I understand there are a number of cross holdings/management between Brickworks, Washington Soul and Milton LIC. Can you comment on the comparative advantages/disadvantages? Which would you recommend long term for an SMSF now in pension phase? My husband and I are in our early 60’s.
A: I am struggling to think of too many advantages. The conglomerate/cross shareholding model is clearly out of favour. Proponents may argue that it makes the company’s share register more stable and that the company can better act as a ‘long-term’ investor. Proportionally, other investors (including fund managers preoccupied with the short term) will own less, and thus can’t influence the company as much. Opponents argue that corporate governance can be poor.
Several fund managers refuse to invest in Brickworks or W H Soul Pattinson, and only a handful of broker analysts cover the stock.
My advice: avoid.
Also, a big negative in regards to Milton Corporation.