User's Guide

The Rivkin Report provides stock recommendations for its members. The Report does not attempt to cover all stocks listed on the Australian Securities Exchange, nor do we pretend to have a view on all stocks.

Each week, we look at the additional stocks that our members have requested an opinion on and endeavour to comment on them on our online audio show, "Virtually Live".

Please be advised that direct investing in the stock market can result in financial loss. Historical performance is not a guide to future performance.

What we aim to do at The Rivkin Report is uncover money-making opportunities for members. The system used is an event driven process that endeavours to target specific situations that have led to a mis-pricing of stocks. We take an individual stock picking view, attempting to pick individual mis-priced stocks. Hopefully, in time, you will learn these strategies and philosophies, enabling you to assess investment opportunities for yourself. The aim of The Rivkin Report is to make you a profitable investor, both by educating you and providing money making stock investment ideas for you.

It is, however, important to remember that investing in the stock market is potentially risky and you should be aware of these risks before making any investment decisions. Despite best endeavours, things sometimes go wrong and investments can result in losses.
The accompanying brochure, "Discover your Investor Profile", discusses risk and it is imperative that you read and fully understand this section to identify your own risk profile. It is our experience that most people overrate their own risk tolerance and do not realise this until a loss occurs.

We intentionally keep The Rivkin Report brief, simple and easy to follow. If it is quantity that you are after, you can easily obtain voluminous amounts of further information on the market through a myriad of other sources. The Rivkin Report advises members on exactly what stocks to buy and the exact time to sell to maximise profits. All of our recommendations come with a buy price, the reason we believe it is a good investment and a risk and time outlook to help you decide whether it is the right investment for you.

The Rivkin Report investment team's own trading is specific to their personality and financial situation. All trading done by the investment team and associated parties in any stock that is subject to a recommendation is disclosed at the end of each Report. It should not be deemed advice or a guide as to how to invest your own capital.

Report Distribution

The Report is written every week, mostly on a Monday (Tuesday if Monday is a holiday). It is generally finished around 5pm, when it is formatted, proofed and finally distributed to you. It is usually available on our website around 6pm on the day of writing.
The Report can be received by mail, fax or online, which is the most popular and time efficient way to receive it.

How to Access the Report

Online Members

As an online member, you can access the members' area of The Rivkin Report website whenever you choose to. This site enables you to access a wealth of resources including:

Current Issue: Access to the current Report. This can also be printed out and kept for your own files. The Report is usually available online around 6pm on the day of writing.
Rivkin Investor Centre: Create your own watch lists and portfolios, obtain stock quotes, company information, view stock charts and read ASX announcements. The Investment Centre is powered by Bourse data.

Recommendations: A list of current Report buy, sell and hold opportunities and their corresponding prices is located in the members' area of the website. This provides a handy table summary of our current buying opportunities.

Library: For further information on the stock market, look no further than our library section, which houses "Story So Far", which provides a summary of our position on our current recommendations. If you are unsure of any of the terminology used in the Report, then this section will also be of great help with our market terminology index. The Rivkin Report track record can also be found in this section.

Virtually Live: Online members are also able to gain access to our weekly online audio broadcast housed on our website, where you can email questions and have them answered by the Rivkin investment team on air.

SMS Alerts: Members who receive The Rivkin Report online or by fax can also receive SMS Alerts to notify them when a new recommendation to buy or sell has been issued via email or fax. This service is particularly useful for members who are not sitting at their computers, or near their fax machines, all day.

Mail Members

The Report is printed on a Monday afternoon and lodged with Australia Post on Tuesday.

Fax Members

The Report is faxed between 6pm and 8pm on the day of production, usually Mondays. Our fax system will attempt to get through to you three times. Please ensure that your fax is online and full of paper so that you can minimise the chances of non-receipt. If your fax has not arrived by 9am on Tuesday morning, please call our customer service centre on (02) 8302 3600.

Buy/Sell Recommendations

Please be aware that there will be Reports in which we make NO BUY recommendations. The market does not always provide us with attractive, weekly opportunities. Our aim is to recommend quality stocks that will make our members money. We do not feel compelled to provide recommendations for the sake of it, in a market in which we see no real value. As one of our favourite Rivkin Rules says, "the pain of losing money far outweighs the pleasure of making it!" Whenever we recommend a stock, we will place a limit on the buy price. In effect, we tell you at what price we consider the stock to be good value. If you elect to buy the stock over our recommended limit, you are doing so at your own peril. If you are not able to purchase a stock in the recommended price range, please exercise patience. Often, a stock may drift upwards on our recommendation, but it often comes back down in the short-term. Generally, you will have plenty of time in which to purchase stock in the recommended price range.

Mid-Week Recommendations

Members should also be aware that we regularly issue mid-week updates and buy and sell recommendations. These are posted on our website in the updates section of the members' area and we notify members by email or fax when an update is available.

What and how much do I buy?

