18 Share Tips – 7 December 2020

Philippe Bui, Medallion Financial Group

BUY RECOMMENDATIONS

Audinate Group (AD8)

Develops and sells digital audio-visual networking solutions. The group’s technology platform distributes quality digital audio and video signals over computer networks. The recent annual general meeting and trading update in October was positive. The shares have risen from a low of $2.51 on March 23 to close at $7.35 on December 3. In our view, AD8 remains a long term growth buy.

Sandfire Resources (SFR)

SFR operates the DeGrussa copper-gold mine in Western Australia. It also has a portfolio of base metal, iron ore and manganese projects. The copper space is experiencing good momentum. Coupled with recent positive announcements around drilling results and mine development, SFR is a buy as an attractive trading opportunity.

HOLD RECOMMENDATIONS

Platinum Asset Management (PTM)

Platinum is an Australian based investment manager that focuses on international shares. It provides portfolios of listed companies from around the world. The shares have performed strongly in November amid the recent shift towards value stocks with high yields. PTM was recently trading on a fully franked dividend yield of 5.5 per cent.

NextDC (NXT)

NXT develops and operates independent data centres in Australia. It focuses on providing scalable, on-demand services to support outsourced data centre infrastructure and cloud connectivity. NXT still has a long runway in terms of growth in the data storage and cloud computing space.

SELL RECOMMENDATIONS

Treasury Wine Estates (TWE)

China has imposed crippling tariffs on imports of Australian wine as the Chinese Ministry of Commerce continues its anti-dumping investigation. TWE has acknowledged that demand for its wine in China would be extremely limited. Net profit after tax was down 25 per cent to $315.8 million in fiscal year 2020.

Telstra Corporation (TLS)

Investors reacted positively after the telecommunications giant recently revealed its plan to restructure into three separate businesses. In the likely absence of dividend growth for the foreseeable future, we believe the recent run-up in the share price provides an opportunity to consider selling or reducing holdings.

Jabin Hallihan, Morgans

BUY RECOMMENDATIONS

Macquarie Group (MQG)

We view this diversified financial services giant as relatively inexpensive and continue to like its exposure to long term structural growth sectors, such as infrastructure and renewables. Near term, it remains well positioned to ride out the COVID-19 pandemic and seize opportunities on the other side.

InvoCare (IVC)

Stringent COVID-19 restrictions led to fewer funerals and a 6.2 per cent decline in operating sales revenue for the 2020 first half when compared to the prior corresponding period. Shares in this funeral operator are trading materially below pre-pandemic 2020 highs in February. We expect an earnings improvement going forward as Australia opens up and funeral services return to normal levels again.

HOLD RECOMMENDATIONS

Orocobre (ORE)

This lithium company will produce an additional 10,000 tonnes of lithium hydroxide a year when the Naraha expansion project is completed in the first half of 2021. ORE’s partners are Toyota and Panasonic. The company’s shares have rallied strongly in response to a rising lithium price. We’re happy to hold for growth in electric vehicles.

ALS Limited (ALQ)

ALS Limited provides analytical testing for commodities, life sciences and industrial purposes. The commodities segment offers assaying and testing services for the buoyant mining and mineral exploration sectors. A strong performance during the COVID-19 recovery phase is behind our recommendation.

SELL RECOMMENDATIONS

Costa Group Holdings (CGC)   

CGC is a leading grower, packer and marketer of fresh fruit and vegetables. Its produce is sold in major supermarkets. However, the shares have already made substantial gains this year and are trading materially above our $3.70 valuation. The shares finished at $4.07 on December 3.

Harvey Norman Holdings (HVN)

The retail giant generated strong sales during the COVID-19 lockdown. Sustaining sales growth will be a challenge given fierce competition. The shares have risen from $2.46 on March 23 to close at $4.73 on December 3. The shares finished at a significant premium to our $3.50 valuation.

Luke Pavone, Broadbent Financial

BUY RECOMMENDATIONS

APA Group (APA) 

This quality infrastructure company recently announced it would build a new 580 km gas pipeline. It will connect the Perth Basin to APA’s existing pipeline network, servicing the goldfields region in Western Australia. APA expects a strong portfolio of long term contracts in place by the time construction is completed in mid-2022. Substantial mining development in the region presents a buying opportunity.

L1 Long Short Fund (LSF)

This fund continues to improve strongly since its March lows. LSF was recently trading 16 per cent below net tangible assets. The share price has risen from $1.25 on July 1 to close at $1.955 on December 3. The buyback and market rotation into value stocks are providing momentum. We’re still buyers at current levels given the discount to net tangible assets is attractive.

HOLD RECOMMENDATIONS

Woodside Petroleum (WPL)

The share price of this oil and gas giant has spiked since early November on the back of higher Brent crude oil prices. WPL’s outlook includes reducing greenhouse gas emissions and growing its hydrogen business. But, in our view, it’s difficult to model any associated earnings from these opportunities in the absence of sufficient cost base guidance. In our opinion, upcoming catalysts appear limited at this point.

Atlas Arteria (ALX)

ALX owns, operates and develops toll roads in France, Germany and the United States. A recent traffic update surprised to the upside. Numbers in France were still historically low due to the latest COVID-19 lockdown, but heavy vehicle traffic remained resilient. It appears higher traffic numbers are factored into the share price, so we view ALX as a hold.

SELL RECOMMENDATIONS

Commonwealth Bank of Australia (CBA) 

First quarter 2021 cash net profit after tax profit fell by 16 per cent on the same period last year to $1.8 billion. It reported a solid lift in new home and business loans. Deposits also rose. However, record low interest rates continue to negatively impact margins, and we believe the improving outlook for the banking sector is priced in. CBA is trading at a significant premium to its peers.

Netwealth Group (NWL)

NWL offers a platform for superannuation, investments and managed accounts. NWL has been increasing its funds under administration strongly, as it’s attracted more clients from industry churn. The company revealed an 8 per cent increase in funds under administration for the September quarter. However, in our view, the company’s lofty price/earnings multiple doesn’t represent a compelling risk-reward opportunity.

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.