Question 1: Following from what I understand was a disappointing profit report from Treasury Wine Estates (TWE), would now be a good time to buy this stock? I am a long term holder.
Answer: For the long, yes. For the short term, I would be inclined to wait as the history of market jolters such as what has happened to TWE is that stocks don’t re-rate quickly. It rarely stops with the first fall – there is a lot of “egg on face” with the analyst and investor community. And it has been a massive fall for TWE. From $17.70 going into the Australia Day long weekend, it closed yesterday at $12.35 – a fall of 30.3%.
According to FN Arena, the consensus broker target price still sits at $17.78. This will come down a touch as more brokers revise their targets. Of those who have (post the announcement of TWE’s problems in the USA), UBS has a target of $18, Morgan Stanley $15, Ord Minnett $15 and Citi is at $15.60.
Fortune favours the brave…
Question 2: Will CSL split its shares this year?
Answer: While there is no logical reason for a share split – it creates absolutely no value – it wouldn’t surprise me if CSL did a 10 for 1 or 20 for 1 share split. This would bring the price of the new CSL shares down to around $30 or $15 respectively.
Because of the way the ASX now trades, a new investor in CSL can buy just two shares (this exceeds the minimum of $500 in value), and an existing CSL investor can sell a single share (there is no minimum). This means that the reasons to split aren’t particularly compelling. That said, there is some pressure building to do one.
Question 3: Do you have a view on the current NB Global Corporate Income Trust (NBI) entitlement offer and the unit price?
Answer: I am a fan (and investor) of the NB Corporate Income Trust (NBI). I classify it within the “risky fixed interest” portion of my portfolio. It is not my only investment in this area – diversifying manager risk, as well as the risk of the underlying asset class (non-investment grade corporate bonds) are key considerations. It is currently paying a distribution of 5.25% pa, although this will drop in FY21 to the mid to high ‘4’s. They are conducting a 3 for 4 entitlement offer at $2.05 per unit to raise about $500m. Last NTA is $2.06. The offer closes on 21 February. As always, review the Product Disclosure Statement closely before making any decision to invest.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
