Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
James Hardie Industries PLC (JHX)
Chart: Share price over the year
This building products maker has rallied strongly in the past few months as the market starts to factor in economies gradually opening up sooner than expected. The company has a strong balance sheet and is expected to maintain a strong earnings profile. We expect JHX to rally towards the high $20 levels in coming months. The shares finished at $21.25 on May 14.
Harvey Norman Holdings (HVN)
Chart: Share price over the year
The retail giant was beaten down to the point it was oversold. It fell from a 52-week high of $4.87 on February 19 to a year low of $2.325 on March 23. Since then, bargain hunters have moved in and the stock finished at $2.79 on May 14. We expect the stock to keep recovering as consumer confidence grows in line with an easing in Coronavirus restrictions.
HOLD RECOMMENDATIONS
Macquarie Group (MQG)
Chart: Share price over the year
We have been bullish about this financial services provider’s prospects for several weeks and the share price has delivered. The stock recently made a significant break above $100, which is a positive sign from a charting point of view. On the back of a well received full year result in early May, we expect good buying support to continue. The stock finished at $103.16 on May 14.
Magellan Financial Group (MFG)
Chart: Share price over the year
This global fund manager continues to trade well compared to the broader market. Funds under management have held up well against expectations and this has resulted in additional buying support. The shares fell from a 52 week high of $74.91 on February 14 to a year low of $30.10 on March 23. The stock finished at $53.93 on May 14.
SELL RECOMMENDATIONS
Coles Group (COL)
Chart: Share price over the year
Grocery stockpiling, in response to the Coronavirus, was positive for this supermarket giant. As stockpiling has waned, we expect earnings to revert to its longer term trend. As the economy gradually opens up, we expect more investors to shift funds from companies with defensive earnings, such as Coles, to more risky high growth companies offering potentially faster returns.
Telstra (TLS)
Chart: Share price over the year
The company’s defensive earnings can cushion share price falls in uncertain times. However, in our view, the telecommunications giant is a low growth company, and investors will look elsewhere, particularly on signs of any improvement in the economy.
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Angus Geddes, Fat Prophets,
BUY RECOMMENDATIONS
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year
The pizza giant has performed well during lockdown, courtesy of its takeaway and delivery services in Australia and overseas. Affordable prices attract cautious spending foodies. A strong store rollout is still likely to occur during next few years. DMP benefits from defensive earnings. In this challenging retail environment, it may also benefit from potential downward pressure on commercial rents.
Evolution Mining (EVN)
Chart: Share price over the year
This miner offers quality exposure to what we believe will be a continuing gold bull market, further fuelled by inflation from unprecedented global stimulus. Evolution recently delivered a good quarterly update, with output of 165,502 ounces. Annual production guidance of 725,000 ounces is retained. Forecast all-in-sustaining costs of about $A990 an ounce should generate strong margins. The acquisition of the Red Lake gold mine in Canada is also timely.
HOLD RECOMMENDATIONS
Spark New Zealand (SPK)
Chart: Share price over the year
The telecommunications giant has been resilient during the lockdown, and also reported a solid first half result. Connectivity has been critical during stay-at-home orders in New Zealand and data usage has increased. We’ve been encouraged by recent momentum in Spark’s key mobile and cloud segments. We expect growth to resume on the other side of the crisis, as 5G is rolled out and companies seek to accelerate the shift to an online model when they can.
Nufarm (NUF)
Chart: Share price over the year
This crop protection company has benefited from improving weather conditions in Australia. It has a strong global footprint. It also has an exciting canola business. The company reported that first shipments of omega-3 canola oil are scheduled for this year’s final quarter, and the outlook for demand is strong. Nufarm plans to double oil production this year for sales in 2021.
SELL RECOMMENDATIONS
Afterpay (APT)
Chart: Share price over the year
Shares in this buy now, pay later company rose from $29.16 on May 1 to $36.10 on May 4 after it was announced that Chinese technology giant Tencent Holdings had bought a 5 per cent stake in APT. The stock rose from $8.01 on March 23 to a 12 month high of $43.68 on May 11. The shares closed at $41.65 on May 14. We believe the stock is fully valued. Consider taking some profits. In our view, APT is one for the brave with an appetite for risk.
Seek (SEK)
Chart: Share price over the year
While we’re in the ‘V’ shaped recovery camp, it’s hard to see a strong rebound in job listings any time soon as businesses come to grips with life during and post a pandemic world. This presents challenges for Seek, which, in our view, aren’t reflected in the share price. The shares closed at $17.14 on May 14.
Jabin Hallihan, Morgans
BUY RECOMMENDATIONS
JB Hi-Fi (JBH)
Chart: Share price over the year
Government cash handouts and superannuation withdrawals have fuelled sales in this consumer electronics giant. The company is benefiting from more employees and students working from home. JB Hi-Fi reported a 2020 third quarter sales increase above 11 per cent on the prior corresponding period after selling more technology products and home appliances. The company’s chain The Good Guys reported a 13.9 per cent increase.
Treasury Wine Estates (TWE)
Chart: Share price over the year
The share price of this wine producer doesn’t reflect value in a potential demerger of the iconic Penfolds brand and associated assets into a separate listed ASX entity by the end of calendar year 2021. Penfolds only accounts for about 10 per cent of TWE’s volumes, but this high margin business delivers more than half of its profit. Consider buying on share price dips.
HOLD RECOMMENDATIONS
ResMed (RMD)
Chart: Share price over the year
The medical device maker delivered a strong third quarter result. The company is hugely profitable and justifies a core holding within investor portfolios. However, after a massive 12 months of outperformance and a lot of good news priced in, it may be prudent to trim into strength.
Ramsay Health Care (RHC)
Chart: Share price over the year
The Coronavirus took precedence and led the private hospital operator to suspend most elective surgery. RHC recently raised $1.2 billion after completing an institutional placement. Eligible shareholders can participate in the share purchase plan, which is expected to close on May 20. Although elective surgery will gradually return to pre-Coronavirus levels, it will take time. But RHC is a quality company that should reward investors going forward.
SELL RECOMMENDATIONS
Bega Cheese (BGA)
Chart: Share price over the year
In the absence of recent Coronavirus updates, we’re concerned about the earnings outlook after falls in global dairy prices, which may continue to be pressured. The shares have performed relatively well during the pandemic, so consider taking profits. The food company is trading well above of our valuation of about $4 a share. The shares were trading at $4.95 on May 15.
Seek (SEK)
Chart: Share price over the year
The employment market is in turmoil and unlikely to return to pre-pandemic levels for some time. We’re concerned about the impact on revenue and SEK’s relatively high debt levels. The company reported net debt of $895 million at December 31, 2019. Consider selling most of your shares, but a hold a small position, as we believe the company may potentially raise capital.
The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing.
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.
