Question 1: Is there upside with BHP? How much of my portfolio should be invested in BHP?
Answer: I think BHP should be the core resources stock in your portfolio. It has one of the best sets of assets across iron ore, copper, nickel and potentially fertilizer with potash, it is well managed, and has been incredibly disciplined (in recent years) on capital and investment. In the short term, it will return to shareholders a bucket of cash via fully franked dividends.
As a resource company, profit is determined by commodity prices – something it has no control over. But despite talk of a global recession, I think that the trend for commodity prices remains positive.
On that basis, I recommend at least an index weight position, which means about 10% of your portfolio. If you are less confident about the outlook for commodity prices, then you would hold less.
Question 2: Do you think this is a good time to invest in your two model portfolios? If yes, given that it has been six months since they started and the recent market volatility, should l buy all the stocks in the portfolios or would you suggest some adjustments?
Answer: Our long-term view is that the current market represents a reasonable buying opportunity. But in the short term, we think it will be quite choppy until the market has a handle on whether inflation has peaked and how hard the central banks will go on interest rates.
I don’t think you need to buy both portfolios – they are relatively similar. If your bias is more towards receiving an income, I would buy the income portfolio. If you are after long-term growth, but with a little more risk, I would look at the growth portfolio.
I will do an update in Monday’s Switzer Report – I expect the changes, if any, will be at the margin.
Question 3: Can you explain the recent rise in the Sigma Healthcare (SIG) share price and if shareholders can expect further upside?
Answer: I expect it to do with the listed Home Consortium (HMC) announcing that it had purchased a 6.33% interest in Sigma as “a seed asset for the new HMC Partners Fund 1, which will focus on high conviction investment strategies for external investors”. For context, the consensus target price is $0.495, about 17.5% lower than the last ASX price of $0.60. Range is a low of $0.43 through to a high of $0.52.
Question 4: Are the super caps changing next financial year?
Answer: The superannuation caps are indexed to movements in AWOTE (average weekly ordinary times earnings), but only move in set increments. There are no increases for the new financial year starting tomorrow.
So, the concessional contributions cap is $27,500 (concessional contributions are your employer’s 10.5%, salary sacrifice contributions and any amount you claim a tax deduction for. Non-concessional contributions, which are personal contributions from post-tax dollars, are capped at $110,000 for 22/23.
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.
