Question 1: I paid $29.30 for Woodside (WPL) some time ago, and almost dumping them at $19.50. Is it time to sell now? I also own BHP shares, so I expect to get a few WPL later this year.
Answer: I am also a long-standing (and suffering) shareholder in Woodside, who owns shares in the $40’s ( I also own shares in the teens). I well understand the temptation to take profits.
My inclination is that the very high $20’s/early $30’s is probably a level to take profits. While Woodside will be a beneficiary of higher oil and LNG prices, there will be a whole lot of new shareholders when the merger with BHP’s oil assets occurs. This is slated to take effect on 1 July and is bound to mean that there will be some “loose stock” around.
Looking at the major brokers, they have a consensus target price of $28.78, fractionally below the last ASX price of $28.86. The range is from a low of $26.10 from Citi through to a high of $30.50 from Credit Suisse.
Question 2: My portfolio is currently heavily weighted toward growth assets (i.e. shares). It’s been suggested my risk profile would suit moving 30% into more conservative assets such as bonds. While I understand the basis for the recommendation, my experience with bonds (through ETFs such as GOVT and IAF) recently has been negative. With interest rates rising, would it be sensible to simply move some of the portfolio to cash accepting say 1% interest rather than invest in bonds? Or is there some rationale for investing in bonds?
Answer: The theory is that bonds are negatively correlated to equities – that is, when equity prices rise, bond prices fall (and vice versa), so that when combined in a portfolio, you can achieve an optimal return without taking too much risk.
Now, this doesn’t always happen as we have seen recently, with both equity prices and bond prices falling (when bond yields go up, bond prices fall). This tends to happen in the early part of rate increase cycle.
My sense is that long bond yields have further to rise (we haven’t really tested the 2.0% level in the US), so I wouldn’t rush into buying long-duration bond funds (such as GOVT, IAF or VAF). I would keep the money invested in short-duration bonds, term deposits or cash. This means almost no return – but also no risk of capital loss. At some stage in the cycle, I would move into long-duration bonds – but I think you are too early.
Question 3: With the pending BHP merger of its oil and gas assets with Woodside, as a BHP shareholder I understand that new Woodside shares will be allocated to shareholders as an in-specie fully franked dividend. What date will this take effect and what will be the last date a BHP share purchase will qualify?
Answer: Implementation is scheduled for 1 July, 2022. To the best of my knowledge, BHP hasn’t yet announced the “ex-date” (the date you would need to own BHP shares in order to qualify for the distribution of Woodside shares). I would expect this to be in early/mid-June.
Question 4: I am a long time holder of AMP. I should have sold a long time ago and have watched the price drop over time. Should I sell now on a price spike or wait until the planned demerger plays out mid-year?
Answer: I would be inclined to hold. I wrote about this the other day. But biting the bullet and taking your loss can sometimes be cleansing for the mind – so if you have better things to do with funds, take the loss.
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.
