Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James and Team CBA has hit another all time high. At what price will you consider trimming or selling your holding? XRO has also hit new highs- they report on the 15th Nov - are you considering trimming prior to their reporting? What are the expectations - has this been priced in already? regards Debbie
Hi Debbie,
We own Commonwealth Bank (CBA) in the Income Portfolio and Xero (XRO) in the Growth Portfolio, with XRO reporting next week, before market on the 14th Nov.
In simple terms, both stocks are delivering, and while they do, we intend to hold them. Both are on the expensive side to varying degrees, more so in terms of CBA given it’s easier to compare that business with peers globally (and locally), while Xero is in the process or monetising its 4m+ users, and focusing more on profitable growth, so their valuation from an earnings perspective is less clear, though we think the stickiness of their platform is incredible, and users can withstand further increases in prices before churn becomes an issue. The stage of their evolution is exciting, and this is where we see the rubber hitting the road i.e. the earnings power of their platform (or not).
We have no intention to trim or sell XRO prior to their result, and within the banks, we think CBA is best placed v peers given their focus over many years on building/developing a better technology stack.
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