Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
Woolworths (WOW)
Chart: Share price over the year versus ASX200 (XJO)
After almost reaching $39 in April, the share price retreated to close at $36.10 on July 2. It’s been hovering around a good support level and the Relative Strength Index has provided a buy signal. This buy signal has occurred twice in the past year and WOW then went onto rally higher. It was recently yielding almost 4 per cent plus franking, so we should get some good buying.
Brambles (BXB)
Chart: Share price over the year versus ASX200 (XJO)
During the past year, this supply chain logistics company has been trending up quite nicely in a fairly obvious range. The share price recently returned to the bottom of that range. Not only that, but for the first time in more than a year, the stock has triggered a buy signal on the Relative Strength Index in response to over-selling. With consensus targets up in the high $9, BXB now appears good value and is providing the right technical signals to be a buy. The shares were trading at $9.33 on July 3.
HOLD RECOMMENDATIONS
Telstra (TLS)
Chart: Share price over the year versus ASX200 (XJO)
Telstra is also towards the bottom end of its recent range. It recently entered the 45-day period before it goes ex-dividend, so investors will start looking at TLS in order to get the dividend and be eligible for the franking credits even if they sell just after the ex-date. Since 2012, TLS has risen on average 16 cents in the 45 days before ex-dividend, and has on average fallen 13 cents on the ex-date. Therefore, by holding TLS, there’s a chance that once we pass the ex-dividend date, the share price could still be at these levels with a dividend in your pocket.
Magellan Financial Group (MFG)
Chart: Share price over the year versus ASX200 (XJO)
Shares in MFG have fallen more than 20 per cent since their highs three months ago. However, it’s not the time to panic and sell. Inflows are still strong and valuations for the company are still well above $13. Momentum indicators, as measured by the RSI, also show MFG has been oversold and is due for a bounce. Resistance can be expected around $12.75. The shares closed at $10.95 on July 2.
SELL RECOMMENDATIONS
AMP (AMP)
Chart: Share price over the year versus ASX200 (XJO)
With our valuation closer to $5, AMP recently got ahead of itself. In early June, it also provided a reversal signal on our daily candlestick charts. Since then, it’s struggled to go higher and there’s a good chance the share price will start to come under pressure. If it doesn’t hold $5, this wealth management company could potentially fall to $4.60. The stock finished at $5.33 on July 2.
Iress (IRE)
Chart: Share price over the year versus ASX200 (XJO)
IRE appears under-valued as the share price has fallen from above $10 several months ago to close at $8.19 on July 2. However, the sell-off doesn’t appear to be finished just yet, which means that those bullish on IRE can wait longer. The pullbacks have been impulsive amid fairly weak rallies, so the bears are still in control. The recent high in IRE has failed to overlap the previous low, and we can see levels closer to $7.20 before support starts to come back in.
Peter Moran, Wilson HTM
BUY RECOMMENDATIONS
Boral (BLD)
Chart: Share price over the year versus ASX200 (XJO)
Boral is our preferred exposure to the building materials sector and we believe it will benefit from a continuing recovery in construction through both higher prices and volumes. This, combined with ongoing cost reductions, should result in strong cash flow growth. We see the recent dip as an opportunity to buy.
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Money3 Corporation (MNY)
Chart: Share price over the year versus ASX200 (XJO)
Money3 is positioning itself as a transparent, scalable and well-managed leader in the Australian non-bank finance market. MNY has lifted pre-tax profit expectations for fiscal year 2014 by $1 million to $10 million. We expect new bank debt funding and a recent bond issue to continue fueling revenue and profit growth in fiscal year 2015. Despite expected growth, the stock was recently trading on a 2015 price/earnings multiple of only 13 times. It’s been recently trading at a 25 per cent discount to our price target.
HOLD RECOMMENDATIONS
Treasury Wine Estates (TWE)
Chart: Share price over the year versus ASX200 (XJO)
TWE has announced a shift in the Penfolds release date to October. It was March and May. The change ensures a longer trading period. It’s also announced a separation of commercial and luxury businesses. We see this as positive and expect TWE will meet its 2014 guidance. However, at current prices, TWE is trading on a 2015 price/earnings ratio of 26 times. The share price is likely to move more on developments relating to merger and acquisition activity rather than earnings. As such, we have a hold recommendation.
