Here’s a sentence you don’t expect to see, brick maker and land-banking play, Brickworks Limited (ASX: BKW) was up over 27% yesterday. BKW was the first stock I ever bought many years ago. Unfortunately due to being young and stupid back then I no longer hold it.
As mentioned, BKW makes bricks. This is your typical Peter Lynch boring, overlooked stock. It makes bricks and when it uses up the resources from one of its quarries it fills it in and either sells or develops the land. So, why would it increase by 27% in a day?
56 years in the making
For the last 56 years BKW has been tied up with a cross shareholding in Washington H Soul Pattinson & Company (ASX: SOL) and that is finally coming to an end. The cross share holding, which saw BKW own a chunk of SOLs and SOLs own a chunk of BKW was put in place to prevent corporate raiders. But many thought it also locked up a whole lot of value as well. Over the years many have tried to agitate and encourage the boards to sell without success.
Yesterday, in news no one saw coming, BKW is set to merge with SOLs. After everything is done, the merged entity will carry the SOLs name and ticker code. As mentioned, the announcement sent the BKW price up 27% and the SOLs price up 16%.
The missing piece in portfolio construction
Todd Barlow will be the CEO of the merged group and I found today’s Chanticleer article in the AFR really interesting, especially coming off the back of our last podcast with Todd. This podcast was in September last year and portfolio construction was front and centre in Todd’s mind. At the time he had just presented a paper to the board on portfolio construction.
As the Chanticleer article points out, the brick making business is one thing, but the real highlight is the vast property portfolio across the east coast of Australia and in Pennsylvania.
This addition greatly increases SOLs property exposure, and high quality property at that. This merge would have been a long time coming and one would think that board paper on portfolio construction had a big fat property-shaped gap.
Markets overnight
I am going to be honest with you…I can’t recall if trade tensions are increasing or simmering. Either one, it’ll most likely flip again tomorrow. Overnight the US markets were up modestly
- S&P 500 = +0.41%
- Nasdaq = +0.67%
- Aussie dollar up 1% to 64.97 US cents
- Iron down 0.4% to $95.30 US a tonne
Tomorrow I’ll be back with a rant about active vs passive. I hate black and white debates and something on a well-known forum-like website got my goat yesterday and I’ll share that with you here.
In the meantime, if you’d like to get in touch with me you can use the chat in the bottom right, jump across to the Rask Community or jump across to the Rask Invest site too. Catch you tomorrow.
