Question of the Week

Questions of the Week

Co-founder of the Switzer Report
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Question 1: What is the broker consensus target price?

Answer: Most of the major broking firms calculate a target price for the stocks they analyse. It is usually looking 12 months’ out. The consensus target price is the average of the broker targets.

Question 2: We were 95% equities and 5% cash in our SMSF just before retirement. However, just after my husband retired, we changed the mix of equities to include about 30% ETFs including SWTZ, MOAT, MFG and NDQ. We also chose higher dividend shares like bank shares and Rio, BHP but did keep some growth stocks. The ETFs are listed on  the ASX but are they considered a different asset class (for ATO purposes) and will we satisfy the diversification rules?

Answer: You are certainly more diversified with the ETFs. The ATO uses pretty rudimentary classification schemes, based off the Annual Return Data that SMSFs submit. If you have classified MOAT and NDQ (which are listed on the ASX) as Australian equities, then their records will show that your exposure is 95% to Australian equities. But I think it is wrong to classify them as Australian equities – I would reclassify as international equities.

If you get queried by the ATO, it should be just a matter of confirming this with your auditor.

Question 3:  I would be interested in hearing your view on the upcoming Centuria Metropolitan REIT (CMA) entitlement offer.

Answer: The institutional offer at $2.86 was very well supported and the stock is now trading around $3.06.The property acquisitions (on paper) strengthen the profile of CMA and the forecast distribution remains quite attractive. On this basis, I would be supportive of participating in the entitlement offer (obviously subject to cashflow and any exposure limits).

Question 4: I currently have shares in Thorn (TGA). They have had a rough run for about 18 months. They are offering a 24 cent share purchase for existing shareholders. What are your thoughts on the soundness of Thorn going forward?

Answer: Investors Mutual and Forager Funds have backed the institutional entitlement (a 1-for-1 entitlement at 24 cents a share) so I guess that is a positive. They are canny investors. But it has been a dog and Thorn Groups (TGA) underlying business (consumer finance) doesn’t do much for me so it is not a stock I have followed closely. None of the major brokers cover the stock. Morningstar says it is “undervalued” and has a target of 35 cents.

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 regard to your circumstances.

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