We are often asked by members how much they should invest in each stock and how do they know which stock(s) to choose. It is obviously impossible to provide personal capital allocation advice in the Report. However, we will endeavour to provide a guide to help you. Some members have $4,000 to invest, while some others may have $400,000 and have completely different goals and risk tolerances. Despite this, at the end of each new recommendation, we do make a portfolio allocation recommendation to help guide members.

As a general rule, we suggest not putting less than about $2000 into one investment. If you have $9000 to invest, you can split it between 3 or 4 investments, but please choose ones that suit your situation. Never invest $1000 in eight of our recommendations, as the cost of brokerage will take the lion's share of any profits. Paying $50 to buy and $50 to sell (with a discount broker) means that if you buy $1000 worth of stock, the stock will have to go up 10% before you hit the break even point ($100 brokerage is 10% of your $1000 investment). If possible, you should also invest in several of our recommendations, as it provides some diversification. Our long term track record indicates that roughly eight out of every ten of our recommendations has returned a profit. While this is no guarantee of future performance, it provides a guide. If you sensibly spread your investments over our recommendations, you reduce your chances of losing capital and improve your chances of profiting.

It is important to understand that you can buy a $50 stock as easily as you can buy a 50c stock. People often say; "I can't buy stocks like NAB because they cost too much. Can you recommend any 50c stocks?" This is wrong. Whether you spend $5000 by buying 100 XYZ shares at $50 a share, or 10,000 ABC shares at 50c a share, it doesn't matter. It's all percentages. People think that it's easy for a 20c stock to go to 40c and hence, make a 100% return. The truth is that it's as hard as a $20 stock going to $40. People think that moving 20c is easy, but moving $20 is impossible. Wrong! It's not dollars, its percentages. That 20c is a 100% move and that $20 is also a 100% move. They are both the same.

Finally, don't be in a rush to invest all your money in the first Report you read. Take the time to familiarise yourself with the The Rivkin Report and the stock market. IT IS NOT A RACE! There will be plenty of future Rivkin Reports and recommendations. We recommend that you paper trade for at least the first five Reports you receive.

Can I get additional financial advice from The Rivkin Report?

Apart from the advice contained within the The Rivkin Report, we are unable to provide any additional advice. We do, however, have Rivkin Report Stock Consultants. If you're seeking clarification on The Rivkin Report recommendations or if you're new to the stock market and you'd like a little help getting started, you can contact one of our Rivkin Report consultants via email at info@rivkin.com.au or by calling (02) 8302 3602. Our staff, however, is not permitted to answer any questions relating to stocks not mentioned in the The Rivkin Report.

What Else Should I Read?

The Rivkin Report always advocates voracious reading by anyone who wants to become a successful trader; you just never know where you will pick up a profitable bit of information. We have listed several publications that you should attempt to read as often as possible;

- AFR, AFR Smart Investor Magazine, Forbes Magazine, BRW, Business Section of the SMH and the Age. Literature on the great investors such as Warren Buffett and George Soros is a must for all serious traders and investors.

- The Rivkin Guide to Getting Started in Shares - We suggest all new investors who are interested in learning more about the Rivkin approach to investing read this best selling book by Jordan Rivkin. The guide discusses how the stock market works, how to make money buying and selling shares, how to 'read' the market, which factors affect share prices, how to choose a stockbroker, how to make money through takeovers, the psychology of investing and options and CFDs. You can purchase this book through our office on 1300 366 145

Recommendations

Long-Term: Relates to an expected holding period measured in years.

Medium-Term: Relates to an expected holding period measured in months (generally between 6 months and 2 years).

Short-Term: Relates to an expected holding period measured in weeks (generally up to 6 months).

Buy: Undervalued and suitable for purchase at limit price.

Hold: Trading around fair value but further upside still likely.

Sell: Exit this investment; may be overpriced or other issues have changed our view.

Buy for Yield: A trade that is attractive value due to yield on offer; will probably not deliver significant capital appreciation.

Speculative Buy: High-risk buy with big potential upside, but with high-risk.

Investment Tables

Average Weekly Turnover: this field is calculated by taking the value of turnover in a stock in the 12 months prior to our Original Buy recommendation and averaging to a weekly figure. We often discus the liquidity of a stock and this helps show how much a stock turns over. For instance, Woolworths turns over around $246m of shares a week, on a market capitalisation of $24B. Oxiana turns over $130m per week, with a market cap of $4.5B. Campbell Brothers turns over $1.97m per week with a market capitalisation of $892m. Codan turns over $0.26M a week on a market capitalisation of $154m. Clearly, Campbell Brothers is a highly illiquid stock despite its apparent size and a small company like Codan practically trades by appointment. You must be very confident of your view when trying to take positions in such illiquid stocks as they are not easy stocks to get in and out of.

% of Share Portfolio: We calculate this figure assuming an investor has capital of $50,000 to invest in an equities portfolio, wants a diversified portfolio across several sectors and has a moderate risk tolerance. When allocating capital, it is very important to ensure that the investment suits your own risk profile, and takes into account the amount of capital you have to invest. Other considerations may include diversification, whether you wish to hold offshore shares (or simply offshore exposure via Australian shares), time horizon, preference for capital or yield, taxation position, your level of understanding of the stock market and so forth.

