Hi all! My first post here. I was looking to buy WES a few weeks back when they were $54, but (regrettably) didn't pull the plug. Still haven't pulled it either
Back in August they were at $65 but have since dropped, anyone have some insight into why that happened?
First up, welcome.
I had a chuckle to myself, as I was thinking of topping up WES, probably around the same time. The chuckle then was probably relating to some rather self-serving comment from a fund manager in an Opinion Piece. Dated 17 Oct, it contained the usual "
I know better than you" hubris
"These are just some examples of companies that have been mispriced when investors succumb to their behavioural biases. Be contrarian and don’t let another salesperson tell you that buying Wesfarmers is a reopening trade.
"There are plenty of investment opportunities, investors just need to be discerning.
Now that date was when WES was just above $54, it had bounced along that level for about a week. Our
Very Important Columnist , operating in the stratified world of spending other peoples' money ( and taking a clip) , had either
a) the desire to buy some for self/ portfolio
b) seen some other fund manager espousing said BUY and wanted to score a point
and so came out with this backhander (the tips, by the way, were BHP, Star SGR and A2M <and WES doing better, 1 month on!>.)
WES, in my opinion, isn't a reopening play; FLT may be!
To answer your question, nothing has happened. Essentially WES is the same company/ corporation/ conglomerate. Inside WES, the company leaders; Bunnings, Officeworks, KMart, have done well through Covid but maybe that momentum is fading, the Lithium play is too early to tell and funds haven't been committed, and now the API takeover has happened and may introduce a level of concern.
I can't help you to decide when to buy. Long term it has been a great story, and probably will be for quite a while. (I hold)
One factor possibly at work is that GE, the archetype conglomerate but a mere shadow of former self, has announced it is breaking into 3 entities. Big money may look at this and wonder/ worry. WES and Seven West Group SVW are the only Aussie echoes, and of course there is Berkshire Hathaway. Recent comment has revisited these themes:
Talk of a Wesfarmers break-up has surfaced from time to time, but the doubling of the group’s share price in the past five years – the stock sits just below the record high it hit in August – has naturally silenced any critics. The chief benefit of a conglomerate is that its different divisions perform in different ways, delivering investors steady returns throughout an economic cycle.
This, of course, is also the big weakness in the model, as exposed by GE’s travails – when a conglomerate gets too unwieldy, underperforming businesses start to detract from the star divisions, which must then prop up the broader group.
Both [WES and Seven Group] have been unemotional about selling, demerging or reducing their exposure to certain business units when it has made sense to do so. Wesfarmers’ willingness to do these types of deals – contemplating the spin-off of Officeworks in 2017, for example, and then demerging Coles in 2018 when it can create shareholder value rather than when it needs to dig itself out of a hole, as in the case of GE – has reassured investors that the group is vigilant about portfolio management.
Further, the repeated insistence by Wesfarmers boss Rob Scott that he will not be pressured into big-bang acquisitions for the sake of it, instead making smaller bets in areas adjacent to the group’s existing units, speaks to strong discipline and a refusal to get sucked in by the empire building that ultimately engulfed GE.