You need a strategy to successfully average down, and budget...

You need a strategy to successfully average down, and budget too

Trying to pick the “bottom” can be a smelly exercise (an old broker told me this) so here is my strategy:

1. Work from the SP high point when falls began (WBC got to about $27)
2. Take small positions on the down legs, say 10% at a time (I picked up more at 25, then 23)
3. Best opportunities arise < 25% from recent highs, so around $20 would be a major top up event in my books

Am topping up into SMSF and at $20 a share, WBC has a 6% yield plus franking credits for me. Most likely will not take up off market buyback at these levels, and instead will enjoy the greater earnings per share going forward. Might be even lower than expected take up of buyback, although institutions and large SMSF will end up gobbling most of the loose franking credits

Clearly WBC is on the nose at present, and the latest ASIC penalty is sobering, but it doesn’t counter the fact that at some point WBC will come back into favour and it’s SP is sitting at a significant discount to the other major banks. WBC will not go broke, it will get its house in order and, in my view, accumulating at current levels will enjoy capital gains later, plus juicy dividends. DYOR