How does ASX Event Work?
Profit From Corporate Actions
This longstanding portfolio suits a relatively conservative investor seeking a modest return with minimal volatility. ASX Event seeks to profit from corporate actions, particularly takeovers.
Need to Know
|Goal||Market||Risk||Re-balance||Horizon||Minimum Suggest Investment|
|Profit from corporate actions such as takeovers||ASX||Medium||Any time||Recommended minimum 3 years||$2000 per stock (model uses $5000)|
How does ASX Event Work?
The portfolio invests in listed ASX equities that are undergoing some type of corporate action. There are three main types of events that we seek to profit from, which are:
- Share buybacks
- Company wind-ups
While takeovers make up the majority of the trades, our analysts also seek other profitable corporate action opportunities. The number of trades depends on the activity in the market, but typically we expect an average of 10 trades per year with a holding period per trade of three to four months.
The return per trade varies but averages around 2-3%, producing annualized returns of approximately 6-12% per trade. Some trades are intended specifically for people in low-income tax vehicles (such as super funds) where the trade relies on obtaining a refund of franking credits. These trades can be quite profitable but generally should not be undertaken by investors who pay a marginal tax rate of above 15%.
How do I Follow ASX Event?
We’ve designed this portfolio to be easy to follow with these steps:
Buy: Buy the stocks in the table, for which there is still an open recommendation. Do not buy into stocks that contain ‘hold’ or ‘sell’ in the recommendation text column). The volumes shown in this table are based on a $5,000 investment per trade.
Is There a Minimum Investment Period or Amount?
Our analysts generally recommend members invest with a long-term time horizon, however, the conservative nature and short duration of a typical event trade means that a relatively short time horizon (e.g. one year) can still produce an acceptable result.
There is no specific minimum investment amount although the minimum brokerage charged by your broker can put a practical limit on the minimum investment size. For example, if your broker charges a minimum of $10 per trade, this would represent a 0.5% charge on a trade size of $2,000 (portfolio size of $20,000 for 10 stocks). Given that the profit per trade can be in the range of 1-5%, this level of brokerage charge would be considered the maximum acceptable. Members should therefore aim to put at least $2,000 into each event trade. This portfolio is also offered in a Separately Managed Account version for which you pay a small management fee for us to follow the portfolio on your behalf.
Learn More about ASX Event
The ASX Event Portfolio has been run in its current form for over 5 years so we have been able to gather performance statistics based on historical closed trades. The table below shows these statistics that are compiled on a per-trade basis.
|ASX EVENT PORTFOLIO|
|Construction||A portfolio of ASX-listed stocks undergoing a corporate action for which there is an arbitrage opportunity|
|Management||Positions are added and closed on an ad hoc basis|
|Annual Average Return*||6.6%|
|Worst 12-Month Return*||0.09%|
* Based on closed trade data over the past five years
Please note that this article contains back-tested data which shows how the model would have performed using historical data. “Backtest” results are neither an indicator nor a guarantee of future returns.