WDC - Westfield Group

Julia,

We just have a different opinion,

you believe that westfields will not see an decent investment returns, I believe they will.

time will tell.

Lei is the first stock in the list you mentioned, we will use that as your example. today it is trading at $38.33, lets look back in 12 months and compare lei and wdc share price growth including dividends.

LEI - $38.33
WDC - $11.63

Same goes for you Julia, I appreciate the discussion, its good to have conflicting views with someone that can express their thoughts without being arrogant or one-minded.

I guess for my portfolio I'm trying to have a combination of many philosophy's, although this is rather difficult as i'm young and don't exactly have a portfolio of a large magnitude, although i've done considerably well since I started investing just 12 months ago (I work as a paraplanner / trainee Financial Planner - started this last Jan as well)

By holding WDC its more of a play that the property sector will improve and also my expectation that long-term America will gradually return to the malls hence filling up the vacancies WDC currently have in the US. I do currently hold WES and bought it at the very low last Feb so i've done quite well there (I think my purchase price was $14.94). I'm slowly moving to a more value investment approach with satellite speculative stocks to enhance my capital returns.

I'm also trying to have a diversified portfolio in terms of the sector the company operates in (currently i'm overwieght energy and materials = which im in the process of rectifying) which I guess contibutes to the reasoning behind my WDC holding. I definately understand there are potentially better opportunities out there, I just feel WDC gives me good exposure to the property sector, with reasonably steady income, solid management and reasonable growth enhanced by ongoing development.

My approach (and goal) is to have 5-10% invested in speculatives (for now this is fine as i'm young, may tone this down further down the line), no more then 10-15% invested in 1 stock (I still breach this rule now due to my low portfolio value and the growth some stocks have achieved) and no more then approx 20% in 1 sector (still rectifying this also). These are my goals currently but i'm still looking into it and tweaking it as I go.

I try to have company goals as well, so for instance its that WDC has reasonable growth and continued yeild over the next 1-3 years in line with what im hoping is a property and US economic recovery of some sorts bringing shoppers back to the consumer discretionary market. I continue to monitor this goal regularly and as situations change I adapt my goals. If they aren't met, thats when I look for new companies that can fulfil new goals etc. (hope that makes sense - also hope we aren't hi-jacking the thread, but I'm loving this discussion, its helping me conceptualise my investment strategies further)

Two questions of interest with Westfield (and retail landlords in general) post GFC are,

1) To what extent are leases being maintained with incentives and how has this changed since the GFC ?
2) To what extent is the property group supporting tennents finance arrangments where banks are no longer willing to lend ?

The second question is a reference to a recent statement by Matthew Quinn of Stockland.

Tysonboss1 said:

Julia,

We just have a different opinion,

you believe that westfields will not see an decent investment returns, I believe they will.

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No, don't attribute an opinion to me that I didn't express. I have no idea what Westfield's returns will be in the future. I'm only interested in what the SP has done over, say, the last five years, and especially that it has not enjoyed the sharp rally shown by many other stocks in 2009. I simply believe my funds can be more profitably employed elsewhere.

Lei is the first stock in the list you mentioned, we will use that as your example. today it is trading at $38.33, lets look back in 12 months and compare lei and wdc share price growth including dividends.

LEI - $38.33
WDC - $11.63

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You are quite welcome to make whatever comparisons you wish. I've made no predictions about what will happen with LEI and have no interest in some sort of competition. I'm holding LEI at present but won't hesitate to sell it if I see a better opportunity elsewhere. I don't have any attachment to any stock.

kermit345 said:

I'm also trying to have a diversified portfolio in terms of the sector the company operates in (currently i'm overwieght energy and materials = which im in the process of rectifying) which I guess contibutes to the reasoning behind my WDC holding. I definately understand there are potentially better opportunities out there, I just feel WDC gives me good exposure to the property sector, with reasonably steady income, solid management and reasonable growth enhanced by ongoing development.

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Fair enough, I understand your thinking. I understand the widely accepted philosophy of being diversified across all sectors. It's just not something I follow for the sake of it. I'm happy to be overweight anywhere that's in favour at a given time.

drsmith said:

Two questions of interest with Westfield (and retail landlords in general) post GFC are,

1) To what extent are leases being maintained with incentives and how has this changed since the GFC ?
2) To what extent is the property group supporting tennents finance arrangments where banks are no longer willing to lend ?

The second question is a reference to a recent statement by Matthew Quinn of Stockland.

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What was the essence of Matthew Quinn's statement, drsmith?

drsmith said:

Two questions of interest with Westfield (and retail landlords in general) post GFC are,

1) To what extent are leases being maintained with incentives and how has this changed since the GFC ?
2) To what extent is the property group supporting tennents finance arrangments where banks are no longer willing to lend ?

