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Carsales.com and ETFs

Question: Am thinking of adding carsales.com (CRZ) to my super portfolio at $10.50. What do you think of the stock and that price? Am also thinking of adding to my Bendigo and Adelaide Bank (BEN) holding but am concerned that the price is too high at the moment. Should I be waiting for a drop in market?

Answer (By Paul Rickard): I think carsales.com looks ok value around $10.50. There is a little bit of concern at the moment that industry sales are down – and this may impact carsales.com’s revenue.

The brokers still seem to like it. According to FN Arena, the current consensus price target is $11.41 and the sentiment rating is +0.6 (scale -1.0 most negative, +1.0 most positive).

On Bendigo (which is trading at a 52-week high), I am with you. I prefer the major banks to the regional banks.

Question 2: Do you recommend investing in ETFs for retirees? How do you rate ETFs in terms of risk compared to direct shares or managed funds?

Answer 2 (By Paul Rickard): ETFs in general are fine for retirees.

Whether they are suitable for you will depend on your own particular situation.

ETFs that track broad-based indices are, in general, less risky than individual shares. With an ETF, you should get the return of the index, less a tiny management percentage. For example, if you invest in SPDRs ETF that tracks the S&P/ASX 200 (ASX Code STW), then if the sharemarket goes up by 2%, the value of your ETF should go up by 2%. They are passively managed.

On the other hand, managed funds are actively managed. Strong managers will perform ahead of the index, others will do worse than the index.

With individual shares, it will depend on your skills in portfolio construction, and hence they are arguably higher risk than an ETF that tracks a broad based index.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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