Question: You recently answered a question [1] regarding the NAB capital raising. Is there anything we specifically need to know if we are looking to offload our exposure? That is, excluding market fluctuations, is there any benefit to selling before the issuance of new shares and therefore avoid the dilution of new shares at the discounted price?
Answer (By Paul Rickard): No, in a pricing sense, the dilution occurs immediately – the market fully factors it in (this is why NAB shares today are trading at a discount to their pre rights price, approx. $33.34 versus $35.50).
Now that trading in the NAB rights has ceased (which provides some downward pressure), I think you might see NAB’s share price improve in a relative sense.
Question 2: In Monday’s report [2] “Super Stock Selectors – Origin, Magellan Financial and Telstra” I note that Paul is quoted that he does not like Dexus (and property trusts), however, it is in the model Income Portfolio. I was of the belief that there should be some diversification in this field.
Answer 2 (by Paul Rickard): My apologies, I didn’t express this very well.
What I was trying to say is that I think the property trust sector is now fully priced – and on a relative basis, feel that this is one of the least attractive sectors to invest in.
I don’t disagree with your point about diversification – and that is why I am keeping it in the portfolio – but on an underweight basis.
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.