Question 1:I believe now might be a good time to buy gold stocks. Do you have an opinion on which companies may be worthwhile?
Answer: If I was interested in gold, I would buy the GOLD exchange traded fund (yes, ASX code is GOLD) rather than gold stocks. Gold stocks are more leveraged to the price of gold (that is, as production costs are relatively fixed, a small increase in the gold price can result in a big increase in profit), plus you have production risks. But risk has its own rewards ………..so for a higher risk, higher reward play, go for gold stocks.
Of the gold stocks, I would look at a “producer” rather than an “explorer”. There are 4 main producers: Newmont Corporation (NEM) (the old Newcrest Mining, but now an international group with primary listing in the USA); Northern Star (NST), Evolution Mining (EVN) and Regis Resources (RRL).
Evolution Mining (EVN) has been the best performing ASX gold miner over the last year or so, but brokers now feel it is a touch over-valued. According to FN Arena, a consensus target price of $5.98, about 5% lower than the last ASX price of $6.28. Northern Star is the biggest local producer, and brokers have upside potential of 7.7% to $19.32 (last ASX price of $17.94). Regis is the smallest producer, with a target price of $3.13, about the same as the current ASX price.
Newmont Mining (NEM) has a target price of $85.00, 14.6% higher than the last ASX price of $74.18. The range is a low of $77.00 up to a high of $95.00.
My preference is Northern Star.
Question 2: What do you think of Super Retail Group (SUL) and Accent (AX1)?
Answer: A tough sector……….discretionary retail.
Super Retail Group (SUL), the owners of Super Cheap Autos, Macpac, Rebel Sports and BFC, reported this morning. The market didn’t like the sales growth (4%, 1.8% on a comparable stores basis), or the decrease in margin. The first seven weeks of the second half have started a bit more positively, although Super Cheap Autos is struggling and there are additional costs while they transition to a new distribution centre. The stock is off about 14% today.
SUL doesn’t look that expensive. Around $14.00, it is trading on a multiple of about 13x forward earnings. Brtokers have a target price of $17.38, although that it likely to come down a touch as they make adjustments to their forecast in the coming days.
For Accent Group (AX1) (mainly The Athletes Foot), the consensus target price is $2.53, about 19.7% higher than the last ASX price of $2.11.
Question 3: What are your thoughts on the Barrow Hanley Global Share Fund, which is listed on the ASX under the ticker GLOB?
Answer: The Barrow Hanley Global Share Fund (GLOB) is a fundamental, bottom-up value fund. As a “value” manager, it shies away from expensive growth stocks and focuses on stocks that are cheap from a fundamental point of view. It has relative overweight positions in materials, real estate and utilities, and relative underweight positions in information technology.
Not surprisingly, its performance has been underwhelming. 11% behind the index for the year to January 25, 9.9% pa behind over the last two years and 5.8% pa behind since inception.
The management fee of 0.99% is relatively low for an international fund. Pass.
Question 4: Telstra has announced a higher dividend of 9.5c per share. Is it too late to join their DRP (dividend re-investment plan)? Is there any discount?
Answer: Telstra will pay a fully franked dividend of 9.5c per share on 28 March. The shares will trade ‘ex-dividend’ on Wednesday 26 February. If you want to change an election for the DRP (either to join or discontinue), you have until COB on Friday 28 February by contacting the share registry (you should be able to do this online). There is no discount.
