The Goodman Group (ASX: GMG) is the largest industrial property group on the ASX and investors looking to preserve their wealth might wonder whether it would be a good addition to their portfolio.
I would invest in the Goodman Group for the following reasons:
- Founder led. Greg Goodman, the company’s co-founder is also its CEO. I prefer investing in founder-led businesses as they tend to take a longer-term view and it aligns your interests with theirs. That philosophy would have paid good returns had you invested with Frank Lowy at Westfield Corp Ltd (ASX: WFD), Jeff Bezos at Amazon and Mark Zuckerberg at Facebook.
- Amazon effect. Whilst Amazon is disrupting many industries and in turn impacting share prices of companies such as Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH); Goodman is a beneficiary of this trend. Amazon is Goodman’s biggest client and other e-commerce operators make up a significant portion of Goodman’s rent roll.
- Significant cash pile ready to be invested. Goodman recently announced as part of its half year results that its gearing remained low at 6.4% with $3.3 billion of liquidity available for investment and this is sitting predominantly in cash. Should there be major movements in the global property market, Goodman will be ready to move in.
- Large global portfolio. Goodman has over $34 billion in assets under management spread across 16 countries in Europe, the Americas and the Asia Pacific region.
There are risks to every investment and it’s no different with Goodman. The main risk for Goodman relates to interest rates. If interest rates rise at a faster-than-expected pace, this could affect the Goodman share price which benefits from the current low yield environment. Investors have been moving away from bonds and into property which has higher yields.
Overall, I think the Goodman Group could be a good addition to a well diversified portfolio looking to preserve wealth.
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Returns As of 6th October 2020
You can follow Kevin on Twitter @KevinGandiya.
The Motley Fool Australia has recommended Westfield. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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