Diverse opportunity
Seven Group Holdings Limited (ASX:SVW) managed by well-respected majority shareholder Kerry Stokes, is a $6bn diversified industrial company offering exposure to numerous cyclical markets including mining and construction through its wholly-owned WesTrac (WA, NSW, and ACT’s authorised Caterpillar machinery dealer) and Coates Hire (machinery and equipment hire), as well as its newly acquired 20% stake in building materials maker Boral Limited.
Resilient commodity prices and increased construction (both housing, which recent data suggests is rebounding ahead of schedule, and infrastructure, boosted by the Federal Government’s stimulus budget) support continued performance in these divisions, offsetting slightly weaker conditions for SVW’s oil and gas investments (28% stake in listed Beach Energy Limited) and its challenged media division (40% stake in listed Seven West Media).
Overall, however, SVW delivered better than expected Full Year results in August and we believe conditions should see this strong operational execution continue through to 2021.
After rallying in the wake of the impressive annual results, SVW shares have recently dropped more than 10% from their October highs amidst a global market pull-back. We see attractive value in a well-liked company with excellent management and quality diversified assets positioned to benefit from both stimulus and the eventual economic recovery from the COVID-19 induced recession.
US election resolution, combined with both the Reserve Bank of Australia and US Federal Reserve standing by to deliver further stimulus at policy meetings in coming days, we believe it is worthwhile putting a little more cash to work ahead of what has historically been a strong performance period heading into the end of the calendar year.
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