Punting with the stars

One of the most dangerous stunts a media money man can do is to stick his neck out and tip shares on the radio. I know this to be true and still I did it for Sydney's Vega breakfast team a few months ago when they wanted to do a 'Great Share Challenge'.

The Vega breakfast team is made up of Tony Squires of ABC's The Fat fame, News Ltd's sporting journo Rebecca Wilson and ex-ABC radio star Angela Catterns. None would admit to knowledge of the stock market or investments generally.

Fortunately my tips were good, however, it reminded me of some lessons I have to share with you.

Eggs in one basket theory
When they asked me to pick them a share each so they could ride them home for three different charities, I informed them that they were making a fundamental mistake as investors to throw all of their eggs into one basket.

Taking the challenge
The better tactic would have been to lump the three shares together into a portfolio so the good-performing shares could offset a bad one, if one happened to under-perform. However, the trio wanted to compete against each other.

Bring in the experts
Given the high risk of putting my neck on the line, I sought out the expert help of professionals who watch the market all of the time. My business is to watch the big market influences and I take a personal interest in about 10 shares that I have in my super fund.

The selection criteria
In reality, some of my favourites had been doing well, so I wanted to find some shares that looked to have some upside but also linked the personality to the shares. Warren Buffet, the great US investor, always emphasises how you should understand the businesses behind the shares you invest in.

Read all about it
I encouraged Rebecca into WA News at $9.50 before Kerry Stokes started buying into the company, and the reason was all of the talk about potential media law changes. It was before the government's announcement and it shows the value of reading everything you can about upcoming law changes. It's now around $11.98.

For the ethical punter
Angela liked ethical companies and so I recommended Blackmores, which was selling for $14.50 and has spiked to $16.90. The company is on a roll and recently won the Sustainable Small Company Award for 2006 at the 6th Australian Sustainability Awards.

A punt on the casino
Being a heroic male I gave Tony the challenge of either Telstra or a resource stock, reminding him that resources had had a good run and it could be all over red rover. (This was about four months ago.)

He was scared of Telstra because of the T2 disaster and opted for Iluka, which has held it own while resource stocks have fallen, but it did lose a bit of ground.

A few weeks ago Squires asked me for a replacement as he didn't want to disappoint his charity and after more research I suggested Coca-Cola Amatil or Reef Casino. He selected the latter but both have risen nicely and his charity could end up loving him.

When's the time to exit?
This has been a good run for the team, the charities and me, but my next big question is: when should I tell them to get out?

Switzer's contribution
The issue is pressing for me as I was recently asked to do a speech and the organiser said they would be happy to pay my fee to a charity, so I nominated the radio team's charities. Now that my money is also riding on my tips, I've got some real skin in the game.

The 2007 story
My outlook for next year is both ups and downs on the stock market, but I still suspect a positive year for the index - though resource stocks will have a few challenges.

The shares my colleagues are with look like good long-term holds and that's the way I prefer to invest, but even good holds can have some dips along a rising road.

Click here to visit Peter Switzer's website