2 ideas in 200 words #4
Trump Tariffs are wreaking havoc; 2 stocks to consider
Whitehaven Coal (ASX: WHC) looks like a classic case of ‘catching a falling knife’ - or is it just buying straw hats in winter? Short term, who knows? But long term, I see excellent risk-return value at ~$4.50, with a strong balance sheet and aggressive buybacks.
Lovisa (ASX: LOV), on the other hand, is a great business facing a short-term challenge. Trump’s tariffs will bite, especially with 22% of stores in the US. The global growth story is intact, but for now, patience is key. Here’s my take on both.
Long-term Buy
Whitehaven Coal Limited (WHC)
‘Catching a falling knife’ or ‘Buying straw hats in winter’? Which adage will prove correct in the case of WHC? The answer in the short term is unknowable, but long term we have a high degree of confidence that buying WHC for ~$4.50 is an excellent risk-return investment. During the week, WHC completed the sale of 30% of Blackwater for US$1.08bn (A$1.7bn). This positions the company in a strong position to fend off depressed coal prices and capitalise on the inevitable recovery. We rate the management team and are strong supporters of their aggressive buyback approach.
Wait
Lovisa Holdings Limited (LOV)
The Trump tariffs are likely to have a notable impact on LOV. As at the end of CY24, 209 of the 943 stores (22%) were in the US. However, LOV has just opened its first store in its 50th country. Whilst the US is expected to remain the largest single market, the global opportunity for store and sales growth is substantial. LOV has a strong brand, early mover advantage, economies of scale and a culture of rapid innovation. There will be a time to aggressively buy this story. However, at present, we need to be patient and allow the impact of the tariffs to wash through.
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Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.
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Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.
Expertise
Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.
Expertise
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