The second question is a reference to a recent statement by Matthew Quinn of Stockland.

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I am sure there would be some incentives in in some shopping centres in some areas, WDC cash profit was up so it can't have to much affect on them, I know westfields has been doing regional promotions in some areas to attract people into their centres. But even through out the GFC their cash profit has been very robust.

What was the essence of Matthew Quinn's statement ?

See Business Spectator - Rise of the reluctant banker.

To my understanding although leases have dropped off in the US and UK, due to Australia's strength and stimulus it has meant that the Australian component of Westfield has basically filled the void left by poor US/UK leases.

Can't really relate to the 2nd question, haven't looked into it quite that much / read the article.

Fair enough, I understand your thinking. I understand the widely accepted philosophy of being diversified across all sectors. It's just not something I follow for the sake of it. I'm happy to be overweight anywhere that's in favour at a given time.

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Also when I purchased WDC close to the bottom I believe it was vastly undervalued, so i've still done ok out of it since then. I'm reasonably happy to be overweight sectors as well (like I am at the moment), however the figures I gave are more guidelines that I wouldn't like to over-step without good reason. Plus I should probably mention that while I do think WDC is a good core component, it is still more of a minor holding in my portfolio rather then a major holding, just for that added diversified exposure.

drsmith said:

What was the essence of Matthew Quinn's statement ?

See Business Spectator - Rise of the reluctant banker.

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Thanks. So WGP, WDC or whoever ends up carrying the debt if the small business fails.
Another good reason to stay away from this sector atm.

Julia said:

Another good reason to stay away from this sector atm.

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there is always a goog reason to stay away from just about every sector or company.

In the last 12 months I have made hundreds of thousands of dollars on companies people scoffed at.

In fact you and dr smith both made negative comments ( on different threads) in regards to my investment in Beppa. Luckily I didn't listen to you both because within weeks my 300,000 shares went from 8c to 37c.

this also happened with, MCW ( 20c to 65c ), AHE ( 55c to $2.30 ), VRL (87c to $2.25 ), APA ( $2.58 to $3.60 ), All of these stocks had people listing multiple reasons why they would fail, But I did my research was happy with them and made the investment.

I believe this will happen again with WDC, But as I said earlier I am not banking on a quick buck, I am happy to hold this one collect dividends and wait for steady cap gains.

Tysonboss1 said:

there is always a goog reason to stay away from just about every sector or company.

In the last 12 months I have made hundreds of thousands of dollars on companies people scoffed at.

In fact you and dr smith both made negative comments ( on different threads) in regards to my investment in Beppa. Luckily I didn't listen to you both because within weeks my 300,000 shares went from 8c to 37c.

this also happened with, MCW ( 20c to 65c ), AHE ( 55c to $2.30 ), VRL (87c to $2.25 ), APA ( $2.58 to $3.60 ), All of these stocks had people listing multiple reasons why they would fail, But I did my research was happy with them and made the investment.

I believe this will happen again with WDC, But as I said earlier I am not banking on a quick buck, I am happy to hold this one collect dividends and wait for steady cap gains.

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Tyson

Big difference between MCW - 3 bagger and APA 1.5 bagger. What do you think WDC will do?

I hold

gooner said:

Tyson

Big difference between MCW - 3 bagger and APA 1.5 bagger. What do you think WDC will do?

I hold

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I am not expecting a 3 bagger in 12months thats for sure, But I expect it to do decently, and investors to book solid returns from dividends and capital growth over time.

I expect it to continue to collect rent and make healthy cash flows and to steadily work through their development pipeline and grow earnings. Earnings that have a natural hedge against inflation.

I have no idea where the share price is heading in the short term, I never do, and don't really give 2 hoots about it's share price short term. I don't judge an investment I make on friday by what it's share price is on the following tuesday.

But I understand its core business and the market it operates in and am very comfortable that it's business is strong.

I think westfields will do ok through the bad times and fantastically in the good times.

Tysonboss1 said:

there is always a goog reason to stay away from just about every sector or company.

In the last 12 months I have made hundreds of thousands of dollars on companies people scoffed at.

In fact you and dr smith both made negative comments ( on different threads) in regards to my investment in Beppa. Luckily I didn't listen to you both because within weeks my 300,000 shares went from 8c to 37c.

this also happened with, MCW ( 20c to 65c ), AHE ( 55c to $2.30 ), VRL (87c to $2.25 ), APA ( $2.58 to $3.60 ), All of these stocks had people listing multiple reasons why they would fail, But I did my research was happy with them and made the investment.

I believe this will happen again with WDC, But as I said earlier I am not banking on a quick buck, I am happy to hold this one collect dividends and wait for steady cap gains.

