TiP Group Newsletter, December 2023

Retail Advisory

Contributing to super

You may not be aware that a few years back the ATO eased the restrictions on making tax deductible contributions to super for individuals who are not self-employed. This means that, so long as you meet the conditions to contribute, you can now make personal contributions to your superannuation fund whenever you wish in addition to any super guarantee payments or salary sacrifice arrangements you may already have in place. Currently the annual contribution cap for concessional super contributions (those that you can claim a deduction for) is $27,500 and includes super guarantee contributions, salary sacrifice arrangements and any additional contributions you make during the year.

Recently the tax office also introduced the ‘carry forward’ which applies to individuals with $500,000 or less in their combined superannuation accounts. For those who meet this condition, they are able to utilise any unused portion of the last five years concessional contribution caps. So for example, if the total of your unused concessional contributions over the last five years is $50,000, then in the 2023-24 tax year you would be able to make total concessional contributions of $77,500 (subject to your super balance being below $500,000) without breaching the contribution cap limit for that year.

Don’t forget that if you are paying a super owned insurance policy personally, you may be able to claim this payment as a tax deduction. If you are unsure how your insurance is structured, don’t hesitate to contact our office and we would be happy to provide this information and some guidance on whether you may be able to claim this payment in your tax.

Whilst the team at Enva is happy to provide some general guidance on tax matters, we are not specialists in this area and are happy to work with your accountant or tax specialist.

Contact our team today​​

Mortgage Broking

The Reserve Bank of Australia (RBA) has decided to hold the official cash rate at 4.35%.

The decision to maintain the cash rate follows the release of data last week which showed the annual inflation rate has fallen to 4.9% for the year to October 2023. 

Get in touch with our Mortgage Broking team today:  Mortgage Broking

Economic Update

Market Update and Economic Outlook – November 2023 

We have witnessed a noteworthy strengthening in both conservative and growth-oriented investments during November. This surprise reversal is attributed to an unanticipated drop in bond yields, thereby pumping up both bonds and equity numbers.

The downtrend in bond yields mirrors a seeming remission in US inflation along with a growing belief that US Federal Reserve might have put a halt to their interest rate hiking strategy.

The S&P/ASX200 reported a return of 4.5%, while the interest rate-sensitive listed property sector sees a healthy rally at 10.9%. Owing to a robust AUD, global returns for unhedged investors positioned at 4.3%, and behind the hedged return, which soared up at 8.1%.

While the Australian equities rebounded from the 2022 slump and coasted up for a while earlier this year, the recent months saw a somewhat bumpy ride on a sideways slope, thanks in part, to dwindling earnings. Yet, as we know, markets are never a straight line. They ebb and flow, offering opportunities for the sharp-eyed, patient investor.

Remember - time is the friend of a great business and the enemy of the mediocre. Let's maintain our wise investment strategy, focusing on Wealth Winners® and avoiding the Capital Killers™. It's challenging times like these that create the greatest opportunities, as Warren Buffet highlighted, we stand ready to be "greedy when others are fearful" and reap the rewards in the long-run.

In investing, as in most parts of life, opportunities often arise when a risk is triggered, creating an irrational fear in the markets. Let's stay ready to pounce on them and ensure our wealth continues to grow. As always, here's to patient, conscious investing!

AUD

The Australian dollar is enjoying a promising position against the US dollar and recently reached a four month high. The driving force behind this surge? Simply put, the prevalent speculation that the US Federal Reserve has put a full stop to its rate hikes.

Looking ahead for the US, predictions of several rate reductions in 2024 are in the air. These forecasts are acting as a catalyst for the AUD, inflating its potentials and putting a smile on the face of Australian market observers. This uptick trend, it seems, is here for a long haul and should happily extend into the coming year, 2024.

We must look to capitalise on this windfall. With the AUD rising, the field is set for us to increase our involvement in US stocks. Remember, our journey in investments is not a sprint, but a marathon, and timely opportunities like these provide us a chance to bring our Wealth Winners® to the podium.

Stock Highlight

Nick Scali (ASX: NCK)

Nick Scali Limited (ASX: NCK) imports and retails household furniture and related accessories in Australia and New Zealand. The company was established in 1962 and is best known for its lounges and sofas. It also sells dining room and bedroom furniture, as well as rugs and other home decorator items. As of June 2023, Nick Scali operated a network of 107 Nick Scali and Plush stores after the company acquired Plush-Think Sofas in November 2021.

Commentary:

• NCK sells furniture, takes deposits and advance orders.
• How do they make money: sell a lifestyle – home pride – affordable luxury
• It is a mid-range brand.
• Covid was a tailwind – people at home and wanting to replace furniture. Short term, there were mixed opinions on headwinds and tailwinds. Mortgage rate increases were considered a challenge in the short term.
• Long-term, there are tailwinds: going forward will be about people moving and buying new furniture.
• Future growth comes from rolling out new stores—107 current stores – Dec 22 (Australian and NZ).
• Own 9 and in premium locations – on the balance sheet at cost.

• Stores:

• - Plush 44 but want 90 to 100
• - NCK has 63 and wants 86.
• - Opened 2 stores 1H23.

