Managed Accounts Share Trading Investment Notification - Purchase Of Hvn
Good afternoon,
Good afternoon,
On Wednesday we made the decision to purchase Harvey Norman (HVN) shares for 15% of the portfolio. As you know, HVN operates the Harvey Norman branded stores, and stores branded under other names such as Domayne and Norman Ross. The 264 retail complexes operate in Australia, New Zealand, Asia and Europe, however the majority are locally operated.
Since the last major share price upgrade (and subsequent upgrades by a number of
managed funds), HVN shares have traded in a wide range between $3.60 and around $4.50, which is a 25% overall range. At $3.60 the company is trading on a forward PE estimate of 11.5 times, and a dividend yield of over 5% fully franked. These estimates may prove to be too conservative, however, and we see the potential for an upside surprise given the strength of the economy.
Once again, we made this purchase because at the purchase price HVN represents absolute value, value against its peer group and the shares are trading at the lowest end of the trading range. Secondly, it is now clear that the domestic economy is quite strong, being driven by raw material exports to China and supported by a resilient consumer market. Under these circumstances, an exposure to the local consumer discretionary sector certainly appears a safe one, especially so given the purchase price.
We anticipate being able to sell HVN at around $4.10, a gain of 13% within two months.
If you would like to speak with me about anything at all, please call the desk.
by: Hayden Kerr
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