INVESTMENT BULLETIN S T U D E N T W R I T E R S - S T U D E N T O P I N I O N S S E P T E M B E R 1 3 T H 2 0 2 0 I S S U E N O . 1 1 The University of Auckland Investment Club Bulletin Research Team 2020 Nikhil Luthra Bulletin Editor-in-Chief Jerry Ren Sam Jain Senior Writer Senior Writer Sean Spires Kyle Quindo Senior Writer Senior Writer Logan Rainey Kai Yun Gao Senior Writer Junior Writer Shyam Prasad-Jones Sean Flower Junior Writer Junior Writer Neha Kumar Saeyavan Sistabesan Junior Writer Junior Writer Ananya Ahluwalia Tim Cross Junior Writer Junior Writer Vignesh Nair Freelance Writer Prices as at Friday 11th September 2020 Unless otherwise stated THE UAIC INVESTMENT BULLETIN FOR 2020, IS BROUGHT TO YOU IN PARTNERSHIP WITH: Contents The club An update from the fund 2 Educational Risk and diversification - part 3 3 Opinions News media must be subsidised 5 Tesla: overvalued, or perfectly valued? 10 Personal finance for students 12 MYOB's Column 14 An update from the fund A RUNDOWN OF THIS WEEKS PITCHES WRITTEN BY IC CHAIRMAN NEHAAL RAM SCALES CORPORATION ALTIUM Pitched by Anna Marsden, Junior Altium (ASX: ALU) is an American- Equity Analyst: Australian electronics design software company specialising in Scales Corporation (NZX: SCL) is PC-based software tools for the New Zealand's leader in design of printed circuit boards Agribusiness, delivering value (PCBs). The company’s Altium across Horticulture, Logistics, and Designer software is the most Food Ingredients. Utilising a widely used PCB design software vertically integrated business worldwide with over 50,000 model and strong brand subscribers and 110,000 registered reputation to capture the NZ, users. Given the diverse Australian, American markets applications of PCBs across nearly (alongside current expansion into every electronic product and the the Chinese markets), Scales is well projected trajectories of smart placed to deliver a strong connected devices and industrial performance to their shareholders. automation, Altium is well-placed With a goal of being the foremost to see demand for its products investor and grower of New continue to rise. Additionally, the launch of Altium’s new cloud Zealand Agribusiness, Scales is platform Altium 365 will be a key poised to maintain future growth driver in helping the company trajectories via organic and reach its lofty target of 100,000 acquisition growth opportunities. subscribers and $500m revenue by Whilst Scales does emplace a 2025. The Investment Committee strong focus on brand reputation has voted in favour of Altium 14/16. and sustainability; concerns were The valuation team will consist of also raised on their singular focus Andrew Meng, Gabrielle Mackisack, on operations in Hawkes Bay. The and Nina Kashyap. Li. Investment Committee has decided to not pass Scales to the valuation stage, with the final vote being 7/16. ‘’Altium is well-placed to take advantage of the rise in AI, IoT, "This investment will scale up Industry 4.0 and every other your portfolio." - Anna tech buzzword you can think Marsden, Junior Equity Analyst of.” – Andrew Meng, Senior Equity Analyst. 2 / The Club September 13 2020 Risk and diversification PART 3 WRITTEN BY CHRISTOPHER WONG THOUGH DIVERSIFICATION OFFERS VARIOUS BENEFITS, IN REALITY, IT IS QUITE DIFFICULT AND TIME-CONSUMING TO ACHIEVE FOR THE AVERAGE INVESTOR. THE FIRST ISSUE IS THE COST OF BUYING MANY INVESTMENTS IN SMALL PORTIONS BECAUSE THERE IS A COST FOR EACH TRADE AND OFTEN A MINIMUM FEE. THIS OCCURS WHEN AN AVERAGE INVESTOR FREQUENTLY BUYS AND/OR SELLS DIFFERENT HOLDINGS. THESE TRANSACTION COSTS ADD UP OVER TIME AND EAT INTO ANY PROFITS (IF ANY). SECOND, THE MORE HOLDINGS IN A PORTFOLIO, THE MORE TIME NEEDS TO BE DEVOTED TO MONITORING AND MANAGING THOSE HOLDINGS. FOR A NON-INSTITUTIONAL INVESTOR, THIS MAY BE IMPRACTICAL. DIVERSIFICATION THROUGH index. Investing in an index fund DOLLAR-COST AVERAGING INDEX FUNDS allows investors to diversify investments across all of the Another dimension of diversification Achieving an adequate amount of companies in a given index in an is time. If you invest everything diversification may sound like a easy and cost-effective manner. today, and tomorrow there is a complex task, but there is an easy negative event, then you may solution. Unlike active investing The key aspect to understand is unhappily capture the whole which aims to outperform the the investment strategy as to impact. If you transition over weeks market, index investing aims to or months you smooth the path and which index and how that is or mirror an index. Index funds are reduce that impact, admittedly also not diversified across industries, essentially funds invested in the missing some growth if the property companies, or factors such as low same companies and in the same market or stock market surges volatility, value, momentum, proportion as would an index. forward. dividends or