The widening of the two-speed economy is reflected in this week’s list of stocks that have either been upgraded or downgraded by brokers, such as upgrades to Paladin Energy, Lynas, Gloucester Coal and in turn downgrades for Bluescope Steel, Fletcher Building and QR National.
Across the non-mining sectors, internet job search provider Seek is a stock that’s watched closely. Deutsche has affirmed its buy rating on the back of the company’s exposure to the South-East Asian employment market. While exposure to Asia sounds exciting, however, the company’s primary exposure is to employment conditions in Australia. According to BA-Merrill Lynch the employment trend in Australia is likely to be down. The risk for Seek is falling employment in Australia and falling ad volumes, notes the broker. Unlike Deutsche, Merrill’s has downgraded the stock to neutral.
The stock Merrill does like is Charter Hall Group – in fact, it likes it the most amongst small cap REITs.
Mount Gibson Iron has given investors plenty to read about. Credit Suisse rates the stock an Outperform following the appointment of new directors to the board. This sentiment is not shared with Macquarie, however, which views the resignation of Mt Gibson’s managing director as worrying. Growth in iron ore, coal and copper projects should see strong cash flows for the group, however board spats make long-term planning difficult.
Ausdrill is a small cap industrial that’s worth placing on your watch list. Deutsche just initiated coverage with a buy rating and a raving recommendation. The company’s fall order book, blue chip customers and earnings resiliency in the face of difficult circumstances – bad wealther, currency and global economic turmoils – says something for management. RBS, Merrill’s, JP Morgan and Macquarie currently have buy ratings in place.
Standouts on the list of downgrades this week include QR National. Citi has a sell on the rail and freight company. The possibility of falling coal volumes next year has the broker worried. This view isn’t shared by Deutsche, who thinks the stock is a buy due to the possibility of scoring more contracts on top of the coal haulage contract it just won for stage one of the Wiggins Island port.
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