Any Opinions on SKI here?, page-8

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JTSogz

233 Posts.

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23/02/18

19:58

Post #: 31302979
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Originally posted by Timber7 ↑

JT,
If you've bought in as a defensive play, then its a good decision. You should not care about +/-20% swings as its a defensive investment. I also assume you are in for the LT.

If none of the above is true your investment is in trouble. SKI thrives in low interest cycles as its bus. model is predicated on borrowing to acquire additional revs. It then goes about driving operational efficiency as this is where its experience lies - managing power transmission assets. To summarise it must acquire to grow as fees are regulated and they cannot simply increase prices on demand.

As the world econ. faces the prospect of higher %rates bond prices are being driven down. This means yields or rates are going up. In turn, this means higher borrowing costs but also higher rates achievable by investing in bond type assets. This makes utility stocks (SKI) less attractive on a risk adjustes basis. Similar stocks like airports (SYD) will be under the same pressures.

What tends to happen in bus. conditions described above is such that SPs stagnate as does div growth. So if you are chasing div growth or captial growth you need to transition a well managed portf. to companies which will perform well in higher rate environments, eg healthcare stocks. You wouldnt go retailing or consumer discretionary as higher rates means less disposable income, means less spending etc etc.

Thats not to say that you cant buy a stock in a poor performing sector. But this kind of thing requires a high deg. of analytical ability which even the experts get wrong.

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Thanks for your input. Definetly a lt holder. Id also buy more at a 20% discount. Yep im aware of overseas rate movement. Rba has signalled mo rates movd for quite a while however. So im comfortable in my exposure to interest rate sensitivity for now. I do have exposure to high int rate beneficiaries too.

SKI Price at posting: $2.40 Sentiment: Hold Disclosure: Held
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0 Great analysis

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