17 April 2024
Elston Quarterly Portfolio Update Q2 2024
In this video, Portfolio Manager David Seager provides his perspective on the key questions discussed in the recent quarterly asset allocation meeting. Read more
12th December 2019 - Asset Management
The stock in focus this month is Lendlease Group (LLC). LLC is a property and infrastructure group with a worldwide footprint comprising operations in Australia, Asia, Europe and the Americas. Until recently the company comprised four divisions: development, construction, investment management and engineering and services.
LLC has provided a good example of why it is important to take advantage of the opportunity the market periodically provides to purchase high quality companies at excellent prices when short term problems impact investor sentiment and result in sell offs.
The LLC share price took a hit in the third quarter last year as problems surfaced on two infrastructure projects in the Engineering and Services division. As a result of overruns and writedowns the division posted a loss of $337 million and despite the issues being contained to those projects, the decision was made to sell off or close down the Engineering and Services division. While at the time we saw this as perhaps an overreaction to isolated issues and divesting a previously profitable division may not have been entirely necessary, the decisive reaction was seen as drawing a line under what became a short-term issue and allowed the company to concentrate on higher margin, less risk intensive parts of the organisation.
While not popular at the time, we took the opportunity to increase the portfolio weightings to LLC given the long term track record of excellent performance and the relative expensiveness of other property sector offerings. This was rewarded when in July LLC announced it had entered into a partnership with Google to develop a project in the San Francisco Bay area of around $20 billion. This is a deal that dramatically transforms the company’s pipeline of projects and substantially de-risks future growth. As a result, the company has re-rated from the current sell off and is now positioned well as further details of the project are released in the future.
If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.
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