Question 1: Is IGO a buy?
Answer: IGO is a producer of lithium, copper, nickel and cobalt. It exited gold production. It is the lithium part that has the market excited, and like other lithium stocks, has had a big run-up over the last couple of months. According to the major brokers, it is fairly valued. Consensus target price of $14.26 compared to the last ASX price of $14.56. The range of broker targets is wide: from a low of $8.40 from Ord Minnett (JP Morgan) through to a high of $21.00 from Macquarie. Given the rapid run-up in price, my inclination would be to wait for a pullback before I committed to the investment.
Question 2: Would MFF Capital Investments (MFF) be a good investment long-term for my super fund?
Answer: MFF Capital Investments (MFF) was formerly the Magellan Flagship Fund. The two-billion-dollar listed investment company invests in a portfolio of high conviction shares (Australian and international). The highly regarded Chris Mackay is the portfolio manager. It had a pretty awful FY22 year, losing about 20% in value. Performance has picked up in July and August, but like many listed investment companies, it is trading at a discount to NTA (net tangible asset value). On 9 September, the discount was 18.1%. One positive is that Chris Mackay is buying shares in the company. A negative is that it is geared (about 19%), so higher interest rates will impact returns.
Is it right for your SMSF? That largely depends on whether it matches your investment objectives. On current track record, I wouldn’t buy it for my SMSF.
Question 3: Why has the market gone cold on Domino’s Pizza (DMP)?
Answer: Domino’s (DMP) has fallen from a high of about $167.00 late last year to about $65.94 today. For a major company, this is a big fall. I guess there are two major reasons. Firstly, the market’s re-evaluation of multiples for high-growth companies such as Domino’s. Even today, DMP is trading on a multiple 31.1x forecast FY23 earnings and 26.2x forecast FY24 earnings. The other reason is inflation impacting food, energy and labour costs, which has impacted margins. Same-store sales are also flat. Domino’s is also exposed to the headwinds in Europe.
According to FNArena, the major brokers see upside. Currently, there are 5 “Buy” recommendations and 2 “Neutral” recommendations. The consensus target price is $84.23, about 27.9% higher than the last ASX price.
Question 4: We have a SMSF in pension mode. I want to calculate how long our pension will last us. I’ve checked out the online calculators but I am not convinced that’s what I need. Is there any formula I could use?
Answer: I think I would stick with the online calculators. As unreliable as they might seem, there is no easy formula. You could do it longhand, but you would need to make three critical assumptions: income investment return, growth investment return, and how much you will take out as a pension each year (potentially, this may need to be indexed to the CPI, and will be subject to the minimum drawing – which increases as you get older). Investment returns are never “straight line”, so anything you do is at best a “model” and a “best guess”. In practice, it will never work out this way. Sorry to disappoint.
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.