With the ASX 200 back at 5,268 points, we still believe the most effective strategy remains a selective one. Broad based buying on index ETF’s probably had to be done at or below 5,000 points. Our stock selection process still remains grounded to balance sheet strength (low debt), robust industry structures and looking for undervalued opportunities. The recovery performance of some of these undervalued blue chips just in the past month has been interesting: Woolworth +9.23%, IAG 8.80%, NAB 2.29%. The entry price of any business you add to your portfolio will determine your view on the stock in many cases.
At the portfolio level we are happy to report Perpetual moved up 5.00% to $42.60 on Friday, after the company delivered better than expected funds under management numbers. We continue to believe this stock will trend towards our fair value target of $46.00 over the coming 6 months, and in the meantime is being supported by a 5.50% fully franked yield. Best Buys remain Perpetual, Qube (Growth), Slater & Gordon (Growth), Telstra below $5.50, Woolworths.
Figure 1- Perpetual 1 Month Chart