

   10.0%


    8.0%
                7.8%

    6.0%


    4.0%


    2.0%


    0.0%


   -2.0%
                                  -0.8%

           Snowball Gross        ASX 200
5 UP and DOWN cycles BEAT the MARKET BY 13.5%
Nov 5 2010 – 27 Jul 2011

                9.0%         8.0%

                6.0%


                3.0%


                0.0%


                -3.0%


                -6.0%                  -5.5%
                           Snowball   ASX 200
     Snowball UP and DOWN cycles
                     Cycle 2
0.15                   13.1%
                             Cycle 4
                                                           9.8%
 0.1
              Cycle 0               7.7%                      6.7%
                 5.7%                                                            ASX 200
0.05

                                                                                 Snowball
   0
                    -0.2%      -0.1%

-0.05
                            -4.5%                                        -3.8%

 -0.1
                      Cycle 1                 -8.3%
                                                   -8.1%
                                                                     -8.7%
        6-Sep-10 5-Nov-10 30-Nov-10 17-Feb-11 15-Mar-11 11-Apr-11 27-Jul-11

                                            Cycle 3               Cycle 5
        Total Gains In UP cycles
25.0%           23.2%
                                    20.9%
20.0%


15.0%


10.0%


 5.0%


 0.0%
                ASX 200            Snowball
         Total Losses in Down cycles
              ASX 200             Snowball
 0.0%



 -5.0%



-10.0%

                                   -10.8%
-15.0%



-20.0%

               -21.5%
-25.0%
Snowball has significantly
    outperformed
      the market
How has the Manager Performed Pre Snowball


  • Graeme Little has invested in the market for 40 yrs
  • Passion for research and innovation
  • Personal investment performance during global financial
    crisis using the Snowball strategy
  • 20 years business experience in the stock market as
    Principal Legal Officer with corporate regulator NCSC
    (now ASIC), corporate stockbroker, new float co-
    ordinator, venture capitalist and SME fund manager
  • Includes 10 years in fund management industry
   2A.
  Unique
 Snowball
investment
  strategy
Unique blue chip investment strategy continuously
enhanced


   • Based upon the Warren Buffett principle of selling
     in greed phases and buying during fear
   • Contrasts to the popular buy and hold
   • Capitalises on UP cycles
   • Minimises losses in the DOWN cycles
   • Concentrates on the highly liquid blue chip stocks
     with best reward to risk ratios
      “Be fearful
when others are greedy,
     and greedy
when others are fearful”

    Warren Buffett,
the world’s No 1 investor
 page 241, The Snowball
So what has changed since Buffett started in 1961



   •   Markets are all computer based
   •   All global markets interlinked
   •   Massive growth in turnover
   •   Expansion in fund management products
   •   Explosion in derivative trading and leverage

   Leading to faster swings both up and down
     So what is
  unique about our
investment strategy
2i. Using an old tool in a new way

 •   The old tool is the Relative Strength Index (“RSI”)
 •   RSI created by the renowned Welles Wilder (1978)
 •   The RSI oscillates between 0 and 100
 •   Above 70 is our “greedy phase”
 •   Below 30 is our “fear phase”
 •   Traditional use is to buy at RSI 30 (“low”) and sell at
     RSI 70 (“high”)
 • “Snowball method” involves selling halfway at RSI
     50 or earlier
You select a stock
       now
 for us to review
2ii. Our unique filtering process


   •   Involves five layers of filters
   •   To find the best stocks on a reward/risk basis
   •   Level 1 filter is by strong financial health
   •   Level 2 is by high daily trading liquidity
   •   Level 3 is by screening stocks < RSI 40
   •   Level 4 is by major peaks in “panic volume”
   •   Level 5 is by our proprietary rating formula
         Level 1 filter - invest in
       financially healthy stocks
2000       1897
1800
1600
1400
1200
1000
 800
 600                         390
 400
 200
   0

            All         Strong Health
Which of the ASX Top 50 stocks
missed our Level 1 screen?

