It’s been a turbulent start to 2016, making it more important than ever that your investment decisions are well-informed and take into account investing fundamentals, technical elements and market factors that can affect a stock’s performance.
has just closed its position on this blue chip stock and locked in 42.3% return in 6 months. Our analysts were focused on finding stocks with the combination of excellent fundamentals and positive catalysts throughout the year to drive growth and increases in profits. Despite the market turmoil we achieved this, and you can too.
Auckland International Airports
is removing Auckland Airports from its portfolio. We currently hold a 5% weighting in airports, but given the recent price developments we now see the current upside investment case as fully priced. We initially recommended AIA in September 2015 at a price of NZ$4.95. We have now captured 42.2% return including dividends. While airports investment thesis remains intact, we do not see value in holding AIA at current prices at a P/E of 40.3x times. Should the share piece revert to more ‘realistic’ levels we would consider re-adding it back to the portfolio.
Further, regulatory clouds remains a major concern for AIA. The Commerce Commission is currently undertaking a full review of how the airport earns its profits and what is considerable a ‘reasonable’ profit, given the lack of competition in the airport space. Should they find that current profits are in excess of what is deemed reasonable, it would provide a major headwind for AIA going forward.
We continue to like the overall thematics of AIA with its exposure to tourism. However, we are taking profits because we have found stocks that offer even better value at the current juncture. Continued improvement in international passenger numbers and significant growth in retail revenue is continuing to provide momentum for the sector. The combination of substantial airline capacity growth coupled with reasonable economic conditions and a lower NZ$ should underpin another year successful year for tourism.
