Question 1: Woodside’s (WDS) share price has been under constant pressure since mid-2023 and around the low to mid $24 mark, it appears good buying from both an income and capital growth perspective. Do you agree?
Answer: I have been a little surprised by the constant downward pressure on Woodside’s share price. I had expected OPEC+ to do a better job at managing the supply of oil and holding prices in the face of a decline in global demand. There have also been some company factors at play, in particular, questions over the viability and funding of its major projects, and cost blowouts.
The brokers remain a little mixed on Woodside. In aggregate, they see more upside than downside, with the consensus target price of $29.14, about 12.1% above the last ASX price of $25.99. The range is a low of $23.24 (Citi) through to a high of $33.00 (Morgans and Macquarie).
Some see Woodside as within “deep value territory”, others question the sustainability of the company’s high dividend payout ratio (80%) and the impact this is having on the share price. Most expect the dividend payout ratio (and the dividend) to fall.
My view is to hold Woodside at around market weight (that is, around 3% of my portfolio). Given the company’s indifferent long-term performance, I can’t see the case to be overweight the stock (and the sector).
Question 2: Cybersecurity seems to be on top of most CEOs’ minds and companies are investing heavily in strengthening their cyber defences. Is there an ETF that tracks companies providing cybersecurity software and infrastructure services?
Answer: Betashares has its Global Cybersecurity ETF, ASX code HACK. It tracks an index put together by NASDAQ of listed companies in the global cybersecurity sector. About 77% of the companies are based in the USA, with India making up 10% and Israel 5%. The top 5 companies are Cisco, Broadcom, CrowdStrike, Infosys and Palo Alto Networks.
HACK has been a bit ‘up and down”, but overall performance is quite attractive. To 31 August, the 1 year return is 20.26%, 3 years is 7.64% pa, 5 years is 16.33% pa and since inception in August 2016, the return is an impressive 17.16% pa.
Question 3: Why are share purchase plans capped at $30,000?
Answer: Share purchase plans come under a special part of The Corporations Act. The law limits them to being no more than $30,000 in size. The big attraction to companies is that under a share purchase plan, they can issue shares to retail investors without having to develop and provide a prospectus.
Question 4: Do brokers see more upside in Xero (XRO)?
Answer: Yes, they do. Target prices have been creeping up. In fact, the consensus (according to FNArena) is now $161.43, about 10.2% higher than the last ASX price of $146.43. The range of targets is a low of $140 through to a high of $184.40.
Brokers have become more confident about Xero’s prospects of success in the USA and its ability to increase ARPU (average revenue per user) from price increases.
