BHP franking credits appealing: David Poppenbeek, K2 Asset Management

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BHP franking credits appealing: David Poppenbeek, K2 Asset Management. Over the past 5 years the ASX 200 Industrials index has delivered a total return of 108% whereas the ASX 200 Resources index has generated just 6%. Therefore we would expect that an aggressive bet favouring industrials over resources today will be considerably less productive in the future. The K2 Australian fund has been underweight resources since August 2011. We remain underweight however our next move will be to up-weight. Our favoured resource stock is BHP. We are attracted to BHP's diversity of high margin products, its near $13 billion of franking credits and management's commitment to maintaining strict financial disciplines. As a result we feel that BHP is determined to deliver superior capital efficiency to its peers. The most logical step would be to distribute a great share of its profits; all shareholders would welcome additional tax effective dividend income.


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