 ORG MQG        BXB     ORI      AMC


  TCL    LEI    WOR     AGK      IPL


 MAP GMG        CPU     LLC      SHL
Level 2 – 123 stocks are highly liquid



           267
                              Daily Traded < $1m



                              $1m+ Daily Traded
           123
Portfolio is weighted to Largest 50

                         $88

        73
                                      The Rest

                        $895

                                      Top 50
        50



      Stocks      Market Cap($b)
Level 3 filter -Create daily watchlist
of strong liquid stocks < RSI 40


   •   Special formula created in trading software
   •   Run the filter after 6pm each trading day
   •   Involves filtering all ASX stocks trading
   •   First screen for strong financial health
   •   Second screen for liquidity
   •   Third screen for RSI <40
   •   Create a watchlist for charting analysis
Level 4 filter – Volume Spikes
created by major panics (“mohawks”)


  • The Manager coined the word “mohawk” to
    describe the typically dramatic volume increase
    associated with severe downturns.
  • Spikey mohawks signal likely trend change up as
    selling subsides
  • Absence of a “mohawk” increases risk of further
    declines
2iii. Our unique Feargood Index


   •   Based upon Relative Strength Index
   •   Counts all filter list stocks > RSI 60 (“greed”)
   •   Also sums the filter stocks < RSI 40 ( “fear”)
   •   Index value is the ratio of greed to fear stocks
   •   Index > +10 indicates market top so cash up
   •   Index < -10 indicates go fully invested
   •   Powerful tool to gauge appropriate cash level
                                         0
                                                  20
                                                       30
                                                            40
                                                                 50




                                             10




           -50
                 -40
                       -30
                             -20
                                   -10
  6-Sep-10
 14-Sep-10
 22-Sep-10
 30-Sep-10
   8-Oct-10
 18-Oct-10
 26-Oct-10
  3-Nov-10
11-Nov-10
19-Nov-10
29-Nov-10
                                                                                                  Feargood Index




  7-Dec-10
15-Dec-10
23-Dec-10
   5-Jan-11
                                                                   6 Sep 2010 - 26 July 2011




 13-Jan-11
 21-Jan-11
  1-Feb-11
  9-Feb-11
 17-Feb-11
 25-Feb-11
  7-Mar-10
15-Mar-11
23-Mar-11
31-Mar-11
  8-Apr-11
                                                                                                      ASX 200




 18-Apr-11
 29-Apr-11
 9-May-11
17-May-11
25-May-11
   2-Jun-11
 10-Jun-11
 21-Jun-11
 29-Jun-11
    7-Jul-11
                                                                  Feargood 3 day moving average
Greedy to fear stocks at fund commencement
6 Sep 2010

   70         65
   60

   50

   40

   30

   20

   10
                              1
    0
             Greedy           Fear
             RSI > 60
5 UP and DOWN cycles BEAT the MARKET BY 13.5%
Nov 5 2010 – 27 Jul 2011

                 9.0%        8.0%

                 6.0%


                 3.0%


                 0.0%


                 -3.0%


                 -6.0%                 -5.5%
                           Snowball   ASX 200
                                          Power of compounding
                                         e.g. ASX 300 growth from 2000-2030
                                             assume 6%p.a. future growth
                              60
                                                                                     55.1
Multiple 30 year fund graph




                              50


                              40


                              30


                              20                                              16.6
                                                                8.7
                              10
                                   4.3            6.2

                              0

                                   0             1%            2%             4%     8%
                                                 Excess returns p.a. > ASX 300
                                     Power of compounding
                                    e.g. ASX 300 growth from 2000-2030
                                        assume 6%p.a. future growth
                              600


                                                                           503
                              500
Multiple 30 year fund graph




                              400




                              300




                              200




                              100
                                      55

                                0

                                     8%                                    16%
                                           Excess returns p.a. > ASX 300
3iv. Concentrated Buy Strategy in 5 best stocks


   •   Weight portfolio to the very best opportunities
   •   Maximum of 5 stocks between 10 to 20% of fund
   •   Small stakes in up to 5 additional stocks <5% each
   •   Buy in 3 to 5 tranches on “down” days
   •   Weightings matrix skewed to size and liquidity
   •   CASH weighting is a central daily decision
3v. Enhanced Selling Strategy


