The share price of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has risen by around 40% over the past three months. Is it still a buy?
What has happened?
Sometimes it’s hard to know exactly why a share price moves up or down because each trade is between two different investors. Each person in the trade will have a different reason for buying or selling.
There have been some very positive news updates from the COVID-19 makers in recent weeks. We learned that the BioNTech-Pfizer vaccine as well as the Moderna vaccine have an effective rate of at least 90%. The Oxford University-Astrazeneca vaccine also has an effective rate of up to 90%.
COVID-19 has obviously impacted the local and global economies significantly during 2020. If that can be taken out of the picture then the next few years would look a lot rosier. Whilst many tech shares have surged over the past eight months because their growth has been unaffected (or accelerated) during COVID-19, other ‘real economy’ businesses suffered.
As an investment conglomerate, WHSP has plenty of investments in businesses that were affected. Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), New Hope Corporation Limited (ASX: NHC), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI) are just some of the businesses to fall heavily in COVID-19. But these are now surging higher.
Interest rates
I think another reason why WHSP is going up so much is because investors is searching for yield now that the risks, in Australia at least, are a lot less. WHSP has the best dividend record on the ASX because it has increased its dividend every year for 20 years in a row. That income certainty is something that investors really appreciate in retirement.
Is the WHSP share price a buy?
I’ve been writing for a long time about WHSP as a solid income option and I’m glad that many investors are attracted to it. However, I think the WHSP share price has gotten a bit ahead of itself in the short term. I believe that WHSP has many years of growth ahead of it, but it’s important to pay attention to the value you’re getting. At around $22 or $23 I think it’d be a good price to buy WHSP shares. But at around $29 I think there are better value ASX dividend shares as ideas – for starters I think Brickworks looks like better value.
