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Peter Day, Sequoia Wealth Management
BUY RECOMMENDATIONS
The A2 Milk Company (A2M)
Chart: Share price over the year
A2M has no debt and plenty of cash. A2M has been one of the better stocks to hold up during the crisis. The company recently announced the A2 milk brand is expanding to Canada under licence. The company’s outlook is bright going forward.
Fortescue Metals Group (FMG)
Chart: Share price over the year
This iron ore producer’s share price has taken a hit despite iron ore prices remaining largely unchanged. We expect FMG to return the bulk of free cash flow in dividends. With a potential yield heading towards 20 per cent, we reiterate our outperform rating.
HOLD RECOMMENDATIONS
Santos (STO)
Chart: Share price over the year
STO has announced a conditional agreement to sell a 25 per cent interest in Darwin LNG and the Bayu-Undan gas field to SK E&S for $US390 million. The sale is conditional on Santos completing the acquisition of ConocoPhillips’ northern Australia and Timor-Leste portfolio, as announced on October 14, 2019. Other conditions and regulatory approvals are part of the conditional agreement. We believe STO is more resilient than its share price suggests, and is in good shape to weather oil demand and supply shocks.
Kogan.com (KGN)
Chart: Share price over the year
Like the broader market, KGN’s share price has been hit, but the online retailer remains a strong business. Retailers are exposed to volatility due to prevailing economic conditions, among other factors, such as astutely managing the company’s operations. But with volatility comes trading opportunities. Investors can chose between trading KGN, or holding for longer term growth.
SELL RECOMMENDATIONS
Japara Healthcare (JHC)
Chart: Share price over the year
The shares were priced at 91.5 cents on February 20 and just prior to the market correction. The shares closed at 45.5 cents on March 19. Momentum is against JHC. Japara is among other aged care stocks experiencing recent share price plunges, as investors feared a Coronavirus outbreak. Strict conditions imposed on visiting aged care facilities may ease investor fears. But we retain our sell recommendation amid too much uncertainty.
Webjet (WEB)
Chart: Share price over the year
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Due to the impact of the Coronavirus, WEB has withdrawn fiscal year 2020 EBITDA guidance. Its cost reduction program is targeting $10 million in savings for the remainder of fiscal year 2020. We acknowledge WEB’s share price has been severely oversold. But, in the short term, there’s too much uncertainty, and we believe it’s too early to start buying travel stocks.
Angus Geddes, Fat Prophets
BUY RECOMMENDATIONS
Collins Foods (CKF)
Chart: Share price over the year
The KFC and Taco Bell operator is trading at depressed levels. The share price was $10.80 on October 25, 2019. The shares were trading at $4.58 on March 19, 2020. The company announced KFC outlets in Australia are closing their in-restaurant dining areas to suppport efforts in slowing the spread of Coronavirus. CKF appears well placed to navigate today’s environment. The company’s three main sales channels – takeaway, drive-through and delivery – remain open and account for about 80 per cent of sales. Sales will probably grow if more people stay at home.
BHP Group (BHP)
Chart: Share price over the year
About a month ago, I recommended selling this global miner. Since then, the stock has lost about a third of its value, yet the iron ore price has hardly moved. China is starting to show signs of recovering from the Coronavirus. The shares offer potential upside, particularly if the crude oil price recovers.
HOLD RECOMMENDATIONS
Oil Search (OSH)
Chart: Share price over the year
The energy producer’s shares plunged in response to a crude oil price collapse and fears of a global recession. We believe the crude oil price war between Saudi Arabia and Russia isn’t sustainable and will be resolved. We expect the crude oil price to rise following a resolution.
Woodside Petroleum (WPL)
Chart: Share price over the year
Woodside’s share price has fallen from $33.25 on February 20 to trade at $16.27 on March 19. The crude oil price plunge has contributed to the share price crash. WPL has good projects. We expect WPL’s outlook to improve once the crude oil price war is resolved and a growing number of people return to work in China.
SELL RECOMMENDATIONS
Afterpay (APT)
Chart: Share price over the year
The share price of this buy now, pay later company has been smashed. Fears of a global economic slowdown have contributed to the share price collapse. I don’t expect a consumer spending revival in the next few months. In our view, there is more downside ahead in an uncertain global economy.
Qantas Airways (QAN)
Chart: Share price over the year
The airline announced it’s suspending all international flights from late March in response to the Coronavirus and Australian Government advice to avoid overseas travel. Domestic flights will be cut by 60 per cent. The company will stand down about 20,000 of its 30,000 employees until at least the end of May. There’s massive implications for earnings and revenues in the short term.
Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
CSL (CSL)
Chart: Share price over the year
Recent price falls provide an opportunity to buy this blood products group at more attractive levels. Prior to the market correction, CSL was a top performer, as wide international exposure generates strong financial metrics. I expect strong demand for CSL stock on signs of a sharemarket recovery.
ResMed (RMD)
Chart: Share price over the year
Makes and sells medical devices for treating sleep disordered breathing and other respiratory illnesses. We expect demand for its respiratory products will generate stronger earnings this year. The shares have also been outperforming the broader market.
HOLD RECOMMENDATIONS
Fisher and Paykel Healthcare Corporation (FPH)
Chart: Share price over the year
The shares recently pushed to new highs in response to increasing demand for its respiratory masks. The FPH share price has continued to outpace the market, and it remains a relatively safe haven for retaining exposure as the sharemarket moves through the current crisis.
BHP Group (BHP)
Chart: Share price over the year
Resource stocks have been hit hard in the recent market sell-off. Investors may conclude this global miner has been oversold, as China moves back to capacity. We still expect volatility for the next few months, making BHP a good trading stock.
SELL RECOMMENDATIONS
Afterpay (APT)
Chart: Share price over the year
Although the share price of this buy now, pay later company may bounce in the short term, we believe investors will sell into share price rallies. In our view, investor demand for tech stocks with high valuations will take time, and this could leave APT’s share price languishing. Concerns are mounting that a slowing global economy could mean fewer buy now, pay later transactions.
Flight Centre Travel Group (FLT)
Chart: Share price over the year
Although the share price has already plunged, we still have no idea when people will feel comfortable enough to book holidays again even if travel bans are lifted. With the company closing stores to reduce costs, there’s likely to be more pain ahead. The shares were placed in a trading halt on March 19.
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.
