Question 1: My investment in Magellan Infrastructure (MICH) has been running at a loss for quite some time. Is there any light at the end of the tunnel?
Answer: The performance of Magellan Infrastructure (MICH) hasn’t been too bad, in a relative sense. It has outperformed its benchmark (the S&P Global Infrastructure Index) over the last 3 months, 6 months, 1 year and 5 years.
However, the performance over the lasty 12 months has been negative (-6.3%) because infrastructure assets have lost value, mainly due to the impact of higher interest rates. Also, MICH is currency hedged, which means that you haven’t received any benefit of a weaker Australian dollar over this period.
I wouldn’t bale out of this investment. What could turn it around? Apart from a market re-rating of infrastructure, a fall in global interest rates would be a positive.
Question 2: I have been holding St Barbara for a long time. The price has fallen significantly, should I sell it now?
Answer: Gold miner St Barbara (SBM) is a bit of a mess. They announced this morning a new CEO and CFO and flagged “board renewal”. If you are looking for a bounce in the price, I can’t see any immediate catalyst for a re-rating. So, sell now. If you can be very patient and don’t need the cash, then I would probably hang on.
Question 3: There is rising speculation of world recession in recent weeks, now even with the ASX. Would you advise a medium-long-term investor to sell broadly before the storm and buy back after the market pull backs?
Answer: I am not in the “deep recession” camp. I think you need to be mindful of a “media beat up” – they love to make everything a “crisis”. If you expect a deep recession, then the strategy of selling now (before the storm) and buying back after the market pulls back would make sense.
If it is a shallow recession (growth falls, but employment remains reasonably firm), then the impact on the stock market might be quite muted. Further, if the central banks cut interest rates (either in response to this or falling inflation), this may lead to a share market rally. So, I would not advise the strategy you propose.
I am in the shallow (if at all) recession camp.
Question 4: I bought Ramsay Health Care (RHC) @ $58.50 however it has continued to head south. You have commented on many occasions that RHC under $60 is in “buy territory”. I am wondering what you feel the share price will look like in 6 – 12 months, and why?
Answer: With Ramsay (RHC), I think you will need to be patient. The market is a bit down on them at the moment as it senses that the recovery from Covid will be slower than liked.
The appointment of David Thodey as Chair and the potential sale of the Asian hospitals joint venture (Ramsay Sime Darby Health care) are positives. The latter, if progressed, would help to hose down rumours that Ramsay may have to strengthen its balance sheet, possibly by undertaking a capital issue.
In the main, the major brokers are positive on the stock. According to FN Arena, a consensus target price of $66.33, about 18% higher than the last ASX price of $56.20. Range is from a low of $57.60 through to a high of $77.57.
My target price in 12 months is $70.