Washington H. Soul Pattinson and Company Limited (ASX:SOL) Managing Director, Todd Barlow provides a portfolio update and talks about the approach to investment that has enabled the company to outperform over decades.
Ortenzia Borre: Hello, I'm Ortenzia Borre for the Finance News Network and joining me is W.H. Soul Pattinson (ASX:SOL) Managing Director, Todd Barlow. Todd, welcome to FNN.
Todd Barlow: Thank you very much.
Ortenzia Borre: W.H. Soul Pattinson (ASX:SOL) is a significant investor, with interests across a broad range of sectors. What is your core investment approach?
Todd Barlow: WHSP (ASX:SOL) is a diversified investor across a range of different investments. We have a portfolio of private equity, public listed equities, property, and we have some very big positions in some companies. Our core approach is to partner with highly-prospective growth companies and partner with them as a supportive capital partner. Our approach is to be a long-term investor, which means not only that we'll hold for the long-term, but also that we'll identify long-term themes. We also try to be a value-focused investor and a kind of cyclical investor, and that means our best returns will be when we make investments when other people are being a bit more cautious.
Ortenzia Borre: And what weight do you put on investment trends and themes?
Todd Barlow: They're vitally important to us. Yeah, we need to distinguish between what's a short-term fad and what's a long-term investment theme. A lot of people invest in short-term fads and ride that momentum, and that's fine if you're a trader, but that's not our style. Our approach is to look at long-term investment themes that are going to play out over a long period of time. And when we look at long-term investment themes, we look at not only demographic trends, but also what Australia is good at. So we try to identify industries where Australia has a globally competitive advantage. Yeah, we think macro trends are vitally important. It's really difficult to grow a business when the market's shrinking.
Ortenzia Borre: Now to your portfolio, can you give us an update?
Todd Barlow: Sure. Well, across the three major assets, the big news, I guess, is the recent Federal Court decision to allow the merger of TPG (ASX:TPM) and Vodafone. We think that that was a really great decision for us. We think it's great for the company, we think it's great for the industry. Those companies will be highly synergistic and they'll also be able to compete aggressively with the major telcos. So that'll be really good for our investment in TPG (ASX:TPM). Brickworks Limited (ASX:BKW) is also performing really well on the back of its move into the US market. It's made a few acquisitions there and it's also developing out its industrial property portfolio, which is a very good move. And the last major asset we have is New Hope Corporation Limited (ASX:NHC) and it's a little bit challenging at the moment with coal prices and negative sentiment. But we hope that in the near term, we'll get some approvals for our Acland asset and we should see some upside there.
Ortenzia Borre: As you've mentioned, your portfolio has always benefited from diversification. What's been the stellar performances in the last year?
Todd Barlow: Well, a couple of years ago, we were in the fortunate position where all of our major investments were performing really well and it's always been the case that, because of the uncorrelated nature of our major investments, we generally had a couple performing well and one performing not so well, but a few years ago, they were all going the right direction, which was fantastic. But in the last 12 months, as I said, New Hope Corporation Limited (ASX:NHC) coming under a little bit of pressure with falling coal prices and negative sentiment towards coal. But I think that the merger of TPG (ASX:TPM) and a strong performance out of Brickworks (ASX:BKW) should give us a boost in the portfolio.
Ortenzia Borre: Todd, what does Washington H. Soul Pattinson (ASX:SOL) yield at current prices and how would it fit in within a domestic portfolio?
Todd Barlow: Well, our current yield is about three and a half per cent grossed up, which is not the best yield in the market. But I think what's more important about our yield is the consistency of our dividend and our approach is to try and increase steadily our dividend every year, so that people have some real certainty about what our dividend looks like. So interestingly, of the 500 or so companies in the All Ordinaries Index, there's only been two that have been able to increase their dividend every year for the last 20 years. And we think that our portfolio is in good shape to be able to continue that.
Ortenzia Borre: No doubt some fantastic news, as you've mentioned, with the recent court ruling. What's the outlook for the next six months?
Todd Barlow: Well, we're very cautious at the moment. Asset prices are very high. So this is not the market for us to be aggressive. We have made a few new investments into some new industries like retirement living, agriculture, and we're continuing to roll out some further investments in financial services, where we see a lot of upside. But generally, I think the next six months, hopefully we get a little bit more certainty around our major assets, particularly in relation to the TPG-Vodafone merger, and hopefully we get some approvals in relation to our Acland asset in Queensland, the coal mine there. But I think we're just playing it cautiously and waiting for our next opportunity.
Ortenzia Borre: Wonderful. Now is there anything else that you'd like to add?
Todd Barlow: No, thank you very much. It's been fantastic.
Ortenzia Borre: Lovely. Thank you so much.
Todd Barlow: Thank you.