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Michael Heffernan, Lonsec

BUY RECOMMENDATIONS

Commonwealth Bank (CBA)

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

This iconic bank with a client footprint across Australia has been a standout performer on the ASX this year. The Commonwealth Bank’s share price has increased by about 10 per cent, and it still pays a fully franked dividend yield close to 6 per cent. With its report due out soon, one can reasonably anticipate the dividend will be increased from the $1.88 it announced this time last year.

Telstra (TLS)

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

Along with Commonwealth Bank, Telstra has been a shining star this year with its share price rising by about 15 per cent. It also pays a fully franked dividend yield above 7 per cent. With $11 billion flowing to it in the next few years from the National Broadband Network deal, the company’s dividend is likely to be increased.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

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

Diverse operations covering supermarkets, hardware, coal and insurance give Wesfarmers broad strength in an uncertain market and economic environment. A strongly performing Coles Supermarkets and Bunnings hardware business paints a bright outlook.

Woolworths (WOW)

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

Its move into hardware provides the supermarket giant with a sound growth profile. The share price has been resilient due to its track record of delivering reliable profits. A sustainable dividend makes it an attractive proposition in the current environment.

SELL RECOMMENDATIONS

Iluka Resources (ILU)

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

This mineral sands producer recently announced another substantial downgrade in sales of key products. One downgrade after another encourages astute investors to look elsewhere.

Alumina (AWC)

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

This has been a poor market performer in the past year. Don’t expect any immediate turnaround in its profit prospects. Investors should look elsewhere in this current environment.

 

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

IInet (IIN)

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

This telecommunications company is well positioned to benefit from current structural changes and trends within the industry. This includes the move from old media to online content providers (see Fetch TV), switching from fixed line to VOIP and increased bandwidth demand through the proliferation of iPhone and iPad use.

Qantas (QAN)

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

Although we are cautious about the low margin, cut throat aviation industry, we can see deep value in Qantas. On a sum of parts valuation, Qantas trumps the market price. Upside includes lower jet fuel prices, or potential corporate activity. The shares closed at $1.05 on July 18.

HOLD RECOMMENDATIONS

Envestra (ENV)

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

A liquid, large cap stock offering dependable and secure earnings via ownership of gas distribution networks in Australia. In the current macro environment, high yield defensives have been the strongest performers. Envestra’s current trailing dividend yield is about 7.3 per cent.

Sundance Resources (SDL)

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

Currently trading at a substantial discount to the 57 cents takeover offer. The deal depends on whether the acquirer Hanlong Mining is able to secure financing. Material to this is the iron ore price remaining high, thereby substantiating value in the company’s Mbalam Project.

SELL RECOMMENDATIONS

Commonwealth Bank (CBA)

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

CBA is now trading close to its highs prior to the global financial crisis. We believe it’s time to take a profit. Historically, the company has met strong resistance pushing above this level and is trading near the consensus analyst price target. Better value exists with the other three majors. CBA closed at $55.25 on July 18.

Orica (ORI)

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

An oversupply of thermal coal and weak coal prices are resulting in production cuts. We expect these production cuts to materially impact Orica’s earnings, as the company relies heavily on providing explosives to the coal sector.

 

Peter Russell, Russell Research

BUY RECOMMENDATIONS

Blackmores (BKL)

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

Makes and distributes vitamins and supplements in Australia and South East Asia. Revenues, profits, earnings per share and dividends have grown every year for the past 12 years. With a strong balance sheet and reputation, seasoned management is now leveraging its Asian experience into active regional growth.

Carsales.com (CRZ)

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

By far the dominant online automotive, motorcycle, marine and wider classifieds business in Australia. Revenue, EBITDA, dividends and cash flow all show high five-year growth. This innovative company offers strong management.

HOLD RECOMMENDATIONS

Amalgamated Holdings (AHD)

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

A conservatively managed business, offering a franked yield of almost 6 per cent. It’s nicely diversified, with interests in entertainment, hospitality, leisure and tourism. It owns cinemas, hotels and resorts and is growing specialist property activities.

ALE Property Group (LEP)

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

Its portfolio includes about 90 high quality hotels across Australia. All the pubs are leased to a Woolworths joint venture on favourable terms. This provides a yield of almost 7.5 per cent. It offers long-term upside as Woolworths continues to develop the properties.

SELL RECOMMENDATIONS

Fairfax Media (FXJ)

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

The newspaper publisher is exposed to a sluggish economy and the structural decline of print against digital media. We’re not expecting its share price to improve.

Transfield Services (TSE)

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

Provides maintenance and project management services to the power, telecommunications, water, infrastructure and mining sectors in Australia, New Zealand and North America. Despite a leaner balance sheet, project delays and adverse weather have trimmed its guidance yet again. Switch to the larger and sounder UGL.

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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.