The Washington H. Soul Pattinson & Co Ltd (ASX: SOL) share price has been something of a quiet performer over the past 2 months. Since 19 August, the Soul Patts share price has risen from around $20.80 to yesterday's closing price of $26.02. That's a rise of 25%. Not a bad return for 2 months of waiting, especially since the S&P/ASX 200 Index (ASX: XJO) is 'only' up by 2.7% over the same period.
So what's behind this rather sudden rally? And, perhaps more importantly, are Soul Patts shares a buy at these new levels?
What's been moving the Soul Patts share price?
The most important thing to understand about Soul Patts is that it's really structured more like a listed investment company (LIC) these days, rather than a 'traditional' share like say Woolworths Group Ltd (ASX: WOW). Unlike most companies, the vast majority of Soul Patts' earnings come from its investment portfolio of ASX shares and unlisted assets. Sure, the company still runs a few pharmacies (its original modus operandi). But in reality, these are rather inconsequential compared with Soul Patts' investment portfolio.
Let's examine Soul Patts' largest portfolio positions. The company owns:
- a 25.3% stake in TPG Telecom Ltd (ASX: TPG)
- a 43.9% stake in Brickworks Limited (ASX: BKW)
- a 50% share of New Hope Corporation Limited (ASX: NHC)
- a 19.3% stake in Australian Pharmaceutical Industries Ltd (ASX: API)
- an 8.6% share of BKI Investment Co Ltd (ASX: BKI)
- a 22.6% stake in Clover Corporation Limited (ASX: CLV)
Over the past 2 months:
- the Brickworks share price is up 12.7%
- the TPG share price is essentially flat.
- New Hope shares are down 11.5%
- Australian Pharma shares are down 5%
- BKI shares are essentially flat
- and Clover Corp shares are down 10.5%
Of these investments, the 43.9% stake in Brickworks is by far the largest. Since Brickworks has a market capitalisation of $2.91 billion on current prices, the 12.7% jump in the Brickworks share price would have been partly responsible for Soul Patts recent gains.
Additionally, we also know that some of Soul Patts' board members have been heavily buying shares in recent weeks too. According to ASX filings, directors Thomas Millner and Robert Millner acquired 100,000 additional Soul Patts shares between them from 6 to 9 October. Those shares are worth more than $2.6 million today. That wasn't the only tranche of shares purchased recently either – both gentlemen were also buying in late September as well.
Investors generally like to see company directors put their money where their mouths are, so I'm sure these moves helped push up the Soul Patts share price as well.
Is Soul Patts a buy today?
Personally, I love Soul Patts. It's one of the most diverse companies you can buy on the ASX in my view. Further, its record-breaking (and still uninterrupted) 20-year streak of annual dividend increases is unbeaten on the ASX today. I don't think the company is as compelling a buy as it was a few months ago, but I would still pick up shares today for a long-term 'buy-and-hold' bottom drawer investment.