• Addressable market: about 4% of the market.
• Price maker – but a competitive space. Has the advantage of designing their own furniture.
• Debt to Equity - 65% interest bearing rest is lease obligations. Members were happy they were paying off the debt.
• Do not have money tied up in inventory (inventory levels are probably the stock for Plush). It is also low fashion and a need to reinvent themselves. Prepaid deposits are a deferred revenue at approx. $85 million.
• Online is not seen as a material threat to NCK’s business model.
• Acquisition: Plush 2021 for 103mil. Too early to understand how the acquisition is going.

Moats:

• Brand and reputation
• Global contract supply partners and relationships
• Exclusive designs
• Store network with key position owner-occupied
• National distribution centres
• Owner manager culture

Potential Future Risks:

• A prolonged significant economic downturn
• Keyman – Anthony Scali
• Sustained supply chain disruption
• Large acquisition fails

• Lose touch with their market.
  

Shareholder updates

Graham Lusty Trailers (GLT)

Private Equity Fund

The Role of Private Equity in Today's Economy 

The role of private equity in today's economy is both significant and multifaceted. Private equity firms play a crucial role in driving economic growth, fostering innovation, and creating jobs.

Private equity firms invest in a wide range of companies, from startups looking for growth capital to mature companies in need of a strategic overhaul. This injection of capital can help these companies expand their operations, enter new markets, invest in new technologies, or implement operational improvements, all of which can contribute to economic growth.

Moreover, private equity firms often bring more than just capital to the companies they invest in. They also provide strategic guidance, industry connections, and operational expertise, helping these companies to grow and succeed. This can lead to job creation, both directly at the portfolio companies and indirectly through increased demand for goods and services.

Private equity can also foster innovation. By providing capital and support to startups and growth-stage companies, private equity firms can help bring new ideas and technologies to market. This can drive productivity improvements and economic growth.

Furthermore, private equity investments can generate substantial returns for investors, including pension funds, endowments, and individual investors. These returns can contribute to financial security for individuals and funding for educational and charitable institutions.

In conclusion, private equity plays a vital role in today's economy. Through their investments and strategic support, private equity firms can drive economic growth, job creation, and innovation.

Future Property Fund

Demystifying Real Estate Investment: Common Myths Busted

Real estate investment can often seem like a labyrinth of complexity to the uninitiated, leading to the proliferation of several myths that can deter potential investors. Today, we aim to demystify real estate investment by busting some common myths.

Myth 1: Real Estate Investment is Only for the Wealthy - This is one of the most prevalent misconceptions. While it's true that real estate requires a significant initial investment, various financing options have made it accessible to a wider audience.

Myth 2: Real Estate is Always a Safe Investment - While real estate is often considered a 'safe' investment, it's not immune to market fluctuations. A well-informed investor understands that every investment carries some level of risk, and real estate is no exception.

Myth 3: You Should Always Invest in Your Local Market - While familiarity with the local market can be advantageous, it shouldn't limit your investment horizons. With proper research and due diligence, profitable opportunities can be found in various markets.

Myth 4: Real Estate Investment is a Quick Way to Get Rich - Real estate investment is a long-term game. It requires patience, research, and strategic planning.

By busting these myths, we hope to make real estate investment more approachable and understandable. 

Learn more about our Future Property Fund here.

​

Corinthian Balanced Fund

Summary

• As of November 30, 2023, the unit price of the CBF was $1.0249, with a performance of 1.135% for the month and 2.3% financial year-to-date.
• The fund currently has a higher allocation to cash than desired, but the asset allocation committee is monitoring this position.
• The CBF has a total portfolio value of $62,2230,327 with growth assets accounting for $15,949,495 and defensive assets accounting for $46,273,832.
• The fund has continued to make strategic investments in Australian shares, commercial debt, and units in SBS Mortgage Series 1 Trust.
• Stock markets had a strong month with the ASX200 rising 4.5% and the S&P500 rising 8.91%. In Australia the listed property sector rallied 10.9%. Unfortunately, this resulted in limited buying opportunities, but we continue to hunt.

 Overall, the CBF continues to perform well and actively manages its portfolio to achieve its investment objectives.

Unit Price

The Unit price is calculated in accordance with the Constitution and is based on the value of the underlying assets of the Fund with an adjustment for any relevant Transaction Costs.

• The financial year starting unit price for the CBF was $1.00166 (ex-distribution price)

• The 30 November unit price is $1.0249.

• The performance for the month of November is 1.135%.

• Financial YTD performance is 2.32%.

Portfolio Update

For the month of November, we continued our gradual buy in strategy with purchases of Australian shares to a value of approximately $310,000. We increased holdings in the following companies:

• AX1
• NCK
• NHF
• RMD

The main increase was in NHF circa $149,000.

A small holding of Nick Scali was added to the portfolio following a good buying opportunity, and we continue to monitor the stock closely. This month we have taken a closer look at the stock in the Stock Highlight section.

As at 30 November 2023 we have deployed circa $6.7m into equities with a current value of $7.1m.

Conscious Investor Fund

In the realm of investments, finding exceptional opportunities can be like finding a needle in a haystack. But what if we told you there's a way to apply Warren Buffett's timeless principles to uncover top-tier companies?

Join us in a captivating video discussion on Ausbiz Australia with experts Mark Moreland and Howard Coleman. They unveil the magic of the Conscious Investor Fund software, which utilizes Buffett's ideals to filter through the market and pinpoint remarkable investment prospects.

Watch the video below and unlock the potential of smarter investments through the wisdom of Warren Buffett.

Conscious Investor Fund

Conscious Investor Fund