Managed Accounts Share Trading Investment Notification - Sale Of Lgl

Good afternoon,

Good afternoon,

Wednesday on close of market we made the decision to sell our position in Lihir Gold, the loss on the trade was 11%. Whilst we very much dislike making losses on investments, Lihir Gold shares have not performed to expectation despite an overall slightly positive move in the price of gold itself. Exercising stop losses is a critical part of any share trading strategy.

We would usually hold the position and allow the fundamentals to work out the share price, as they do 95% of the time; however this situation is a little different. The price of Gold overall appears to have hit a wall, and the US dollar is strengthening against both the Euro and the Pound and has been doing so very quickly over the past month. What we're seeing, then, is the price of gold increasing in Euros and Pounds, however not in Australian dollars or US dollars.

Our concern is that should we see a sharp selloff in the price of Gold it will further impact the price of gold stocks locally, specifically LGL which has a history of being highly volatile. A period of USD strength could last another six months and we strongly believe that after this time US Dollars will continue to be weaker long term. We just might see gold back below $1,000 an ounce before that happens and we certainly don't want to be owning LGL should that occur. For the time being we feel our money is better off working for us in the bank, and awaiting other opportunities. The shares have continued to slide since then and so thus far the decision has been the correct one.

Whilst I'm here, I was talking to an institutional fund manager yesterday about National Australia Bank, and he had some interesting thoughts which I would like to share with you. He mentioned that in investment land, there is a firm view that NAB is trading at such a large discount to both it's peers and it's long term earnings per share growth expectations that it's by far the best buy in the sector (if you were a buyer right now). Also, once the AXA takeover proposal is given a green light or even if it's not, expect to see the shares re-rated strongly to the upside.

Secondly in the update, WOW reported earnings today in line with expectations, up 11.4% on a year earlier and announced a dividend up 5c to 53c. They also reported a $400 share buyback to sweeten the deal, and so as I write this the shares are up $1.11 to $26.56.

In our opinion, and that of many local commentators, the local economy has well and truly turned the corner. We will be looking for some selling due to overseas issues which could drive our market lower temporarily and this will reveal some value buying for us to deploy some of the 65% or so cash we are holding.

If you would like to speak with me about anything at all, please call the desk.

by: Hayden Kerr

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