Question: I got quite excited about all the hype about Slater & Gordon and bought it at $7.90. I am now concerned at its dramatic drop in three weeks. How long do you think it will take before I see it in positive territory and what is your long-term view of this stock? Do I reluctantly now cut my losses and run?
Answer (By Paul Rickard): There is a good lesson here – don’t get excited about the media acquisition hype.
Unfortunately, the track record of Australian companies buying companies offshore is pretty appalling – so the odds are against Slater & Gordon making this acquisition work.
Of course, there has been a two for three accelerated rights issue – so the fall in the share price is not quite as bad as it looks.
Question 2: I am interested in buying some shares in Wealth Defender Equities. However, I was wondering whether I would be better off buying the shares when the fund (WDE) listed on the 21 May 2015?
Answer 2 (By Paul Rickard): Possibly – will depend on the enthusiasm or not of sellers. The downside is you will pay brokerage and also miss out on the loyalty option. On the upside, you may pay less than $1.00 per unit if it trades around NAV, which will be worth around $0.975
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