Ben Potter, RBS Morgans
JB Hi-Fi (JBH)
Market sentiment is certainly against discretionary retailers at present, and weakness presents an opportunity to buy growth retail stocks, particularly those with a store roll out program. JB Hi-Fi is the pick of these stocks and it will again boost growth with a further 13-to-15 stores a year.
Westfield Group (WDC)
This retail property giant offers high leverage to improving retail and consumer conditions in the US, where we are also seeing property values stabilising. With more than $5 billion in available funds, management is well placed to take advantage of future acquisition opportunities.
AMP has weathered the global financial crisis well and should now benefit from a cyclical upswing and potential changes to superannuation guarantee contributions. As a result of the Cooper Review, AMP has announced a restructuring of super and pension products that will simplify the number and generally lower costs.
APA Group (APA)
APA recently hosted a two-day site visit to several of its NSW assets and demonstrated it has a quality team and a raft of opportunities in the gas transmission space. A dividend yield of 8.55 per cent supports the current share price.
Aquila Resources (AQA)
Aquila is stgeloping a suite of material assets, including coking coal, iron ore and manganese projects. We see long term upside from continuing resource expansion at its stgelopment projects. However, it’s trading more than 10 per cent above our discounted cash flow valuation and we remain unclear as to what extent asset sales will meet capital expenditure requirements.
REA Group (REA)
It appears Google is moving more aggressively into the real estate advertising market. We doubt Google will threaten REA’s number one position, but it may disrupt the market and affect REA’s ability to push through significant price rises. Strong growth already seems factored into the share price.
Andrew Inglis, Shadforth Financial Group
Woodside Petroleum (WPL)
Australia’s leading oil and gas company, offering long life quality assets, is on track to start producing from its 90 per cent owned Pluto LNG project from early 2011, which is forecast to increase profit by 140 per cent over the next two years. Pluto and the further stgelopment of Pluto LNG trains will be major catalysts for WPL.
JB Hi-Fi (JBH)
This electronics giant has been out of favour mostly due to the resignation of its long- term chief executive earlier this year. This provides an opportunity to buy into a high quality retailer. JBH has a management succession plan, strong balance sheet and excellent ongoing organic growth prospects from its store roll out program. The popularity of iPads and iPhones also helps.
OZ Minerals (OZL)
South Australian copper miner OZ Minerals has $1 billion in cash, is forecast to produce a $320 million profit in 2010 and has strong copper/gold exploration prospects. OZL is putting runs on the board after a chequered history.
This education provider has been out of favour since the introduction of stricter immigration rules for overseas students and the fallout from racial attacks on foreign students in Australia. The company business model provides strong cash generation, it has low capital requirements and there are significant barriers to entry into many of the universities where they have established on-campus colleges.
The share price of this medical products maker has done very well in a down market, and recently hit an all time high of $7.99. I recommend investors reduce holdings by half and take some profits. Otherwise, RMD is in a strong financial position with an excellent sales outlook for its sleep apnea products.
White Energy Company (WEC)
Since recommending this coal technology business as a buy mid last year, its share price has risen about 60 per cent and is at eight-year highs. Given the speculative nature of the stock, I recommend taking some profits by halving holdings. Otherwise, recent stgelopments look positive.
Mark Goulopoulos, Patersons Securities
QBE Insurance (QBE)
Concerns over exposure to the Gulf of Mexico oil disaster have contributed to significant share price weakness in recent weeks. A recent investor update confirmed exposure was within expectations and while business conditions are challenging, we believe there’s clear value here at the current share price.
Like QBE, this engineering services company has also been impacted by negative sentiment surrounding the Gulf oil tragedy. The likely medium term response is tighter energy industry regulation, which will lead to further work for engineering and services companies. As a result, WorleyParsons should benefit over the medium to long term.
Commonwealth Bank (CBA)
Its predominant domestic loan book means CBA is the lowest risk of the major banks. This has attracted a premium valuation, which became excessive in recent times. The share price correction in May has reduced this premium and the bank is now trading at fair value again.
Recent results indicate the company’s growth rate has slowed on past years. With an efficient operating business, the challenge is to find the next growth catalyst. The recent entry into the hardware market may provide this growth, but only time will tell.
Santos is trading at a very high valuation due to forecast growth from its Gladstone LNG project. With coal seam gas to LNG an unproven process amid a significant lead time to first production, the valuation premium is unjustified. Better value exists for exposure to the LNG sector.
Insurance Australia Group (IAG)
An increase in UK claims caused a recent profit downgrade. Although the share price reflects this fall in profitability, IAG carries higher risk as an insurance investment so we much prefer QBE.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
Other articles in this week’s newsletter