size. For example, investing in both the NZ20 and This method is backed statistically One investor technique that is the S&P/NZX50 Fund would and is even endorsed by Warren popular especially with those Buffet himself. Over 5 years, duplicate 20 holdings and building up their long-term savings 78.52% of U.S. fund managers approximately 78% of the is dollar-cost averaging (DCA). underperformed the S&P500 holdings. Dollar-cost averaging is the method 3 / Educational September 13 2020 of investing the same amount brokerage of $120 while investing each week/month regardless of one lump sum would incur a cost of market performance. What is only $30. However, a lot of new-age great is this is offered through services do not charge transaction certain auto-invest features, fees for buying or selling their funds which combined with an which makes index investing automatic payment on payday, through auto-invest that much allows investors to put a set more attractive. amount into their funds. To illustrate, say I wanted to invest $1200 into an NZ Property fund. Instead of investing all of the money at the same time, I invest $100 every month over one year. Auto-invest facilitates the dollar- cost averaging strategy, allowing investors to benefit from various advantages. Firstly, auto-invest can be a great way to invest during volatile or uncertain markets, eliminating worries like ‘Did I buy it on a dip?” or “Did I sell at the right time?” and associated timing stresses. Secondly, auto-invest suppresses the emotional component of the stock-picking process. No matter how much the stock price fluctuates between the investments, the value invested will always remain constant. Thirdly, an everyday retail investor including myself) may not have a spare $1200 lying around to invest. Therefore, auto-invest is a smart (way to accumulate without creating a financial burden or waiting until a substantial amount is saved. One consideration against DCA is that it can incur brokerage fees and transaction costs higher than if an investor just invested a lump sum. For example, if a broker incurs a minimum of $30 per trade, then investing 4 times through DCA would incur a 4 / Educational September 13 2020 News media must be subsidised WRITTEN BY SAEYAVAN SITSABESAN JOURNALISM HAS BEEN AROUND FOR MILLENNIA, WITH IT ACTING AS A MEDIUM THROUGH WHICH GOVERNMENTS COMMUNICATE TO CITIZENS. FROM THE MEDIEVAL AGES WHEN TOWN CRIERS WOULD GO AROUND MAKING PUBLIC ANNOUNCEMENTS, TO THE WORLD’S FIRST DAILY NEWSPAPER IN THE EARLY 17TH CENTURY, ALL THE WAY TO THE BOOM YEARS OF PRINT MEDIA DURING THE 20TH CENTURY, IT HAS PLAYED A FUNDAMENTAL ROLE IN THE VARIOUS GOVERNANCE SYSTEMS. NEWS MEDIA COMPANIES WERE ONCE POWERHOUSES, WITH THE RETURNS GAINED FROM OWNING BEING DESCRIBED AS ‘RIVERS OF GOLD’ BY MEDIA BARON RUPERT MURDOCH. THE COMPANIES WERE ABLE TO CHARGE HIGH FEES FOR ADVERTISING ON THE PAPER, AND CHARGE FOR BUYING THE PRINT EDITION. THE RISE OF TELEVISION IN THE POST-WAR BOOM, RESULTING IN THE PRIMARY SOURCE OF NEWS FOR NEW ZEALANDERS BEING FROM THE TV. 5 / Opinions September 13 2020 THE SIGNIFICANCE OF NEWS IN business model and declining stark contrast. The Industry has OUR DEMOCRATIC SOCIETY demand for news. Covid-19 and its lost close to 600+ jobs to date. economic impact have only We live in a democratic country accelerated an international trend. THE TRADITIONAL REVENUE and our governance revolves MODEL FOR NEWS MEDIA around three main branches, the Falling profits have forced many legislative, the judiciary and the news companies to cut back on The traditional revenue model was executive. Edmund Burke, an 18th reporting and journalism, with a based on running classified and century British political thought focus on investigative journalism other advertisements through leader, stated that “there were and less profitable reporting. newspapers and television. This three Estates … but in the Investigative journalism is a capital model does not work anymore. Reporters Gallery yonder, there intensive, risk heavy investment Before the internet newspapers sat a fourth Estate more that news companies have deemed and tv were the only viable form of important far than they all.”The non-essential. The focus on mass media around. Throughout reporters having the very profitability of each journalist by the eighties and nineties, the important role of maintaining media companies will eventually number of households who had transparency in any government lead to a strong decline in regional access to the internet in more and the distribution of unbiased journalism, which unsurprisingly developed nations rose news. A democratic country is not reaches a smaller audience. The significantly. able to reap the benefits of void in the stories and the loss of democracy and the freedoms it grants unless the constituents plurality of voices is a matter of This coupled with the can have informed debate.