Question 1: I would appreciate feedback on your single “most preferred” stock in each of the ASX Sectors: Information Tech – Health Care – Materials – Real Estate – Telecommunications – Utilities – Discretionary – Industrials – Staples – Financials – Energy.
Answer: I work on a portfolio of stocks, rather than a ‘single’ stock per sector. If you have a look at my model portfolios (see https://switzerreport.com.au/advice/model-portfolios/ ), you will get a really good idea of what I think. Also, your question makes no reference to “price”. For example, Commonwealth Bank is my ‘single most preferred stock’ in financials, but it is so, so expensive. Here’s my answer (with comments about price where relevant):
Financials: Commonwealth Bank (very expensive)
Materials: BHP
Health Care: CSL
Energy: Woodside
Real Estate: Goodman Group (very expensive)
Consumer Discretionary: JB Hi-Fi (very expensive)
Consumer Staples: Woolworths (probably)
Communication Services: CAR Group
Industrials: Brambles
Information Technology: NextDC
Utilities: APA
Question 2: I’ve recently sold a commercial property which was my only source of income. I’m 68. Could I avoid paying CGT if I retired?
Answer: If you owned the property in your name, you can’t avoid paying CGT. There are no exemptions for retirees. If you have owned the property for more than 12 months, you will only pay tax on half the gain. The net gain will be treated like any other assessable income and you will pay tax according to the normal scale. On the first $18,200 of income, zero tax; from $18,201 up to $45,000, at 19%; from $45,001 up to $120,000, at 32.5%; from $120,001 up to $180,000, at 37%; and for each dollar over $180,000, at 45%. Medicare levy of 2% is also applicable.
Question 3: What is your view on Metcash (MTS) share purchase plan? Should we opt in or let it go?
Answer: The Metcash (MTS) share purchase plan (SPP) follows a capital raising of $300m by Metcash at $3.35 per share. The proceeds were used to fund the acquisition of three businesses: Superior Food Group (a food wholesaler), Bianco Construction Supplies and Alpine Truss (a supplier of roof trusses).
Metcash is paying about $577m for the businesses, to be funded by the capital raising and debt/cash facilities. Metcash says that the transaction is expected to be “mid-single digit EPS accretive”. The institutional capital raising was well supported, and it looks like the market is on board with the acquisition.
For the SPP, participants will pay the lower of $3.35 per share, or the weighted average ASX price in the 5 days leading up to the offer close. The maximum application is $30,000, with the offer due to close on Friday 1 March. As the total size of the SPP is indicated to be $25m, applications may be subject to a scale back. With Metcash shares trading on the ASX at $3.58, the SPP looks to be quite attractive. While I have never been a fan of the company (I find its business model hard to understand), the pricing metrics are relatively undemanding – trading on a multiple of around 12.0 times FY24 and FY25 forecast earnings.
The brokers are also reasonably positive – consensus target price $3.97, about 11% higher than the last ASX price.
Question 4: I own shares in Commonwealth Bank and am coming to your view that they are pretty expensive. I have signed up for the DRP (dividend re-investment plan). Can I take the cash dividend instead?
Answer: Yes, you can get out of the DRP. You will need to act fairly quickly as the election date for the next dividend of $2.15 per share, which will be paid on 28 March, is 23 February. You will need to opt out of the plan before 5.00pm on Friday 23 February (you can do this at the Link Market Services registry site).