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Chris Conway, Marcus Today

BUY RECOMMENDATIONS

National Storage REIT (NSR)

Chart: Share price over the year

It’s stable, some might even say boring, but it makes money. At the recent results in late August, NSR lifted revenue to $152.2 million, up from $135.3 million a year earlier. The current one year forward dividend yield is 5.5 per cent. There are also opportunities for growth via increasing demand and acquisitions. In our view, NSR is a quality income play, with a sustainable yield in an industry that is expected to grow between 1.5 per cent and 2 per cent per annum.

Elders (ELD)

Chart: Share price over the year

The share price of this agribusiness has pulled back recently, but Elders has a history of reporting well, so buying now potentially provides an opportunity to get set for value. The stock was recently trading around a 20 per cent discount to the consensus target price. The recent acquisition of Rural Retailers means ELD now has a presence in the wholesale channel, filling gaps in Queensland and New South Wales and increasing its exposure to the high margin animal health sector.

HOLD RECOMMENDATIONS

Inghams Group (ING)

Chart: Share price over the year

The share price of this poultry producer has fallen from a 52 week high of $4.86 on February 6 to trade at $3.08 on October 31. However, ING recently reiterated guidance at its AGM, talking up poultry demand and a favourable industry structure. The five year strategy is compelling, although a little too early to bank on.

JB Hi-Fi (JBH)

Chart: Share price over the year

The recent trading update was impressive, particularly as a lot of other retailers are reporting tough conditions. Like-for-like sales growth improved between July and September for JB Hi-Fi Australia and its subsidiary The Good Guys. Further upgrades may emerge if current momentum continues. At this point, the stock appears fully valued, up about 40 per cent in fiscal year 2020.

SELL RECOMMENDATIONS

Cochlear (COH)

Chart: Share price over the year

It’s difficult betting against this hearing implants maker because it’s been such a remarkable performer over a long time, but it appears overvalued at current levels. COH lost market share in fiscal year 2019, as it lagged in introducing an MRI (magnetic resonance imaging) compatible implant. There isn’t enough industry growth in cochlear implants at this point to support the current share price, in our view. The shares were trading at $212.21on October 31.

Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

The recent investor briefing was well received by the market. The company’s growth outlook across Europe and Japan is solid. However, the inflection point for these regions may still be several years away and will probably require more investment. In our view, more guidance is needed as to Australasian earnings in fiscal year 2020. The share price has enjoyed a strong run up since early August, so now may be the time to consider taking some profits.

Jabin Hallihan, Morgans

BUY RECOMMENDATIONS 

Westpac Bank (WBC) 

Chart: Share price over the year

WBC remains our preferred major bank. The outlook, particularly based on housing credit growth, has improved post the banking Royal Commission, in our view. Also of particular interest is whether the bank sustains or cuts its dividend when it releases its full year results on November 4. If the shares fall, buy on weakness.

Woodside Petroleum (WPL) 

Chart: Share price over the year

The share price of this oil and gas company looks cheap based on fundamentals. It was recently trading at a discount of more than 20 per cent to its 12 month high. The sharemarket seems too pessimistic about the outlook for oil and gas prices. We’re also forecasting an attractive grossed up dividend yield of 8.8 per cent in the next year.

HOLD RECOMMENDATIONS 

Cleanaway Waste Management (CWY) 

Chart: Share price over the year

The company recently posted a second earnings warning. Growth appears subdued for the next year and the outlook remains challenging. However, the stock appears to be oversold – at least in the short term. The shares have fallen from $2.13 on October 24 to trade at $1.83 on November 1.

National Australia Bank (NAB) 

Chart: Share price over the year

In our view, the banking environment is improving. We expect profit margins to be broadly stable when the bank reports its full year results on November 7. The company was recently trading on a forecast dividend yield of 8.1 per cent. Wait for the response from investors after the company releases its results. The shares may pull back into buy territory.

SELL RECOMMENDATIONS 

Bega Cheese (BGA) 

Chart: Share price over the year

Difficult trading conditions persist due to the continuing drought. Falling milk supplies and excess manufacturing capacity are continuing to cause fierce competition for the company. Softening demand for products in key export markets is expected to impact earnings in fiscal year 2020.

Tabcorp Holdings (TAH) 

Chart: Share price over the year

Sportsbet and BetEasy have announced a merger in an all share transaction. If successful, this will make the combined business the largest online betting company in the world. Global consolidation of the gambling industry is creating serious competition for Tabcorp. Market conditions are already tough, and we view this merged competition as a negative for TAH.

Julia Lee, Burman Invest

BUY RECOMMENDATIONS

Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

While the past few years have been challenging, the outlook is brighter. A record number of stores in France should open this financial year. The outlook for Japan appears strong and Australia looks to be improving. The outlook should underpin a stronger share price unless any negative news emerges. The shares have enjoyed a good run since early August, rising from $36.66 on August 5 to trade at $50.945 on October 31.

JB Hi-Fi (JBH)

Chart: Share price over the year

First quarter sales were strong as the consumer electronics giant approaches the all important Christmas period. If sales growth continues, guidance may be upgraded. JBH should benefit from shoppers with more money to spend after the positive impacts of macro stimulus and tax cuts. Also, housing prices have stabilised, as opposed to falling, which should provide consumers with more confidence.

HOLD RECOMMENDATIONS

Commonwealth Bank of Australia (CBA)

Chart: Share price over the year

A falling interest rate environment pressures net interest margins and growth, but the CBA is good at retaining customers. In our view, the bank is more likely to sustain dividends given its strong capital position, which could also lead to a capital return at some point.

National Storage REIT (NSR)

Chart: Share price over the year

A dividend yield above 5 per cent should support the share price. The company is forecasting underlying earnings per share growth above 4 per cent year on year. An increase in occupancy and rates would result in investors taking a more bullish stance towards the stock. If earnings per share growth fell below 4 per cent, then we would expect the stock to be re-rated downwards.

SELL RECOMMENDATIONS

Bega Cheese (BGA)

Chart: Share price over the year

The drought is having an impact. Farmers are leaving the dairy industry, so securing enough milk is more difficult and leads to a higher cost base for BGA. Higher feed prices exacerbate difficult industry operating conditions. Generally, the time to buy agricultural stocks is during a drought. But this drought is lasting longer than expected, so we would wait for rain.

Australian Agricultural Company (AAC)

Chart: Share price over the year

AAC is a vertically integrated beef company. Drought and floods have led to higher feed costs, weaker cattle prices and attrition. More favourable conditions are likely to emerge in 2021/22, but until then I expect weakness to persist. I would be happy to look at accumulating this stock below 90 cents for the long term. The shares were trading at 98.5 cents on October 31.

• Please note: Domino’s Pizza Enterprises is recommended as a buy and a sell this week, as sharemarket experts take different views about its outlook.

 

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.