I sweated on an overweight WPL holding for 18 months before it finally delivered....I took profits and I don’t regret that. But having sat on the cash for two months now I’m finding it difficult to find a better place to invest than back into WPL. Even investing over the past two months (with no capital gain) has carried with it still the near certainty of an annualised 10% dividend.
It’s difficult to have much confidence investing in
anything right now. Consider the following performance of various investments over the past one month, and 6 months (as of close of trade last night on Wall St)
A few comments :
US Big Tech : I still like several of them - but sentiment has really turned against them on interest rate fears - don't appear to be bottoming out just yet.
Pandemic Stocks : the 6 months performance data really drives home how frenzied and brainless this got.
Bitcoin : so much for the notion it was the ‘new gold’ in terms of a safe haven when stock markets tumbled - LOL - it gyrates up and down with the NASDAQ
More locally we have the following options :
Fixed term deposits - rates still miserly and won’t be an option for a long time yet. 12 month fixed term deposits with the big banks are 0.25% - laughable.
Residential Property - has surely had its run. The first of the interest rate rises has actually happened now both here and in the US with more to come. Capital losses are a very real possibility now for anyone that has bought residential property in recent times. Many of the banks and property analysts are now talking property prices going backwards 10-20% over the next 2 years - forget property.
So in light of the above a flat WPL stock price that pays a 10% dividend is hard to beat - yet with WPL you do still have the possibility of capital appreciation for the following reasons :
(1) The BHP merger (a) - a near certainty however the market will react positively to it being formally signed and sealed - not far away now.
The BHP Merger (b) - WPL becomes a top 10 ASX stock with a 10% fully franked dividend - fund managers compelled to re-weight.
Note : I think (a) and (b) will outweigh the effect of BHP wokies dumping their WPL stock.
(2) US listing - oil friendly place to list. Any disparity between its ASX listing price and its US listing price will come to the market’s attention and likely to lift the ASX price. ( ie arbitrage trading becomes a possibility where it wasn’t really previously)
(3) The underlying global supply/demand misalignment just hasn’t gone away - it’s just that there are two offsetting temporary situations keeping the price of oil around $100. China’s lockdowns are temporarily effecting demand and the Russia/Ukraine war is temporarily effecting supply. I’m backing the China situation to resolve itself first and for the repercussions of the war to be long lasting.....this combination promises to keep oil prices above $100 long term.....something not factored into the current sp.
(4) Sangomar/Scarborough 3rd party buy ins - great risk management options that can underpin the sp.
I’m looking to take advantage of this market pullback in coming weeks. I was happy with my weighting in WPL and it wasn’t on my ‘buy the dip’ list - but in light of all of the above I’m thinking going back overweight WPL is probably a better bet than any new investment (or top up) in a bank, retail, health, tech or whatever stock.
Apologies - a bit longwinded - just my take.
(20min delay)