The Aussie market traded flat last week – the All Ords barely kept its head above water, finishing the week up just 0.6%. The market is at a standstill, seemingly waiting for the next disaster or breakthrough to come out of Europe. The S&P/ASX 200 Materials index traded literally flat, while the consumer discretionary sector was up 1.1% and the financial sector was 1.2% higher.
Few analysts are forecasting a raging bull market in the near term, however they are upgrading stocks due to valuation reasons – they’ve been too heavily sold off – or because they offer defensive earnings streams in more turbulent times (such as Woolworths).
JB Hi-Fi has been a top shorted stock for months now, and its share price has been slammed. Citi puts a buy rating on the stock on the simple fact that its shares have been oversold. Although JB Hi-Fi sits in the scary discretionary sector – which everyone knows will face tough times as the army of penny-pinching Aussies grows – JB Hi-Fi has a secret in hand called JB Hi-Fi Now, which involves unlimited streaming of music tracks from local and international musicians. Citi maintains a forecast of slow growth in 2012 but thinks that the share price will get a kicker from the fact that JBH is buying up its own shares, which is EPS accretive.
Boom Logistics is another stock that analysts reckon might be oversold. UBS likes the stock because it’s trading at a hefty discount to NTA.
Miners continue to charm the market with discoveries, production upgrades and takeover opportunities – and there are plenty of miners on the list this week.
A resource upgrade for Fortescue Metals at Nyidinghu has the possibility of boosting production and/or mine life, says Macquarie. Tap Oil is another one to put on your watchlist as confirmation of the resource size of its Zola gas discovery in the Carnarvon Basin meant it got the thumbs up from Macquarie, lifting its net asset valuation to $1.60 (Tap Oil is covered in detail this week, click here for article).
Ikuka Resources was upgraded by Credit Suisse based on a lift in fourth-quarter revenue expectations. Deutsche Bank, too, has lifted its price target from $16.50 to $17.35 on Iluka due to share price weakness (although it rallied last week, rising 7.5% and is up 33% in just two weeks) and expectations for a stronger iron ore price (Iluka is covered in detail this week, click here for article).
Merrill Lynch backs the much-discarded uranium sector saying that the sector is hardly dead – upgrading Extract Resources, a company that holds the fourth largest uranium deposit in the world. The broker reckons that Rio may have its sights on Extract’s Husab uranium project, which is located on the west coast of Namibia.
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