I bought my ANZ shares in 2001 for about $20. Over the past decade I've made approximately.... zero dollars in capital gain. It's only a small part of my portfolio. I either (obviously) reinvest the dividends (since Covid began) or take the dividend as cash. My banking is all with ANZ. Perhaps I'm a creature of habit
Two months ago, I reluctantly and for the first time, sold half my holding at $25.40. We're constantly told it's not possible to time the market, yet something didn't quite feel right here and overseas. A little dry powder to re-purchase ANZ shares at a higher yield will be nice. Rudi Filapek VanDyk from FNArena has been calling this market well over the past few months.
It's funny how the same brokers who were recommending a buy at $27 and $30 price targets "due to banks benefiting from rising interest rates" are now recommending a hold and low-mid $20 targets... "due to banks facing negative consequences of rising interest rates". Hilarious. Talk about being Exhibit A for *do your own research*.
Share prices long term follow earnings per share. It's no coincidence that ANZ's earnings have gone nowhere over the past decade, and neither has the share price. Much like Telstra shares. The banks have become a cyclical, medium-term trading opportunity and yield play. Much different to the 2000-2007 period where real growth occurred. Better than bank interest for a small part of the portfolio -- especially if you can buy them under $20 in a downtown.
To think there must be a floor full of economics and finance PhDs & master's degrees in head office in Melbourne with much greater financial knowledge than me making these decisions. And yet it's so obvious that this deal will not generate EPS growth. ANZ is even saying it up-front. We get bigger, but not better. Much like an externally-managed REIT, which buys more and more earnings-neutral property because the fund manager collects greater fees according to the size of the fund. How about some actual growth through offering better products and services.
As others have correctly pointed, out we initiated a share buy back plan in the high $20s only to announce a share purchase plan in the high teens. It seems like madness. Yet l failed economics in first year university and barely passed the second time around, so what would I know. Surely it would be prudent to raise money when ones shares are at the top of the cycle, not be repurchasing stock just because you can. I wasn't completely against the buyback -- it's the only way ANZ was going to improve EPS. Revenue has been flat for years. The main area for profit growth seems to have been through cost-cutting.
Like most investors here I'm just relieved the MYOB deal has fallen flat. Maybe that was the plan! Scare the market with a horrible deal for MYOB so everyone would be relieved that "at least the Suncorp deal isn't the alternative". Of course, I'm joking, but it makes you wonder about the long term thinking and strategy of the board. It's hard to imagine a founder-led listed-company acting this way. Perhaps it's inevitable when we're talking about multi billion dollar financial institutions.
Now for the big question. Will I take up the offer? I'm not sure. I'll see where the share price goes over the next few weeks. I'm yet to see a SPP where the share price doesn't fall to under the offer amount. I very much doubt we stay at $21 with this SPP offer on the table. Unfortunately my remaining 50% holding will drop under $19 -- which will present a buying opportunity to have a nibble if the market softens further. If/when interest rate concern disappears, ANZ shares bought between $17-$20 will look like a great investment. Although, good value is starting to appear elsewhere too.
All the best to my fellow ANZ shareholders.
ANZ Price at posting:
$21.64 Sentiment: Hold Disclosure: Held
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