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For someone who claims to have made hundreds of thousands of dollars you seem to have a very large chip on your shoulder.

If you wish to respond to the specific points I have made then by all means, be my guest.

Julia said:

Thanks. So WGP, WDC or whoever ends up carrying the debt if the small business fails.
Another good reason to stay away from this sector atm.

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It does increase overall sector risk and that is something any potential investor needs to be aware of.

Thats a big potential 'IF' the small business fails. I'm sure westfield, or stockland, or whomever the larger company is, they do their due dilegence on the company beforehand to make sure they will be profitable enough to not only pay their rent but also pay their loan owing to their larger company.

Yes if the small business defaults then the large company takes on the debt and risk and loses their money. But it also can provide the returns on any idle cash they may have had as well.

Its basically an investment that westfield or scotland are making in the small business to make sure that their core business of having their land rented continues to occur as well. This may have been a major issue 6-12 months ago when unemployment was on the major rise and consumers were spending less at the stores. But as unemployment is now reasonably steady / on the improve the only main thing that I can see hurting the small business within the malls is when the stimulus is wound back. However even in aus to the individual it has been wound back, its only the infrastructure stimulus that is really left to be implemented.

So in essence, yes it is more risk for the property companies, but i'm sure it is calculated risks that they would only take on if they are comfortable and see it as a positive for shareholders. All companies are going to have risk, you just have to be comfortable that management understand the risk they are taking on, which I would be confident Westfield would handle any loans dilligently.

drsmith said:

For someone who claims to have made hundreds of thousands of dollars you seem to have a very large chip on your shoulder.

If you wish to respond to the specific points I have made then by all means, be my guest.

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I don't think I have a chip on my shoulder.

I was just pointing out that any one can take a quick glance at any sector and probally come up with 5 reasons why the present time is a bad time to invest in the sector or company.

I get a bit tired of spending weeks thinking about a company and researching the facts only to have people make out I am a fool for having faith in that company.

But hey I guess I have to live with that, It wouldn't be much of a forum if we all agreed on everything.

If you don't believe that I made the investments that I listed above you can check a thread a made called "rate my portfolio" you will see that many people were scoffing at my portfolio at the time, you can also check the threads on each of the companies you will see posts I made saying I was accumulating the stocks.

The only one I mentioned that I didn't take full advantage of was VRL I sold out early to buy more AHE (which was a bigger gain any way) and only made 30% instead of 225%,

kermit345 said:

Thats a big potential 'IF' the small business fails. I'm sure westfield, or stockland, or whomever the larger company is, they do their due dilegence on the company beforehand to make sure they will be profitable enough to not only pay their rent but also pay their loan owing to their larger company.

.

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yeah alot of "IF's",

If some of westfields store's need capital and
If some of them can't get other finance and
if westfields happens to lend them money and
If they can't repay the loan

Lets say 5% of tenants need capital this year, and 10% of those can't arrange other finance, and 5% of those need it so desparatly that westfields have to step in, and 5% of those can't repay.

we are talking about 0.00005% of tenants not repaying, And that only "IF" this may be happening on a large scale. which I don't think it is.

Tysonboss1 said:

yeah alot of "IF's",

If some of westfields store's need capital and
If some of them can't get other finance and
if westfields happens to lend them money and
If they can't repay the loan

Lets say 5% of tenants need capital this year, and 10% of those can't arrange other finance, and 5% of those need it so desparatly that westfields have to step in, and 5% of those can't repay.

we are talking about 0.00005% of tenants not repaying, And that only "IF" this may be happening on a large scale. which I don't think it is.

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This is just pointless speculation.

The fact is that it's happening within the sector. Are you disputing the proposition that it increases overall sector risk ?

I don't intend to buy into the bigger "discussion" that seems to be going on here but on the subject of risk to WDC in supporting/lending to its tenants, yes, it is a risk but it's a business risk which WDC management is well qualified to assess and assume if appropriate.

As has been stated, risks are present with all businesses. It's the ability to assess and manage those risks that sorts out the successful companies from the unsuccessful.

Or is that too obvious?

The more risks there are though, the more that risk has to be factored into the price of the shares.

drsmith said:

This is just pointless speculation.

The fact is that it's happening within the sector. Are you disputing the proposition that it increases overall sector risk ?

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Yes, Thats right Pointless speculation in response to pointless speculation,

I am saying the fact that this is happening in the sector will not have any affect on westfield's viability in the shorterm or longterm,

I can't comment on other members of the sector because I know nothing about them, except I do know stocklands assets and balance sheet don't match WDC in terms of qualty, so it may be a problem for them if they are already over leveraged and have weaker properties with weaker tenants.

The original article was talking about stockland not WDC.