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Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

Red Fork Energy (RFE)

Chart: Share price over the year to versus ASX200 (XJO)

Explores and produces shale gas in the US. Expectations of a steady increase in oil production, amid upward revisions of what exploration acreage may be worth, should deliver above-average capital appreciation to investors over the next 12-to-24 months.

Prima Biomed (PRR)

Chart: Share price over the year to versus ASX200 (XJO)

PRR focuses on developing anti-cancer therapeutics based on the emerging technology of immunotherapy. The technology is interesting in that it uses the body’s own processes to destroy cancer cells, reducing the side-effects compared to external chemotherapy agents. There’s several potential near-term catalysts for the stock, including the successful conclusion of clinical trials. Any good news should be positive for the share price.

HOLD RECOMMENDATIONS

CSL (CSL)

Chart: Share price over the year to versus ASX200 (XJO)

The share price of this blood products group has been relatively strong since the start of the year compared to the broader market. After reporting a strong underlying first half result, as demand for its products improved, the company has increased its full year profit guidance by 3 per cent to 13 per cent. CSL is an ideal exposure to the healthcare sector for long-term portfolios.

Seven Group Holdings (SVW)

Chart: Share price over the year to versus ASX200 (XJO)

SVW operates strong industrial businesses with leading market shares amid solid demand from the construction and mining sectors. It also has diversified media investments in the traditional and digital space. WesTrac, a wholly owned subsidiary of SVW, announced it had reached an agreement to acquire the distribution and support business formerly operated by Bucyrus. The transaction is valued at about $US400 million and is expected to be earnings per share neutral until June 30, 2012, and accretive thereafter.

SELL RECOMMENDATIONS

Boral (BLD)

Chart: Share price over the year to versus ASX200 (XJO)

This building products group recently announced that its Australian operations had been negatively impacted by heavy rain and weaker residential housing activity on Australia’s east coast. As a result, it expects full year net profit to range  between $128 million and $153 million, down from $150 million-to-$175 million. Although BLD has a strong order book, largely driven by major resource projects, several risks remain and we prefer other investments.

OZ Minerals (OZL)

Chart: Share price over the year to versus ASX200 (XJO)

Profitability of this gold and copper company is subject to swings in commodity prices, of which it can’t control. With limited commodity diversification, it needs to rebuild its project exploration and development pipeline. In the absence of any short-to-medium term production growth, investors could look at reducing their exposure, with a view to investing in one of the larger diversified resource companies.

 

Michael Heffernan, Lonsec 

BUY RECOMMENDATIONS

Navitas (NVT)

Chart: Share price over the year to versus ASX200 (XJO)

Navitas is a pre-university education provider, offering services across the world. It stands to benefit from a stronger US dollar, as most of its revenue is sourced outside Australia. In addition to attractive underlying fundamentals, the continuing growth in Asian economies should produce a constant stream of students for its courses in Australia.

Telecom Corporation of New Zealand (TEL)

Chart: Share price over the year to versus ASX200 (XJO)

New Zealand’s equivalent to our Telstra is in a very strong market position, and it pays an attractive dividend yield of about 6 per cent, although it isn’t fully franked (as is the case with Telstra). However, and again similar to Telstra, its retail and wholesale arms have been structurally separated. Its dominant position in NZ’s telecommunications market paints a bright outlook for future growth.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

Chart: Share price over the year to versus ASX200 (XJO)

The diversity of its operations, such as supermarkets, hardware, coal and insurance enables it to withstand softer economic activity. The Coles turnaround and the popular Bunnings hardware chain underwrites its future performance.

Woolworths (WOW)

Chart: Share price over the year to versus ASX200 (XJO)

Expanding into hardware via the Masters big box outlets provide an attractive profit growth profile. The share price has languished in recent years, but the company has retained its dividend. This makes it an attractive investment proposition from a growth and income perspective.

SELL RECOMMENDATIONS

BlueScope Steel (BSL)

Chart: Share price over the year to versus ASX200 (XJO)

The steel industry continues to remain under intense competitive pressure, with high domestic costs in raw materials and labour. Also intense import competition, due in no small part to the high Australian dollar, and the introduction of the carbon tax creates a blanket of uncertainty over the Australian steel sector.

Transfield Services (TSE)

Chart: Share price over the year to versus ASX200 (XJO)

A disappointing performer, culminating in its exit from the S&P/ASX 100 Index. The performance of most other mining services companies has been impressive, but Transfield Services has struggled. The company needs to confirm stronger profitability before taking another look at the stock.

 

Sean Conlan, Macquarie Private Wealth

BUY RECOMMENDATIONS

Fortescue Metals Group (FMG)

Chart: Share price over the year to versus ASX200 (XJO)

The iron ore producer’s quarterly performance was in line with our expectations and expansion continues. We anticipate stronger shipments in the June quarter given the cyclone season is drawing to a close and FMG has two ship loading circuits commissioned.

Karoon Gas (KAR)

Chart: Share price over the year to versus ASX200 (XJO)

KAR has been drifting on limited news flow since its failed Brazilian initial public offering at the end of 2010. But this is about to change with an active year ahead, including the Poseidon gas appraisal, the first three-hole program at Brazilian wells, up to three farm-in deals and an update on its prospective resources in South America.

HOLD RECOMMENDATIONS

Woolworths  (WOW)

Chart: Share price over the year to versus ASX200 (XJO)

The absence of sales productivity across Australian retail operations plagues the group. Current strategies are designed to support full year 2012 net profit after tax guidance, while a new strategy for dealing with competition will require a new creative piece for customer communication.

Mincor Resources NL (MCR)

Chart: Share price over the year to versus ASX200 (XJO)

We currently rate this nickel miner as neutral with a price target of 76 cents. It closed at 68.5 cents on April 24. Total full-year 2012 production appears achievable, while the transition to owner/operator mining should continue to deliver further cost improvements and increase mining flexibility. However, we believe MCR’s suite of projects are fully priced at current levels.

SELL RECOMMENDATIONS

Paladin Energy (PDN)

Chart: Share price over the year to versus ASX200 (XJO)

The uranium producer has announced a convertible bond issue of up to $US275 million. But we believe a turnaround to positive cash flow generation is required to fully alleviate funding concerns. This may be difficult to achieve at this time given uranium prices remain subdued.

Gloucester Coal (GCL)

Chart: Share price over the year to versus ASX200 (XJO)

We view the highly leveraged balance sheet coupled with high capital requirements to meet production growth targets as a risk. The capital return provides some protection in the near term, but the long dated nature of the payment has caused us to discount its value.

Investors should take the time to confirm price trends, which can be as easy as comparing two very simple indicators that will give you good lead time and solid verification of the trend movement. Remember to check the volume and its rate of change the next time you look at a chart of your favorite moving averages.

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