Prospective Net Dividend Yield: We calculate this by dividing the dividends we expect the company to pay in the coming 12 months by the closing share price. Thus, this figure will update for movements in the share price. We will also update it when a company pays a dividend, to reflect the future dividend expectations. If we know of special dividends which the company intends to pay these will be included, but capital returns will not. If you have been in the habit of using the information provided in newspaper tables, please use our information instead. Historic dividends have little relevance and can actually be quite misleading. This is particularly so if a company has paid a special dividend recently, or has hit financial difficulty and cut its dividend, or has a new dividend payment policy.

If you want to recalculate for the yield you will receive based on the price you bought the stock, then you simply multiple the % shown by the closing share price (to get back to the cents per share dividend forecast we have made) and then divide by your buy price. Eg. The table shows a yield of 5% and a closing price of $1.00. You acquired the shares at 80c. $1.00×5% = 5c. 5c÷80c = 6.25%. The figure makes no adjustment for franking credits attached or where companies distribute capital and thereby allow a deferral of tax on the distribution.

Franking Level: Australian companies often pay dividends with franking attached. Essentially this is a way of preventing double taxation of company earnings as it gives shareholders a taxation rebate for the Australian taxation paid by a company on the earnings it is distributing as dividend. Franking is currently at 30%, being the statutory corporate tax rate, and dividends can be unfranked (0%), fully franked (100%), and partly franked (anywhere between 0% and 100%). For an Australian taxpayer, franking will always have value, as even if you pay no tax the franking credits distributed to you will be paid back to you by the ATO. If you wish to gross up the dividend yield for franking credits, the calculation is: ((Net Dividend Yield ÷ 70 × 30) × Franking level) + Net Dividend Yield. An example: The Net Dividend Yield is 5%. The Franking Level is 50%. ((5%÷ 70 × 30) × 50%) + 5% = 6.07%. With a 100% Franking level, the Gross Dividend Yield is 7.14%.

ASX Code: This is the code under which the company trades on the Australian Securities Exchange. All ordinary shares trade under a three letter code. Eg. WOW, CBA, NAB. Preference shares are typically traded under a five letter code consisting of the company code and two letters (PA, PB or PC), such as SGBPA and DJSPA. Then there are many hybrid securities which also use five letter codes, such as WOWHB, SUNHB. Convertible notes typically (though not always) have four letters, the three letter company code and one letter which is normally G, such as AHUG, AGIG, BNBG.

Market Cap: Market capitalisation is the current shares on issue multiplied by the current share price (see Closing Price below). This updates constantly depending on the share price and any issues or cancellations of shares on issue. It does not include unlisted shares or options, but when we calculate financial ratios such as Earnings per Share we do take account of these unlisted securities as set out in accounting standards.

Closing Price: The price at which the shares are currently trading, if the market is open, or the price at which it closed in the most recent trading day is shown as the Closing Price. This price updates every twenty minutes so there can be a slight delay between the price you see and that being paid live in the market.

Original Buy Date and Price: This is the price at which we recommended subscribers buy the stock and the date on which that recommendation was made. (If you are searching our site for the original article on our reasons for the buy, then a quick stock code search and then a scroll down the Search results to this date is very effective). Also, bear in mind that a company can pay dividends between the current date and when we originally recommended the stock, and many developments can have occurred since, so you need to consider this.

Risk: This is a judgement by us on the Risk associated with this stock. It takes into account many factors including the industry dynamics, the company's competitive position, the financial flexibility of the company, the operating leverage implicit in the business model of the company and the size and liquidity of the stock itself. While Volatility is not the same as risk, we do also consider how volatile a stock is in an overall judgement of Risk.

Term: Again, this is a judgement by us as to how long we anticipate holding this stock. On occasion we see a very short term mis-pricing in a stock which we think will correct quickly. Other times, there are specific catalysts on the medium term horizon which we expect to result in the share price appreciation we are expecting. And sometimes we believe that this is a high quality company trading at a very attractive price and we simply see it as a great buying opportunity for a long term investment. The term we specify does not always come to fruition: a long term investment may simply get so overvalued by the market that we feel it is sensible to take profits short term; a short term mis-pricing may take longer to correct than we expect; and so on.

Current Recommendation: As we stand here today, with ongoing information flow, changing earnings and dividend expectations, corporate developments and so on, we have a view on whether to stay in a stock we have already recommended at lower levels, or whether it is still a good buying opportunity.

Once we recommend a sell, this will show here. Unlike many brokers who tell you to buy a stock and then forget about it within a week or month (or churn you in and out for a bit of extra brokerage), we stay with you in that holding until it is time to sell, and constantly keep you up to date on your holdings. While we recognise for new subscribers coming on board there is often little of relevance as you do not hold our prior recommendations, we work constantly on new opportunities so that over three to six months you can gradually move to being fully invested in stocks we like.