Question 1: Do you think investing in IVV (the iShares ETF that tracks the US S&P 500) is a good investment? And is there any chance that the fund will go bankrupt or an investor not being able to withdraw money out of it?
Answer (by Peter Switzer): IVV is a good investment product. If you think the biggest fund manager in the world (Blackrock, which owns iShares) can go broke, then avoid it. I think it’s a solid investment opportunity at a low cost. Some people buy IVV after the market has been smashed and it has proved to be a good strategy. There are no guarantees but it would have to be a very scary depression to KO Blackrock.
Question 2: What are your thoughts on the Magellan High Conviction Trust (MHH) stock that will start trading on October 11? Applicants eligible to participate in the priority offer will receive additional “loyalty units” of up to 7.5% of their initial application (which will be paid for in full by the Magellan Group).
Answer (by Paul Rickard): The priority offer is very attractive. Of course, the starting point is to make sure that this is an investment that is suitable for your portfolio and consistent with your objectives/needs/risk appetite/asset allocation. Notwithstanding, Magellan’s fantastic track record, as a high conviction fund investing in just 8 to 12 global companies, it is concentrated and high risk.
Question 3: Could you please give me your thoughts on Pilbara Minerals (PLS)? Are they a hold, sell or buy? I have invested in them at 68 cents and they are now trading around 35 cents.
Answer (by Paul Rickard): I am no expert on the lithium market except to note that it was unquestionably over-hyped. If I did want to play in lithium, it would be through an established producer rather than a developing producer such as Pilbara Minerals (PLS).
Of the major brokers who cover the stock, Credit Suisse has a target price of $0.90 and an outperform, and there are 2 neutral recommendations from Citi and Ord Minnett (J P Morgan) with a target of $0.60. Macquarie has a ‘no -rating’.
To quote from Credit Suisse: “FY 19 results were in line. Cash is clearly tight for a single-asset operation, with uncertain cash inflows stemming from market weakness.”
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