James Cooper, Morningstar
CPU is the only global share registrar administering more than 100 million shareholder accounts for over 14,000 corporations across 20 countries on five continents. With its scale, expertise, strong balance sheet and low capital requirements, CPU should generate solid long-term growth, while cyclical fluctuations in sharemarket activity may result in substantial shorter-term volatility. A high quality company, more prudently bought when equity markets aren’t bullish.
James Hardie Industries SE (JHX)
This building materials company has an excellent business model and a clear technology advantage over its competitors. This combination drives strong relative outperformance compared with its peer group. Its US market share continues to grow, although the current housing contraction impacts near term demand. JHX penetrates existing and emerging markets with traditional exterior products amid an increasing market share in interior products. Fundamentally, JHX is an attractive investment proposition.
Domino’s Pizza Enterprises (DMP)
In Australia, it still can still increase its store base by a third over the next few years. European growth is much more substantial, with potential to increase the existing store base by more than three times to over 1000 outlets in the next decade. Management is active in importing marketing strategies from the US and applying them to local trends in individual markets.
Caltex Australia (CTX)
Caltex is well placed to benefit as management has dramatically overhauled its balance sheet while improving operating efficiency, refinery utilisation and margins. The business is now on a more stable foundation. Caltex is only suitable for investors with above average risk tolerance as many factors influencing performance are out of management’s control.
Virgin Blue Holdings (VBA)
Virgin Blue has a strong brand, but it faces intense competition from Jetstar and Tiger Airlines. Both have more competitive cost bases than Virgin. As always, jet fuel prices remain a wild card, although fuel surcharges and more fuel-efficient aircraft soften the impact. Airline stocks are only suitable for investors who understand their high and specific risks.
Aristocrat Leisure (ALL)
Changing regulations and volatile gaming demand mean earnings can disappoint. A strong Australian dollar provides earnings headwinds. Competitive advantages include Aristocrat’s gaming machine skill base and distribution alliances. The challenge is to rebuild investor confidence after repeated downgrades. ALL is only suitable for higher risk tolerant investors seeking growth. It has mild corporate appeal, but is too volatile for conservative investors.
Steven Hing, Novus Capital
Groote Resources (GOT)
Groote Resources is currently exploring for manganese in the Gulf of Carpentaria. It’s main focus is under sea tenements, which it has pegged to the west of BHP’s world class Gemco manganese mine on Groote Eylandt. Gemco has a resource of 150 million tonnes, and Groote is hopeful of proving a JORC (Joint Ore Reserves Committee) resource similar in size by early 2011. The stock was priced at 79 cents on October 1, and I believe the price could rise if the results are good.
Woodside Petroleum (WPL)
The stock has moved above $44 and technically broken above some significant resistance. Fundamentally, the story remains strong as WPL has large reserves of LNG. With a carbon price back on the agenda, it appears LNG is the easiest and cheapest option to replace coal. WPL’s share price has been much higher than current levels, and a $55 target price isn’t out of the question. Shell also remains in the background as a possible suitor.
ASX Limited (ASX)
The share price fell in response to regulators opening the market to competition and granting Chi-X a licence to operate in Australia. Although volumes have been relatively light in recent months, it doesn’t appear to have impacted ASX’s profitability. Also, ASX has recently been able to reduce costs due to ASIC taking over its regulatory role. Volumes should begin to rise as market conditions improve.
Lynas Corporation (LYC)
Lynas is principally involved in the exploration and stgelopment of rare earth minerals. These minerals, such as titanium, tend to be used in batteries, electronics and super alloys, and there’s high demand in China. The share price has rallied from 50 cents to $1.36 (October 1, 2010) on the back of an increase in its resource estimates and a number of solid funding initiates, which place the company in strong shape.
Crown Limited (CWN)
Despite a strong full-year result in August, the stock has failed to excite, and I feel it’s fully priced at these levels. The group has recently expanded its flagship complex in Melbourne and is planning to expand its Burswood casino complex in Perth. However, with the likely implementation of more gambling regulations, particularly on poker machines, there’s enough to suggest that it’s time to lock in profits and shift elsewhere.
Supplies paper products to numerous countries, but the company announced another net loss of $225 million for the year to June 30, 2010. Challenges exist as to how the company will make a sustainable recovery. The share price decline has been significant over the past two years, but, even so, it’s declined from 80 cents in May 2010 to 45 cents on October 1. The chart suggests further falls.
Andrew Inglis, Shadforth Financial Group
Tatts Group (TTS)
Tatts Group provides a strong 9.1 per cent fully-franked dividend yield. Losing the Victorian gaming machine business in mid 2012 is a negative, but it’s factored into the share price. Expect Tatts Group to benefit from the NSW lottery acquisition and improvements in their wagering business. A strong balance sheet enables acquisitions. For example, as a contender for Tabcorp’s Victorian wagering business in 2012.
National Australia Bank (NAB)
The bank recently withdrew from acquiring AXA, thereby reducing risk and improving investor sentiment towards the stock. NAB is currently the cheapest bank on a share price to earnings ratio basis and offers the highest dividend and earnings growth forecasts.
Sims Metal Management (SGM)
The share price performance of this global metal recycler has been disappointing, but it’s starting to gain support. Sims offers excellent leverage to a global economic recovery, has no debt, and is the largest metals and electronics recycler in the world. More efficient equipment, the rapid growth in electronics recycling driven by legislative change and ongoing acquisitions are additional growth drivers.
Many frustrated investors are selling out. I recommend patience and waiting for a better opportunity to exit the stock. There are plenty of negatives, but the strong 9 per cent dividend yield supported by strong cash flow (albeit dividends are expected to reduce in coming years) and recent sales momentum from new business initiatives provide some hope of a recovery in its share price.
Tabcorp Holdings (TAH)
Sell Tabcorp and switch into Tatts Group. Tabcorp faces the prospect of losing its Victorian wagering business in the 2012 tender process, already in addition to its Victorian gaming machine business. Heavy capital expenditure on casinos is required to remain competitive with lavish new casinos in Asia.
Fleetwood Corporation (FWD)
Fleetwood make recreational vehicles, caravans and temporary accommodation. It’s benefiting from baby boomer travel and the accommodation needs of workers in the resources sector. It’s a cyclical business that is doing well, but with the share price at record highs, I think it is time to take some profits by halving your holdings.
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.