Argo Goes Shopping For Quality Bargains
The Age
Tuesday February 5, 2008
ARGO Investments, Australia's second-largest listed investment company, used January's sharemarket correction to "top up on quality stocks" that had been oversold, and managing director Rob Patterson expects more buying opportunities in the volatile market.
The company's "cautious buying" last month included BHP Billiton and followed outlays of about $70 million on additional stakes in Alumina, Fairfax Media (owner of The Age), NAB, QBE, Westpac and Westfield in previous months."We were active in January, as you would expect in that market," Mr Patterson said yesterday.With about $350 million in cash reserves and another $50 million likely to be raised by its latest share purchase plan, Argo would continue to look for high-quality investments to expand its $4.7 billion portfolio, he said.Where is the sharemarket going? "I haven't got a clue," he said. "You've seen the volatility, and I imagine there will be more of it. It's still not clear whether the United States is going into recession and Japan has slowed down, so there are certainly clouds out there."But I think the markets did get a bit too gloomy last month."The Australian sharemarket was not overly expensive in historical terms, he said.Company profits and dividends were continuing to rise - although heavily geared property trusts were likely to come under pressure as interest rates rose.The Australian economy remained buoyant and despite expected rate increases and labour cost pressures, the outlook was "still pretty positive".Argo expected a sound full-year profit on income from its investments, Mr Patterson said, after announcing a 32.7% jump in half-year net operating profit to $93.1 million - excluding gains from the sales of long-term investments into takeovers.Those sales, including Adelaide Bank, Alinta, Rinker and Coles Group, raised $144 million before tax and took the bottom-line profit from $91.9 million to $196.8 million, enabling Argo to increase its interim dividend from 12? to 14?, payable on March 4.Chairman Chris Harris said Argo derived its income from Australian company profits and dividends and the outlook for these remained sound, despite a likely moderating of the economy. Argo had achieved a compound annual return of 14.3% for the past 10 years, including 14% in 2007, measured by net asset backing a share and dividends paid to shareholders. But following the market correction, January's net tangible assets will show a significant fall from the $8.17 a share on December 31. Argo closed at $7.94 yesterday, up 12?.
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