Should You Buy Transurban Group at This Share Price?

What happened to the TCL share price?

Transurban Group [ASX:TCL] gained 0.78% by early afternoon trading today. The stock was trading at $10.30 a share. The Aussie market is significantly higher today. Market observers say it is due to bargain hunters stepping into the market. Investors are betting on further stimulus measures from China as the economy continued to show contractions in its manufacturing sector.
The latest HSBC PMI numbers showed another contraction, which marks the third contraction in a row. Will there be more stimuluses from China? Yes, there will be. However, investors need to be aware of the diminishing effect further cuts will have on the equity market. The Chinese economy will bottom in 2015 with the help of stimuluses. This will also mean it is the bottom for the commodities market.

Why did this happen to TCL shares?

Transurban Group has been a growth stock for almost five years now. Its share price has presented a stable expansion path. The consensus rating on the stock is ‘outperform’ and the earnings outlook is positive. What this means is that the stock will continue to be a growth stock in the foreseeable future.

What now for TCL?

TCL struggled between 2007 and 2009. The stock bottomed during the worst of the GFC and has been reflating in a steady upward trend. The last ten years have been smooth sailing for the stock. It allowed a phenomenal amount of return if some leverage is used (a maximum leverage of 1.8times is recommended).
A $20,000 investment in the year 2000, at a leverage of 1.8 times and a maximum drawdown of negative 50% would have given you $3.5 million today. Right now, the stock remains a great growth stock on a trading basis. Return is positive and continues to reward any investor’s reinvestments in the stock.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor


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