Woodside Petroleum (WPL)
Chart: Share price over the year versus ASX200 (XJO)
The recent Shell sell down removes an overhang so it’s positive. Using franking credits for part of the buy-back is also positive as it utilises what would have remained locked in WPL for some time. However, with limited earnings growth and recently trading on a 2015 price/earnings multiple of 13.8 times and a yield of 5.8 per cent, we view WPL as being fairly valued.
SELL RECOMMENDATIONS
Metcash (MTS)
Chart: Share price over the year versus ASX200 (XJO)
Metcash’s full year result was in line with expectations. But it was disappointing to see the trading commentary wasn’t more positive given the petrol discount restrictions on Coles and Woolworths. We’re concerned MTS will need to spend more money than currently forecast to stop customers from moving to competitors. We continue to recommend investors sell.
Arrium (ARI)
Chart: Share price over the year versus ASX200 (XJO)
Arrium is highly leveraged to the weaker iron ore price. Its lower quality ore fetches less than higher quality producers. In our view, an iron ore price around US$75 a tonne, if it were to be reached, may result in ARI needing to raise capital. Given the risk, we would sell for better lower cost opportunities in the iron ore space.
Janine Cox, Wealth Within
BUY RECOMMENDATIONS
Independence Group NL (IGO)
Chart: Share price over the year versus ASX200 (XJO)
IGO shareholders stood their ground as the recent tide of sellers entered the market. Given current conditions, a strong close back above $4.44 is preferable prior to an entry to raise the probability of a further rise in the medium term. Should this gold, copper and nickel company slip back below $4.02, it’s likely to trade lower and therefore this level is an appropriate stop loss. The shares closed at $4.45 on July 2.
Federation Centres (FDC)
Chart: Share price over the year versus ASX200 (XJO)
Often new listings fall within the first couple of years of their debut, but FDC has so far defied this trend. In considering a medium term buying opportunity, FDC must first demonstrate it has the momentum to head into blue sky in the second half of 2014. Given this, an opportunity exists following a break above $2.65. The shares of this shopping centre owner and manager finished at $2.47 on July 2.
HOLD RECOMMENDATIONS
JB Hi-Fi (JBH)
Chart: Share price over the year versus ASX200 (XJO)
Retailers have been quite vocal about the negative change in consumer sentiment in the past few months. I suggest investors continue to watch retail sector heavyweights, such as JB Hi-fi, Harvey Norman and Flight Centre for a better time to buy in the second half of 2014. If JB Hi-Fi heads back towards the November 2013 high of $23.13, another buying opportunity will occur, as this would indicate that JB Hi-Fi is heading to blue sky towards $26. But there are risks to the downside.
Aristocrat Leisure (ALL)
Chart: Share price over the year versus ASX200 (XJO)
This gaming machine company has recovered in the past few months to charge above a very important historical resistance/support level at around $5. This indicates that ALL has the potential to achieve between $6 and $6.50 in the next three to six months. An important level to watch is $5.20, as a move below this represents a significant break in momentum. The stock closed at $5.39 on July 2.
SELL RECOMMENDATIONS
CSL (CSL)
Chart: Share price over the year versus ASX200 (XJO)
Having started an almost vertical trend in 2011/2012, CSL continued its stellar run to break all time highs. However, in the past 12 months, CSL has changed personality, giving chartists the impression it’s running out of steam, particularly as the April low of $67.10 has been broken. Therefore, now is a good time to take part profits in this blood products group.
Fairfax Media (FXJ)
Chart: Share price over the year versus ASX200 (XJO)
Following a previous recommendation to buy the media giant, the share price has pushed beyond our two medium term targets of 77 cents and $1. In our view, the next couple of months is likely to be sideways and down, as FXJ pulls back to test support between 75 cents and 85 cents. Take part profits, or confirm your trailing stop loss.
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.
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18 Share Tips – 7 July: 18 Share Tips to BUY, SELL & HOLD from…
