Question 1: Peter quoted Jim Cramer in his Saturday article about the rotation between tech, banks and smokestack stocks which creates value for longer-term investors. I am interested in Fortescue Metals (FMG) for that reason: the company is hugely profitable and will likely continue to do so; and is diversifying for a greener future. Do you think that Fortescue is a buy/accumulate for the longer term at these levels or should I wait for the rotation down the track?

Answer: I think Fortescue Mines (FMG) share price is more a function of the iron ore price than the “rotation” trade. Higher iron ore prices are driven by economic growth and in particular, the demand from China, but are also driven by supply – in particular, the disrupted supply from Vale, the world’s biggest producer.

I really like what Andrew Forrest and his team are doing in relation to “Fortescue Future Industries” and their development of a portfolio of renewable energy and green industry opportunities. But these are long-term initiatives – and will have minimal impact in the short term on the share price. If you are investing in FMG, you are investing in iron ore mining.

I prefer BHP to FMG because it is better diversified and less dependent on the iron ore price. I hold basically index weight positions in this area, because I have seen that no one is good at forecasting commodity prices.

As for the major brokers, they have a target price of $23.26 for FMG, about 20.1% higher than the last ASX price. Reflecting the variability in their iron ore forecasts, the range is wide: a low of $17.45 from Morgan Stanley to a high of $29.00 from Ord Minnett.

Question 2: I own shares in Computershare (CPU) and I see they are raising money to buy the Wells Fargo Corporate Trust Services business. I don’t have a lot of cash on hand – what are my options?

Answer: Computershare (CPU) is raising approximately $835m through a renounceable entitlement offer. This is on a 1 for 8.8 basis – that is, for every 8.8 existing shares owned, you are entitled to buy 1 new share at the price of $13.55. This price is a 9.6% discount to the last ASX price.

So, if you own 1,000 CPU shares, you will be entitled to buy 114 new shares at $13.55 per share.

As a shareholder, you have three choices. Firstly, take up your entitlement (the offer is due to close on Monday 19 April). The second option is to sell the entitlement on the ASX. These will trade under the code CPUR from 29 March through to 12 April. The third option is to do nothing. In this case, your entitlement will essentially be auctioned to institutional investors and if there is a premium, you will receive this as a payment from Computershare on 30 April. There is also a fourth option if you haven’t got the cash and don’t want to increase your exposure. This is to sell some of your existing CPU shares on the ASX and use the proceeds to fund the payment for your entitlement.

Question 3:  When does CBA’s new hybrid issue, PERLS XIII, close?

Answer: It closes this Friday (26 March) at 5.00pm. CBA Shareholders can go to the Commsec website to apply. As payment (via BPay) is also required by Friday, don’t much around.

Question 4: What is your view on Magnetite Mines (MGT)? It has exploded this year from a 0.1c per share to about 4.4c per share. Is it a start in the making?

Answer: Magnetite Mines (MGT) – a stock for the insiders and “those in the know”. Obviously gone for a big run, but on the back of what? A higher iron ore price?

I note that they only have $4.3 million cash on hand. Where are they going to find the capital to complete the feasibility study, and then develop the project at Razorback?

I am not “in the know”.