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23/11/19
22:46
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Originally posted by pslally:
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Share prices of blue chip stocks drop significantly all the time and most of the time the share price eventually recovers. You have to stay invested for the long term. On the other hand share prices of small companies do not recover after significant drop most of the time and stay invested for the long term in small companies doesn't work most of the time. After suffering heavy losses in the stock market over the past 29 years and making a few bucks here and there, here is my humble opinion about WBC and why its share price will hit $41.Small companies Bought Vocation shares in 2014 after they fell 90% but realised that VET business model was flawed and it was not going to recover. Sold shares at a loss and a few months later it went into liquidation. Bought Dicksmith shares in 2015 after they fell a lot. Realised that DSH was carrying a lot of inventory and had lots of debt. Debt can bring a company down if there is a downturn in demand. Sold shares at a loss and a few months later it went into liquidation. Bought Slater Gordon shares in 2015 around $1 mark and sold them at 90 cents. Bought back again around 60 cents and sold them 38 cents. Bought back again around 33 cents and sold them again at 30 cents. Price is 23 cents now. Hint - I wont be buying SGH anymore.Blue chip companies During GFC, bought MacBank around $30 and sold them and then bought back again around $20 and some more around $15-16. It was "world is going to end" scenario. Macbank is still here. It is making billions in profits and shares are trading well and it is a market darling today. Regret selling those Macbank shares. Another "world is going to end" scenario. Bought BHP shares in $22 range in 2015. Sold them when price dropped below $20 and bought them back when when price dropped in $14-15 range. A few years later, BHP is actually doing quite well and share price has gone up a lot and it has become a market darling again. Regret selling those BHP shares. WOR was targeted by short sellers too and was being heavily sold. People were telling me oil price will never recover. I bought WOR shares around $16 and sold them at a loss. Price fell even more so bought them back at $9 and sold them at a loss again. Price dropped even more to below $4 so I bought them all back again. Another "world is going to end" scenario. Regret selling those WOR shares. I can add COH, TLS, MND, FMG and many other shares to this list and it will go on and on.Now coming to WBC . Bought WBC shares around $15 in March 2009 but sold them at a profit and another regret. Bought WBC shares around $25 in Nov 2018 and held on to them since then with the plan to buy more if an opportunity came up but price kept on going up and didn't get another decent opportunity to buy more shares. Last week the AUSTRAC news came out. Voila the wonderful opportunity to buy WBC shares at lower prices. Yes there is a risk it might drop a dollar or two but who cares. It will eventually go back up to $41 in next few years. WBC is not the same as VET which had a flawed business model. WBC is not the same as DSH which was polished by PE firm for ASX listing and had massive debt. WBC is not the same as SGH which bought a billion dollar business and funded it with massive debt. WBC is not the same as MQG which has a great management team and number one investment bank in Australia. WBC is not the same as BHP which is more than 100 year old and the largest resources company in the world . WBC is unique and different in many aspects. It is the first bank of Australia and recently celebrated its 200th year as a bank. It has significant market share and is the second biggest bank in Australia in terms of market cap. The Westpac brand is is going to suffer a bit from this debacle but WBC does not have any solvency problems like DSH or SGH. WBC is a very mature company and their management will deal with these issues and bring the bank back on track and share price will go up in the long term. Buy and hold WBC forever. We should have some faith in WBC share price and its performance. Give it some time and share price will be back on track. FMG was on the brink of collapse when its huge debts problem spiraled FMG had to issue shares in lieu of payments to its suppliers and contractors. Those suppliers and contractors who held on to the FMG shares must be very happy today. It is time to buy more WBC shares if you can afford to. If you are selling WBC shares at these prices and exiting your long term position then you might regret not holding on to WBC for a few more years. Majority of WBC shares are held by large financial institutions, industry super funds etc and they have a very long term investment outlook. My price target for WBC is $41 and I know it will get there in next few years. Only need to stay calm and wait patiently like the other time.
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Other than hope and prayer, can you please tell us the basis for your $41 target. What EPS figure are you using to get the nice round figure of $41? My guess is at the moment you have no idea and until some further clarity no one else does either. In my opinion it will probably recover some of the recent losses as the price is getting to oversold levels, but that's just in the short term, what happens after that? I noticed that you curiously left out TLS as an example, the bluest of blue chips. If it wasn't for the ultra low interest rate environment the share price would arguably be lower now and further away from the lofty levels it used to trade at before it had to cut its dividend. Investors have been indoctrinated into believing that bank share will always go up without ever thinking about the possibility of dividend cuts and share prices. Everyone should their research elsewhere and not fall for number plucked out of thin air.