Question 1: With the recent rotation out of tech stocks, do you see this as a contrarian’s buying opportunity for the likes of Zip (Z1P) and Pushpay (PPH)? Zip had an outstanding report which was released this week with growth in the USA and for Pushpay, there has been recent volatility due to the share split. Why did they split the shares?
Answer: Re tech and the ‘rotation trade’, we will take the lead from the USA. I think there will be buying opportunities, but I would be a little wary regarding the ‘buy now pay later’ space because this sector is over-valued.
With Pushpay (PPH), no logical reason for a share split as it creates absolutely no value. The Pushpay Board said: “It considers that the share split will assist to enhance liquidity in the market for Pushpay’s ordinary shares. Pushpay previously completed a share split in February 2016. Pleasingly, the Company saw a meaningful increase in both the shareholder base and liquidity that was partly attributable to the share split.”
If this is all the Board is concerned about, potentially a reason not to buy Pushpay.
Question 2: What is your thoughts on Senex Energy (SXY) to play the global energy recovery? When compared to the other major energy stocks such as Santos (STO) and Woodside (WPL) looks to be well undervalued. Is Senex too small to be impacted by rising oil prices? Which is your favourite energy stock for the recovery?
Answer: If you want to play the “global energy recovery” (I am not convinced that it has that much further to run due to the ability of OPEC and others to increase production), I would stick to the majors. Probably Santos (STO) or Oil Search (OSH) because they are most exposed to the oil price.
You are right about Senex being undervalued compared to the majors (upside of 25% according to the analysts, vs -1.2% for Santos, -0.4% for Woodside, -5.6% for Oli Search and +4.0% for Beach Petroleum). But Senex is second or third tier, involved in coal seam gas in Queensland, and claims that it is not overly exposed to a movement in the oil price.
Question 3: Suppose you were a young person with a 20-30 year investment horizon and over that period, you could only buy 3-4 ETFs at regular intervals (no selling allowed). What would you buy and why?
Answer: With a 20 to 30 year investment horizon, I would probably have a growth portfolio with 40% in Australian shares, 30% in international shares, 10% infrastructure and 20% fixed interest. Because no selling allowed, I would stick with the benchmark major indices (which in Australia, also picks up property) and the ETFs that track them. So:
IOZ , iShares S&P/ASX 200 for Australian Shares; probably VGS, the Vanguard International Shares Index Fund for International; VBLD, Vanguard Global Infrastructure Fund for infrastructure; and for fixed interest, IAF, the iShares Core Composite Bond.
Question 4: What is your opinion on Southern Cross Media (SXL) and Sky Network Television (SKT)? There appears to be plenty of upside to get back to pre Covid levels.
Answer: Yes, looking at the charts, lots of “upside” compared to where the stocks were trading pre-Covid. Sky Network Television (SKT) is of course the New Zealand television service. It has recently increased revenue and earnings guidance. It is not covered by the major Australian brokers and I do not have any specific knowledge on the Kiwi advertising market. Southern Cross Media is a more interesting proposition, although I think there are structural headwinds for advertising on radio and regional TV. The brokers are somewhat underwhelmed – a consensus target price of $1.73, about 27% below the current price of $2.37. Range is a high of $2 from UBS to a low of $1.40 from Morgan Stanley.
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