Tim Boreham: Investors happy to keep (blue) chipping away

While Australian retail investors remain keen on the share market, they’re becoming more conservative, gravitating to the ‘boring’ blue chips.

Unlike these, playing around with blue chips on the stock market is less of a gamble.

While Australian retail investors remain keen on the share market, they’re becoming more conservative, as many of the younger dabblers rediscover post-pandemic life beyond a computer screen.

According to Selfwealth (ASX:SWF), investors are gravitating to the boring blue chips that would look comfortable in ma and pa’s portfolio: the big four banks and BHP (ASX:BHP)

A, with a smattering of CSL (ASX:CSL).

---

For the best columnists, sign up here for free Stockhead daily newsletters

---

Gone are the buy-now-pay-later and “meme” stocks – those heavily promoted on the internet – although there was a brief flurry for troubled Nasdaq-listed retailer Bed Bath & Beyond.

Exchange traded funds remain popular and none more than the Global X Ultra Short Nasdaq 100 Hedge Fund (ASX:SNAS) which generates returns with an inverse correlation to the Nasdaq.

In other words, it’s an insurance policy for “ultra bears” wary about tech stocks.

Selfwealth chief Cath Whitaker describes trading as choppy, with volumes picking up in August and September after a quiet July.

“We will have a run either way for a couple of days and then we have days that are as flat as a pancake,” she says.

“Our retail investors are still looking for bargains. Their key question is, ‘Have we reached the bottom?’ and no one knows the answer definitively.”

Indeed.

As the only ASX listed pure-play retail broker, Selfwealth provides a rare public window into its own performance and the soul of the industry.

The company this week reported record revenue of $7.15m for the June quarter, up 24 per cent quarter on quarter, with cash burn narrowing to $845,000 from $1.8m.

---

Visit Stockhead, where ASX small caps are big deals

---

With 127,862 active users, 19 per cent higher year on year, Selfwealth claims to be the country’s third biggest retail broker, albeit streets behind gorilla Commonwealth Securities. Selfwealth is also one of more than 40 broking platforms – mainly low-cost “challenger” brands – duking it out for the loyalty of increasing demanding investors.

Recent entrants include the Chinese backed Tiger Broking, marketing big spender Superhero, Kiwi outfit Sharesies and moomoo.

Whitaker says it’s a case of wait-and-see if consolidation occurs, but with retail equities volatility declining, across the board, casualties are likely.

Elsewhere in the ASX orbit, Bell Financial Group (ASX:BFG) shares are trading at roughly half their late 2007 listing price of $2 but management gets an elephant stamp for more robust performance in recent years.

As of the end of August Bell reported overall revenue of $153m for the calendar year to date, 20 per cent lower, and a net profit of $15m (down 45 per cent).

But the firm’s earnings from retail broking fell from the previous $17.4m to pretty much nothing, so it was a case of “saved by the Bell” from other divisions such as funds management, third party platforms and equity capital markets.

The company trades on a handsome dividend yield of around 8 per cent.

Formerly Evans & Partners and Evans Dixon, reinvented wealth group E&P Financial Group (ASX:ED1) is back in black following this year’s collapse of its Dixon Advisory arm.

Meanwhile, Western Australia’s biggest broker, Euroz Hartleys (ASX:EZL), continues to tap investor interest in the state’s smorgasbord of resources speccies – many of which have snuck ‘lithium’ into their mission statements.

Valued at a tad over $50m, Selfwealth has lost about 40 per cent of its value over the past year, with the shares hovering just above its 20c listing price in late 2017.

So, the jury’s out on whether the brokers themselves are decent investments, but there’s no doubt their clients are well served by innovation and intense competition.

On the 35th anniversary of the October 1987 share market crash, all we need now is for the market to shed its “Shocktober” reputation and end the year with a bang.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Get more Tim Boreham wisdom at stockhead.com.au.

SUBSCRIBE

Get the latest Stockhead news delivered free to your inbox. Click here

Originally published as Tim Boreham: Investors happy to keep (blue) chipping away