Weekly Update - Week Ending 23 September 2011

To calculate the weekly performance on my portfolio I take the close from last Friday to work out the percentage increase/decrease in each stock. This is compared to the ASX 200 (Code: XJO) and the Small Ords (XSO). The Small Ords is comprised of companies included in the ASX 300 index, but not in the ASX 100 index. I include the Small Ords in my comparison as it helps highlight the markets appetite for risk.

Market:	Close (Friday 16/09/11):	Close (Friday 16/09/11):	Percentage Change:
XJO	4149	3903	-5.93%
XSO	2435	2233	-8.30%

Firstly sorry that this is a little late in coming out but I have been flat out with work this week. Last week was horrible for the local market with the XJO closing down 5.93%. We also saw a massive move away from riskier stocks as indicated by the larger sell off in the XSO (down 8.30%). This mood was reflected throughout the world’s financial markets with gold, silver, commodities and currencies all being sold off hard.

Code:	Weighting:	Share Price (Friday 16/09/11):	Share Price (Friday 23/09/11):	Percentage Change:	Weighted Change:
OBJ	25.66%	0.019	0.017	-10.53%	-2.70%
MHM	12.50%	0.735	0.61	-17.01%	-2.13%
KGL	11.81%	0.11	0.096	-12.73%	-1.50%
Cash	50.03%			0%	0.00%
TOTAL				-13.420%	-6.33%

As a result my portfolio was smashed and down 6.33% on a weighted basis. The worst performer was MHM metals down over 17% with KGL not too far behind. Removing cash from the equation paints an even darker position and shows that the weighted value of the shares in the portfolio decreased 12.67%.

Code:	Weighting:	Share Price (Friday 16/09/11):	Share Price (Friday 23/09/11):	Percentage Change:	Weighted Change:
OBJ	51.37%	0.019	0.017	-10.53%	-5.41%
MHM	25.01%	0.735	0.61	-17.01%	-4.25%
KGL	23.63%	0.110	0.096	-12.73%	-3.01%
TOTAL					-12.67%

The reasons for the selloff are clear. Investors are taking risk off the table and any company not producing an income is being sold off. Obviously I am disappointed with the portfolios performance over the last couple of weeks, in particular MHM. On reflection it is now clear that I paid too much for the “blue sky” potential of the stock. I believe the fall from my purchase price of $1.195 to its current price can be attributed to (in this order):

1.    Management’s failure to deliver on the US expansion.

2.    The general markets move

3.    The fact that the Australian operations are yet to deliver a full quarter of normal production.

I continue to hold all stocks until a change in the fundamentals of the company suggests otherwise.