Secretary and Vice President of CSR Catherine Newell on July 20, 2012 announced that Dimensional Fund Advisors (DFA) with 25,483,453 Ordinary fully paid shares was a substantial shareholder entitled to 5.036% Voting power. This shareholding is comprised of smaller parcels in the names of its subsidiary companies, with their various funds, and associated companies for whom it acts.
Dimensional, as it is commonly called, is an investment advisory firm based in Adelaide’s sister city, Austin, the capital of Texas. It does not market directly to retail investors, but provides investment recommendations and fund management to USA and international mutual funds, including some Australian managed funds through its Australian subsidiary in Sydney. Total funds under management were US$206.5 billion at the end of 2010.
Dimensional has an impeccable academic pedigree. Company founders in 1981, David G Booth and Rex Singuefield, are both graduates of the University Of Chicago Booth School Of Business. A former Director, the late Merton Miller was a Nobel laureate in Economics whilst Myron Scholes a current Director, was also awarded a Nobel Prize in Economics. The Board of Directors also includes several other leading Economists. Two of them, Eugene Fama and Kenneth French author a website known as the Fama/French Forum.
The company prides itself of having a different approach to investing based on portfolio composition and management, rather than on stock-picking and market timing. For example some of their most successful funds have taken advantage of the out-performance of small-cap stocks in the USA.
ANNEXURE E of DFA’s compliance statement to CSR Limited submitted July 20 lists 107 transaction share parcels on behalf of subsidiary and associated companies over a 4 month period prior to the announcement. These were a mix of sales and purchases, indicating that the company was not just a passive holder but an active trader in the shares.
On balance 1,714,480 shares were sold in the months March-May at an average price of $1.7051; on balance 2,046,505 shares were purchased in the months June and July at an average price of $1.3016. The consideration for the March-May sales was $2,923,276, and the cost of the June-July acquisitions was $2,663,693.17. The trading advantage was a 40c/s reduction in the cost of the acquisitions.
The transactions listed account for only 2,046,505 shares compared with the total of 25,483,453 shares owned. These records however demonstrate the advantage that can be gained by selling shares in a declining market, with a view to re-purchase at lower prices. As I am wont to say: “a dollar saved is as valuable as a dollar gained!”
Retail investors can take advantage of the price differential created by the larger participants.
Categories: Trading opinion