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Your opinion of several stocks

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Question asked 24/08/2024

Your opinion of several stocks

G'day Esteemed Team, During 2023 I bought ILU which is a stock I see having a good long future. I paid about $6.80 for it and it took off. Later MM made a comment that the stock COULD be $6.20 in the future and I was way ahead so I sold it. I have learned to jump ship when you give a warning. I am happy with both my decision to buy and my decision to sell. Now I notice ILU is around $5.60 and wonder if it is now worth reconsidering. NOTE: I said RECONSIDERING NOT BUYING. I bought BOQ some years ago at the advice of an ASX legend and did very well out of it. When it started dropping I stupidly held on thinking 'bank stocks ALWAYS come back'. It seems now that the only way BOQ is ever going to return to my buy price is via a takeover and even then I will probably have my hair trimmed. It is unlikely the small banks will ever be able to compete with the big 4 and they probably don't have the money to gear up on world class computer systems like CBA and the other have. Is BOQ like ' My darling Clementine' who is lost and gone forever or is it possible that it will one day claw itself out of the swamp to broad sunlit uplands? I keep having a yearning, probably based on greed, to buy YAL but it seems that every pundit is hyper wary of it. If China goes into deep recession it will reduce coal purchases. However, as YAL is Chinese owned it would seem that the Communist government who always favours it's own will buy Australian coal from YAL rather than Australian owned vendors. I notice that their future dividend/share estimates are pointing downwards. Is YAL still in your 'too hard' basket? Finally, SUL has gone for a nice run. All good things ( and bad things) must come to an end. Hard times may be coming . I tend to lean toward low risk right now and wonder if SUL is likely to be a bad ship to be sailing on in a hurricane. Retail can be a dangerous place to be in hard times. What do you think of both the sector and the company if recession comes? Keep up the great work. MM is the best company of it's type I have ever come across. I would like more advice on what is dangerous. Most consulting companies speak only of what to buy. I believe Warren Buffet said that the first principle of investing is NOT TO LOSE MONEY. Paul

Answer

Hi Paul,

Your last comment is a pertinent one and is really the key to successful investing, i.e. managing the risks in markets, and it’s why the validity of any investment strategy should be considered on a risk adjusted basis. Strategies that are very high risk, can have great periods of performance, but returns can be given back quickly. Slow, steady, and being consistent in an approach is what it’s all about in MM’s view.

Iluka (ILU): We view this as a very leveraged play on China. Right now, mineral sands are struggling, and the rare earths market is being heavily influenced by Chinese intervention. We do keep a close handle on ILU, and there will be a time we will buy it again. We think now is a little too soon, but not far off.
Bank of QLD (BOQ): Scale in banking as you rightly point out is key, given they operate on big volumes, low margins, and the technology side is becoming all the more important. BOQ has simply not been able to keep up. For them to really turn around, they need scale, and that will only come with a takeover or merger. We’re yet to review the specifics of the proposed buy back of franchised branches, though we will. Importantly, we think this is a step towards alignment with peers, and it will remove one of the sticking points in their business model that has perhaps stopped them from amalgamating with another brand sooner.
Yancoal (YAL): We simply think there is more risk in YAL than other producers, so we stick with the other producers. We have been burnt in the past holding stocks that are primarily owned by a shareholder whose interests may not be aligned with our interests.
Super Retail (SUL): We think SUL is a lower risk retail stock. They have net cash on their balance sheet and operate different brands in different sectors creating an added level of diversification in their earnings. If a recession comes, consumer discretionary stocks generally will struggle, though the ones with the above mentioned attributes would be more likely to outperform. If we do go into a recession, our portfolios would be become more defensively set.

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Iluka Resources Ltd (ILU)

LAST UPDATED 23/08/2024 16:49

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