Question 1: What are your thoughts on lithium plays? Allkem (AKE) looks good, but are their more local opportunities and is the recent profit hike just a short term supply issue until other producers get up to speed?
Answer: Lithium stocks have had a huge rally in July/August – some adding more than 50%. While the fundamentals still look promising, there are mixed views as to how ‘supply’ will respond to the ‘demand’ that everyone talks about.
The two main stocks are Allkem (AKE), the former Orocobre, and Pilbara Minerals (PLS). With AKE, the broker target price is $15.69. This compares to a last ASX price of $13.91, implying a potential upside of 12.8%. The range is quite wide – from a low of $10.30 through to a high of $21.00.
Pilbara Minerals (PLS), which produces locally and is my preferred stock, is currently trading around $3.65. The brokers feel this is fully valued, with a consensus target price of $3.52 (about 3.8% less). The range is wide – from a low of $2.60 from UBS through to a high of $5.60 from Macquarie.
You could also consider IGO and Mineral Resources (MIN), although they are not “pure=play”.
Question 2: When does the US Federal Reserve meet next? Will there be a “dot plot” at this meeting?
Answer: The US Federal Reserve is next due to meet on September 20/21. The Fed Governor will hold a media conference on September 21 (early Thursday September 22 our time), where presumably he will announce a 0.75% increase in US interest rates. The Fed will also release the “dot plot” – a chart showing where the individual members expect interest rates to head over the next several years, plus their economic projections.
While the ”dot plot” will be highly anticipated by the market, historically, it hasn’t proven to be that accurate. That is, the members of the FMOC aren’t that good at predicting US interest rates!
Question 3: If I want to invest in the USA, can I take out the currency risk? What are your thoughts on IHVV from iShares?
Answer: Yes, most of the providers of exchange traded funds offer unhedged and currency hedged versions. For example, IVV from iShares tracks the US S&P 500 index. It is unhedged, meaning that you are exposed to the AUD exchange rate. If the AUD weakens, you “win”, if the AUD appreciates against the US dollar, you will lose on the currency.
As an alternative, you can take out the currency risk by investing in IHVV (the currency hedged version). From iShares, this also tracks the US S&P 500.
Question 4: Does Woodside (WDS) offer a dividend re-investment plan? Is there any discount?
Answer: Woodside has declared a dividend of US$1.09 per share, approximately A$1.59. It is 100% franked. Rather than receiving the cash, as an option, you can participate in the dividend re-investment plan. There is no discount.
To participate, you must advise the registry (Computershare) by 12 September.
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 regards to your circumstances.