   • Two phase selling strategy
   • Take part profits if fast bounce to RSI 40
   • May re-invest if RSI falls below 30 again
   • Sell out when RSI approaches 50
   • Reduce selling RSI target if RSI bottomed <
     20
   • Re-invest in next qualifying stock or hold cash
        3A.
Underpinned by a
long term research
       study
        ONE stock portfolio over 10 years
          20 Largest Blue Chip Stocks
           Since 1 Jan 2000 compound return p.a.
35.0%
                                        29.6%
30.0%
25.0%
20.0%
15.0%
10.0%
                4.7%
 5.0%
 0.0%
               ASX 20               Snowball Basic
Rules of the 10 Year study



   •   One stock portfolio only or stay in cash
   •   Buy first stock to hit RSI 30 going down
   •   Sell when RSI rises to 50
   •   Reinvest into next stock to hit RSI 30
   •   Interest included at cash management rates
   •   Dividends and brokerage excluded
             74 Actual Trades Performance
30.0%


20.0%


10.0%


 0.0%
         1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73



-10.0%


-20.0%


-30.0%
     4A.
   Highly
 competitive
fee structure
Performance based fee structure - Cash


   •   No management fees
   •   Performance fee only
   •   12% pa hurdle rate payable monthly
   •   Monthly rate compounds to equal 12% pa
   •   Fund retains 75% of excess above hurdle rate
   •   Manager paid cash fee equal to 25% of excess
   •   Trustee issued units equal to 25% of excess
Performance based fee structure - Cash


   •   No management fees
   •   Performance fee only
   •   12% pa hurdle rate payable monthly
   •   Monthly rate compounds to equal 12% pa
   •   Fund retains 75% of excess above hurdle rate
   •   Manager paid cash fee equal to 25% of excess
   •   Trustee issued units equal to 25% of excess
Performance based fee structure – Escrow units


   • Trustee issued units equal to cash fee at NTA
   • Calculated and issued monthly
   • Units held in escrow for 12 months
   • If fund performance is negative after 12 months from
     issue, then Trustee transfers units pro rata to current
     unit holders provided they held units at the time of
     issue of the escrow units
   • If 12 month performance is positive, then Trustee
     transfers units to the Manager
   • Designed to enable Investors to recover losses
   • Plus manager to focus on consistent performance
          5A.
        We say
the Snowball method
     is the safest
       blue chip
       strategy
Risk Management


  •   Strategy itself is designed to minimise risk
  •   Sole focus upon liquid blue chip stocks
  •   Must have strong financial health
  •   Concentrates buying strategy on the best opportunities
      only
  •   Aims to pinpoint buy price close to the lowpoint
  •   Measured selling strategy
  •   Cash reserves adjusted daily to reflect risk
  •   Less “shocks” from large blue chips
  •   Ban on debt avoids selling under pressure
Performance Fee - 12% p.a hurdle rate
       20% p.a. performance

          4%                       Investors
   2.0%
                        12%        Cash fee
2.0%

                                   Escrow units


                                   Investors
Performance Fee - 12% p.a hurdle rate
       16% p.a performance

               2%
          1%                   Investors
     1%
                               Cash fee

                               Escrow units
                       12%
                               Investors
Communication



  • Each investor will have live password access to
    internet broking account with Etrade
  • Only Manager and Trustee to have trading
    password
  • Only Trustee has access to bank account
  • Quick snapshot email sent by Manager regularly
  • Access to watch lists of stocks under review
How you invest



  • Application Form completed including Accountant’s
    Certificate where applicable
  • Forward funds to Trustee as detailed on Application
    Form or direct to Etrade trading account
  • Fortnightly closings until funds raised
  • Monthly redemptions upon at least a week’s notice
    prior to the end of each month
   So what did
  You decide is
 the safest way
   to invest in
blue chip stocks?

				
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posted:12/30/2012
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