Question 1: We are looking at rebalancing our portfolio and would like to add investments in the Nasdaq 100 and also Robotics and AI. What would be your recommended ETFs?
Answer: If you are after locally (i.e., ASX) listed ETFs (exchange traded funds), then for the NASQAQ, I would look at either NDQ or HNDQ from Betashares. They are identical in that they both track the NASDAQ 100 index, except that HNDQ is currency hedged. Because I think the AUD will rise over the medium term relative to the US dollar, I would select HNDQ. NDQ has a management fee of 0.48% pa and HDNQ is 0.51% pa.
For Robotics and Artificial Intelligence, RBTZ from Betashares is probably the go. With thematic ETFs, they are only as good as the underlying index they track. RBTZ tracks an index created by INDXX (the provider). Broadly, it is an index of listed companies in developed markets with a market cap of over US$300m that are involved in the robotics and AI industries. Looking at the major holdings, it looks more weighted to the robotics arena.
RBTZ has a fee of 0.57% pa. The performance of RBTZ over the last 12 months at 11.70% has been reasonable but not outstanding (NDQ has done 11.15% over the same 12-month period to 28 April).
There is also ROBO from Global X, which tracks a robotics and automation index. The management fee for ROBO is 0.69% pa.
Question 2: If TPG has launched a takeover for funeral home operator Invocare (IVC) at $13 per share, why are Invocare’s shares only trading on the ASX at $12.34? Should I sell now?
Answer: Firstly, it is not a ‘take-over’ but a potential transaction via a Scheme of Arrangement. This requires the Company to support it and a shareholder vote where 75% of shares voting must be in favour and 50% of shareholders (by number) to support. The Court will also need to approve.
More importantly, they haven’t yet inked deal. It remains a ‘conditional, incomplete and indicative’ proposal. TPG needs to conduct due diligence on Invocare, and subject to any findings, then decide to proceed with the transaction. There must be some chance (probably low) that TPG will find something it doesn’t like or otherwise, decide not to proceed.
Thirdly, schemes of arrangement typically take around 6 months to implement, so it will be some time before shareholders get paid the $13. The time value of money, plus risk the transaction won’t go ahead, plus risk that shareholders will not vote for the Scheme plus possible regulatory risk is why the shares are ‘discounted’ on the ASX – $12.34 in the hand now or a possible $13.00 in maybe six months’ time.
My sense is that the deal will probably go ahead (because TPG already owns 19.9% of Invocare and is in “too deep”), so I wouldn’t sell now but wait. With the possibility of Invocare paying a special fully franked dividend, the effective selling price (if the Scheme goes ahead) is closer to $13.25.
Question 3: What do the analysts say about Telstra? Can they see any further upside?
Answer: The major stockbroking analysts are still marginally bullish on Telstra (TLS). According to FN Arena, the consensus target price is $4.59, about 5.4% higher than the last ASX price of $4.35. The range in target prices is a low of $4.20 from Ord Minnett through to a high of $4.75 from Morgan Stanley.
Question 4: When do the major banks pay their dividends?
Answer: If you are banking on the cash, you will have to wait till the new financial year. Westpac is the exception – it pays its interim dividend of 70c per share on 27 June. The others pay as follows: ANZ on 3 July with 81c per share; Macquarie on 4 July with $4.50 per share; and NAB on 5 July with 83c per share.
