Question 1: I am looking at Woolworths (WOW) to add to my grandchildren’s small investment portfolio. Is this a good investment at this time?
Answer: I think adding Woolworths to your grandchildren’s portfolio is a sound step. I would have a retailer as part of it, and if I had to choose one, it would probably be Woolworths. Two reasons: firstly, market leadership, and secondly for ‘name affinity’. The latter to me is really important because I want my grandkids to develop an interest in the stock market.
As for timing, there is probably never going to be a “right” time. If you go by the analysts, they feel Woolworths is a little expensive – a 12-month target price of $37.08, pretty close to where it is trading on the ASX. But you are buying for the long term – and the market pays a premium for market leadership.
Question 2: The Paladin Energy (PDN) share purchase plan (SPP) is offering shares at $0.72 each following an institutional placement, but the share price is still at around $0.79 today. Normally the share price will fall to around the offer price of $0.72 after the institutional placement is completed. I am a holder of PDN, should I sell some shares to take profits and then get them back through the SPP? Or should I even buy more shares on the market as the momentum of PDN is strong?
Answer: If an institutional placement goes well (strong demand), it is not unusual if the trading on the ASX is at a premium. One strategy is to sell on the ASX at about 80c, and buy back in the SPP at 72c. I have done this a couple of times before. The only thing you have to be careful of is the company scaling back applications. They have said that they are only seeking to raise $15 million, but they reserve to right to take more or less.
As far as buying more, I think you need to be bullish on uranium and comfortable with the Namibia country risk. Macquarie, the only major broker to cover the stock, has a ‘buy’ on the stock – target price of 90c.
Question 3: What is your view about Beach Energy (BPT) and Santos (STO)? Is it time to book profits around current price points?
Answer: Yes, I do think it is time to take a little profit on the oil stocks. My preference is to sell Woodside (WPL) – it seems to have done the best. The analysts think it is fully valued – the target price is $30.55, about 9.5% lower than the last ASX price of $33.74.
Interestingly, those same analysts see upside for both Beach Energy (BPT) and Santos (STO). BPT has 12.1% upside to a target price of $1.78, Santos has 18% upside to a target price of $9.47.
Question 4: I have been following Super Retail (SUL) for a while. I am thinking of putting it into my SMSF for a dividend play. There is some support but I am not really up with it. A number of reports in Switzer have been mildly positive, but since I started following it in November the price has fallen over 25%. CommSec has it as a moderate buy. What is your view?
Answer: Retail stocks are tough… On metrics, Super Retail Group is cheap – trading on a multiple of 11.1x forecast FY22 earnings, 11.9x forecast FY23 earnings, dividend yield of 6.1%.
Analysts are positive – target price of $13.68, about 29% higher than last ASX price of $10.60. Range is a low of $12.13 through to a high of $14.50. 5 ‘buys’, 1 ‘neutral’.
The federal budget should be a positive. Questions about supply chain disruptions, margins etc.
Maybe you buy some now. But I would keep some powder dry because the market doesn’t seem to be wholly on board.
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