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Joshua Stega, JAS Wealth

BUY RECOMMENDATIONS

Macquarie Atlas Roads (MQA)

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

After time in the wilderness, we see a brighter outlook for this infrastructure play. We continue to believe MQA is a catalyst driven stock with a lower Aussie dollar providing earnings support. Also, should the State of Virginia in the US decide to acquire MQA’s interest in toll road Dulles Greenway, this could prove to be another positive catalyst.

Breville Group (BRG)

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

BRG is expanding globally with much success. Although the domestic market is relatively mature, BRG has been winning market share. We are also encouraged by potential growth opportunities in North America and the UK. As long as the US consumer stays resilient, this stock should do well.

HOLD RECOMMENDATIONS

Nufarm (NUF)

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

Based on reasonably conservative assumptions regarding sustainable sales trends and margins, we believe this crop protection company offers a reasonable risk/return. However, in our view, there are few catalysts to drive outperformance in the short to medium term.

InvoCare (IVC)

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

One of the great business models on the Australian market today. IVC’s business (and the funeral service industry itself) is unusual in that there is close to zero correlation between asset returns and the general economic environment. Despite this, we wouldn’t be rushing to buy the stock as IVC currently trades on a premium to most comparable listed companies in the US.

SELL RECOMMENDATIONS

James Hardie Industries (JHX)

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

JHX is undoubtedly one of the building materials sector’s best run and most focused companies. Additionally, it has exposure to the US housing recovery. But potentially rising costs, in combination with stagnant prices, is likely to keep EBIT margins at the bottom end of the targeted 20 per cent to 25 per cent range in the short term.

Charter Hall Retail REIT (CQR)

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

CQR is a property play that traditionally targets well-located supermarket shopping centres in Australia and overseas. While the business model has evolved in recent years, we don’t want to be invested in this space at the moment. Risks include a potential reduction in net property income and uncertain economic conditions in Australia and abroad.

 

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

QBE Insurance (QBE)

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

Historically, QBE insurance has performed well when the Australian dollar is retreating against the US dollar and US 10- year bond prices are weaker. We expect weakness to continue. On a peer comparison, QBE appears discounted and perhaps it was too aggressively sold off during recent profit downgrades. Expect improving profit performance and a potentially higher fully franked dividend in the absence of natural disasters.

Freedom Foods Group (FNP) 

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

Freedom Foods operates in a niche space, manufacturing food free of allergen and gluten. Significant growth opportunities exist via its recently announced expansion to the US. Discussions are underway with a major North American retailer to supply a co-packed product.

HOLD RECOMMENDATIONS

Fairfax Media (FXJ)

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

It owns high quality online assets, such as Domain, RSVP, stayz  and mycareer, which are experiencing strong earnings and user growth. But it still has a fair amount of debt. Potential does exist for a strategy change to unlock value. 

Inca Minerals (ICG)

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

The share price rose from 2.5 cents to more than 10 cents after its porphyry discovery in Peru. It was trading at 2.2 cents on July 4. The company has completed a capital raising and has been preparing and de-risking for another drilling campaign. Upcoming drilling results will be key catalyst that could propel Inca’s valuation back to higher levels. A speculative play.

SELL RECOMMENDATIONS

Alliance Aviation Services (AQZ)

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

Alliance is a charter airline operating fly in fly out services for miners. We believe the end of the commodities super cycle and a slump in commodity prices is likely to have a material impact on AQZ’s future earnings prospects. We anticipate margins will compress in response to a reduced mining work force cutting demand for charter flights. 

GrainCorp (GNC)

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

The current Archer Daniels Midland (ADM) takeover offer for GrainCorp represents $12.20 per share plus a fully franked $1 dividend. There’s opposition to the offer so there’s a risk the Foreign Investment Review Board (FIRB) won’t approve the takeover. Reduce risk and take profits.

 

Carey Smith, Alto Capital

BUY RECOMMENDATIONS

Ausdrill (ASL)

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

ASL is one of Australia’s largest mine services companies, specialising in drilling, blasting and in-pit grade control. ASL’s share price has fallen 78 per cent in the past 12 months over concerns the resources boom is ending. While there appears  little doubt the group’s earnings and dividends will decrease over the next few years, we believe the selloff has been overdone.

Doray Minerals (DRM)

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

DRM is set to become Australia’s newest high-grade gold producer, with commissioning of the group’s gold processing plant at Andy Well under way, with first gold production expected in August. With production forecast at 70,000 ounces a year and an all in cost less than A$850 an ounce, DRM is expected to be one of the lowest cost gold producers on the ASX.

HOLD RECOMMENDATIONS

QBE Insurance (QBE)

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

QBE has recovered from its multi-year low share price in November last year, and has now been in a solid uptrend for more than six months. The increase in long-term interest rates in the US is a positive for QBE, as it invests its float (money received from premiums but not yet paid out in claims) in high quality fixed interest rate instruments. QBE is potentially at the beginning of a multi-year uptrend.

ASX Limited (ASX)

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

This operator of the nation’s securities exchange relies primarily on the number of trades and trading volumes to generate revenues. The increase in computerised trading (algorithmic trading) has resulted in the number of trades increasing significantly, although volumes remain rather weak. The recent $553 million capital raising puts the group in a very strong position to pursue growth opportunities.

SELL RECOMMENDATIONS

CSL (CSL)

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

While there’s no doubt CSL is a top-notch quality biopharmaceutical company, its popularity among the investment community has resulted in its market capitalisation significantly overshooting its value, in our view. With the imminent departure of long serving CEO Brian McNamee, we cannot justify a forecast 2014 price/earnings ratio above 20 times and a dividend yield below 2 per cent.

Flight Centre (FLT)

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

This dominant travel agent has benefited greatly in the past few years from a strong Aussie dollar, prompting many Australians to holiday overseas. The recent 10 per cent fall in the Aussie dollar, combined with a general tightening in the Australian economy, is likely to see travel volumes decrease going forward, leading to a possible decline in group earnings.

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