Question 1: Is Magellan Financial Group (MFG) now a buy following the announcement that Chris Mackay will oversee the portfolio management?
Answer: I was very surprised by the market’s reaction on Monday to the announcement that Hamish Douglas was taking medical leave and Chris Mackay was returning to help. I thought it was a positive, not because of lack of confidence in Hamish, but rather when there is a lot of pressure, taking a break and letting an “old hand” come back could be beneficial. Further, it brought “certainty”.
Maybe we have seen the bottom in the share price, but going forward, I don’t think you will get a re-rating of Magellan until two things happen: its investment performance improves, and secondly, the outflow of funds stops.
The broker analysts are now quite bearish – 2 sells, 4 neutrals and 0 buys according to FN Arena. The target price is $18.66 – a few cents higher than the last close of $18.59.
You can be patient about getting set.
Question 2: I own some shares in Suncorp. Should I sell, or hold on?
Answer: Suncorp (SUN) reported a strong first half, beating the market. Although cash NPAT was down from $509 million to $361 million, this was due to a significant decrease in investment income for the insurance business and an increase in natural hazard claims (storms, floods, hail etc). The banking business increased its profit contribution by $10 million to $200 million, and in insurance, Suncorp grew its gross written premium by 7.5%. For shareholders, the interim dividend came in higher than expected at 23c.
According to FNArena, there a 5 buy recommendations and 2 neutral recommendations (0 sells). Following the result, Morgans upgraded to Add from Hold. The target price is now $13.70, about 12.2% higher than yesterday’s close of $12.21.
While there are challenges with insurance companies (for example, perceptions about the long term impact of climate change), Suncorp appears to have got its act together. I like how they are going. Definitely a hold, and arguably, put on the “buy” list for new investors.
Question 3: Do the major market indices such as the All Ords or S&P/ASX 200 adjust when stocks go ex-dividend?
Answer: The indices published in the media or broker screens, the All Ordinaries and S&PASX 200, are price indices. There is no adjustment when stocks go ‘ex-dividend’. So on the day when the big companies go ex, they automatically get hit. For example, a BHP or CBA going ex can each take about 10 points off the index.
There are also accumulation indices – the All Ordinaries Accumulation Index and the S&P/ASX 200 Accumulation Index. These indices add back dividends.
If you want to measure or benchmark investment performance, use the accumulation index.
Question 4: What is the last you can buy CBA shares to get the $1.75 fully franked dividend?
Answer: CBA will trade ‘ex-dividend’ on 16 February. That means that the last date to buy shares on the ASX to get the dividend is Tuesday 15 February.
If you want to take part in the dividend re-investment plan (DRP), you must advise the registry by Friday 18 February.
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.