The Sage: where to invest post COVID, according to Macquaire

By Peter Lynch |

Investing it



Welcome to the Sage, our irreverent take on the week just passed.

Millionaire’s Factory tips where to invest after COVID

They call Macquarie Bank the Millionaire’s Factory, because so many of its staff become millionaires. So when Macquarie tells you where to invest, it’s not a bad idea to listen. Especially when the Millionaire’s Factory is talking about post coronavirus recovery. After all, that’s the holly grail of investment tips, right?

Well, this week Macquarie revealed its investment tips. Macquarie claims Star Entertainment, SeaLink Travel and Austal are among the best stocks to rise once a vaccine is found for COVID-19 and Australia rebounds from the recession.

The surprise is Star. Casinos hardly look likely to inherit the earth post COVID. But according to Macquarie it’s a “key vaccine beneficiary”, thanks to gaming revenue tax talks and poker machine exclusivity for 20 years (yes, you heard that right!).

Shares are running at around $3.15 with a dividend of 6%.

SeaLink Travel Group is a favourite of The Sage. We all know travel is being smashed, but this Aussie company carries more than 360 million passengers a year in different locations around the world.

The Group has over 8,700 employees and operates approximately 3,400 buses and 80 ferries with established domestic and international operations across Australia, as well as Singapore and London.

It’s share price is around $5.18 and a dividend yield of over 2 per cent.

Austral is a defence play and ship builder with a difference.  Their catamarans are the darlings of navies around the world, including America, but they are also ferry builders.

Austal designs and builds frigate sized, multi-mission surface combatants, high speed military transport vessels and a range of patrol boats for customers worldwide.

Austal’s commercial vessel platforms include high-speed passenger ferries and vehicle-passenger (ROPAX) ferries that deliver performance, comfort, economy and reliability for both operators and customers.

The stock is at $3.29.

The Motley Fool, an investment website which claims its purpose “ is to make the world smarter, happier, and richer with a decidedly Foolish bent” – also has some recommendations.

Scott Phillip is the local stock picker.

“I wouldn’t want one of your first investments to blow up in your face. That could put you off ASX shares, which would be very disappointing because I think shares are the best long-term wealth creation tool out there” says Scott.

So what are they selling?

WAM Microcap Limited 

WAM Microcap is a listed investment company (LIC) which invests in small ASX shares.  Over the past three months its gross return was 26.9 per cent, over the past year (including the COVID-19 crash) its gross return was 25.4% and since inception in June 2017 it has returned 21.7 per cent per annum.

Since inception in June 2017, its gross performance outperformed the S&P/ASX Small Ordinaries Accumulation Index by 13.3 per cent per annum.

At the current WAM Microcap share price it’s trading at a slight discount to the August 2020 net tangible assets (NTA) per share. That you means you can buy a basket of ASX shares worth $1.49 per share for $1.46 per share.

Betashares Global Sustainability Leaders ETF

This is an exchange-traded fund (ETF) which owns a portfolio of businesses that have been identified as climate leaders that have also passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investing considerations.

Investing ‘ethically’ doesn’t have to come at the expense of returns. Over the past year it has returned 27.8%, over the past three years it has returned 23.5% per annum and since inception in January 2017 it has returned 21.6% per annum.

A2 Milk Company Ltd

“If you want to invest in an ASX share with plenty of growth potential then I think A2 Milk is a great option today,” says Scott.

A2 Milk grew revenue by 32.8 per cent and net profit after tax rose by 34.1 per cent to NZ$385.8 million.


Banks get a heart…sort of

Good news for borrowers who have deferred bank loans for six months or longer – your credit ratings won’t be affected until at least March next year.

That’s important because a bad credit rating can serious impact your ability to get other loans.

The Australian Banking Association – not renown for being big hearted – made the announcement this week.

It has extended the credit rating amnesty by six months, so customers granted loan deferrals are assured that banks will not report missed payments to credit agencies.

Those in arrears will need to restructure their loan or apply for another hardship program. Contact your banks if you’re in trouble. You may be surprised at how much help you will get.

Meanwhile, some customers have found a way to deal with the persistent “We need to talk…” calls they are getting from their banks.

It’s called “ghosting” and one in five customers is using it.

Basically, what some are doing is just not responding to bank communications.

The Australian Prudential Regulation Authority says banks have $167 billion of  414,430 deferred home loans on the books.

APRA reckons 80,000 home loan borrowers, who owe $30 billion, are resorting to taking the phone off the book and laying low.

What happens next? The Financial Review reports a senior banker saying: “The notes will get a little bit sharper to get a response…One month after, three months after, the letters will get more severe.”


Are banks ageist?

You’ll have noticed a lot of ads for switching bank accounts. Some banks are even offering big savings to do it. Australia’s first digital bank, 86 400, claims new customers have saved more than $3,000 by getting bonus interest each month, which adds up to around $200 for the year.

The bank’s ‘Energy Switch’ service saves individuals $200 a year. Customers who bought or refinanced their home through the smart bank are up to $2,300 better off, and those who use the bank’s ‘Coming Up’ feature, which notifies users of upcoming subscription payments, have saved as much as $550 from cancelling unused subscriptions and avoiding late fees.

Meanwhile, Westpac, which targeted under 30s with a 3 per cent savings rate for balances of up to $30,000.

Are you noticing a trend here?  If you are not a millennial, you miss out.  Is this really the way to be inclusive in 2020?


Who bought that $95 million home


$95 m house

The Wolseley Road, Point Piper property known as Edgewater – complete with a 40m harbour frontage pointing directly at the Bridge and Opera House – has traded for $95 million.

Amazingly, it’s the SECOND highest ever.  And an Australian did the deed (though born overseas, says the rumour mill).

There is a tennis court on the waterfront and a deepwater jetty. The views are to die for.

Sotheby’s managing director Michael Pallier – well known for highly prized properties – did the deal.

And if you needed a lesson in why property is a long term bet, here it is:

The Katies women’s retail clothing chain owners Joseph Brender and the late Sam Moss bought the 1800 sqm property for $5m in 1985.

Westfield billionaire Frank Lowy bought his waterfront just up the road for $1.3m in 1991.

It’s actually two properties – the new owner bought both for $47.5m for each with settlement delayed until 2022. He or she will convert it back into one grand residence and live there.

Atlassian co-founder Mike Cannon-Brookes bought Fairwater, the former Fairfax mansion nearby for $100m in 2018. That’s the nation’s highest-priced house sale to date.

Valuer Simon Feilich was quoted as saying: “When you buy something for $5m and make $90m, that’s a pretty unbelievable return.”

You certainly could say that!

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