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Joshua Stega JAS Wealth

BUY RECOMMENDATIONS

Magellan Financial Group (MFG)

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

MFG is a boutique funds management group specialising in global equities. We believe global equity investment managers are well positioned given they are less impacted by the shift to lower cost investment options, exposed to lower levels of competition in Australia and a significantly larger investment universe. While MFG was recently trading on a price/earnings multiple of 24 times and a yield of about 2 per cent, we are buyers for the longer term story.

Astro Japan Property Group (AJA)

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

The Astro Japan Property Group invests in, manages and develops a portfolio of office and retail properties in Tokyo. We like AJA’s non-recourse debt structure in an improving Japanese economy. While AJA sits higher up the risk curve than the typical REIT, we think it remains attractive on a risk-adjusted basis. AJA trades on a PE of 7.5 times and was recently yielding about 4.9 per cent.

HOLD RECOMMENDATIONS

Newcrest Mining (NCM)

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

One of the world’s top 10 gold mining companies by production, reserves and market capitalisation. We believe NCM’s valuation relative to its peers and its growth and cost profiles provide investors with an attractive long term investment. NCM was recently trading on a PE of 14.85 times and a dividend yield of 1.4 per cent. We await a higher gold price before becoming more positive on this story.

Credit Corp (CCP)

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

Credit Corp Limited is a receivables management company, specialising in debt purchase and debt collection. CCP remains a well managed and high return on equity generating business. But we believe there’s increasing risk that its ROE profile will decline in the near to medium term and wait for further progress in the US business before reassessing our valuation. CCP was recently trading on a PE of about 13 times and a fully franked dividend yield of about 4 per cent.

SELL RECOMMENDATIONS

Jetset Travelworld (JET)

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

JET is one of the largest travel distribution businesses in Australia, with key brands such as Harvey World Travel and Travelworld. JET’s fiscal year 2013 report was at the top end of expectations. But on our reading, next year’s guidance suggests a fall in earnings between 17 per cent and 27 per cent, excluding implementation costs for its new business initiative, Helloworld. We don’t see any reason to be in this stock given our uncertain view surrounding its business model.

ALE Property Group (LEP)

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

ALE Property Group was established in 2003 as a listed freehold owner and manager of pubs. All properties are leased to Australian Leisure and Hospitality Group (ALH), which own the pub businesses and pays rent under long term inflation linked leases. We like LEP’s strong 6 per cent yield, conservative management team and high quality tenant covenant, but believe its current premium to net tangible assets is too big relative to its peers. We are sellers of this stock.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

FlexiGroup (FXL)

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

FlexiGroup offers consumer finance through retail and merchant partners. The company has posted strong growth in recent years in response to a strong consumer market. At its annual general meeting, FXL management reiterated net profit growth guidance of between 17 per cent and 19 per cent net during fiscal 2014.

G8 Education (GEM)

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

G8 Education operates day care centres across the country. It has a strong track record of achieving growth through acquiring, integrating and operating new centres. Having settled a large number of acquisitions in recent months and conducted an $80 million placement, the company is set to continue its strong track record of profit growth. Financial health is strong.

HOLD RECOMMENDATIONS

Ainsworth Game Technology (AGI) 

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

Makes and sells poker machines in Australia, the US and Asia. The company’s heavy investment in product development has increased market share. While the company provided a positive update, the share price is trading at a premium for now.

Brambles (BXB)

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

With the demerger of Recall looking likely to proceed, BXB remains attractive for its US based earnings. Expectations that the Australian dollar could soften further and the RBA indicating that currency intervention is a possibility, we believe BXB offers investors good exposure to US earnings growth.

SELL RECOMMENDATIONS

Monadelphous Group (MND)

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

Mining services has seen a litany of downgrades in recent weeks. MND indicated at its AGM that margins remain under pressure due to a more competitive environment. Revenue may soften in the second half of the year. While we believe MND is one of the best run mining service businesses on the market, sector headwinds may intensify in coming months and delivering on expectations might become even more difficult.

Qantas Airways (QAN)

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

Following on from Virgin Australia Holdings announcing a capital raising and increasing foreign ownership, it’s becoming clear that QAN will face intense competition in domestic markets for years to come. With the airline barely profitable amid potential for renewed competitive pressures, QAN appears to offer further downside risks.

 

Michael Heffernan, Lonsec

BUY RECOMMENDATIONS

Iress (IRE) 

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

An information services provider to brokers and others in the financial services area. It’s internationally diversified and is positioned to benefit from increasing sharemarket activity in general, and an anticipated sharp increase in the number of new floats.

The Reject Shop (TRS)

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

This retail business, focusing on the cheaper end of the market, has been a solid sharemarket performer over many years, apart from the difficulties associated with the Queensland floods. It expects to open six new stores before Christmas and 12 before the end of the financial year. It should benefit from an improving economy and low interest rates.

HOLD RECOMMENDATIONS

CSR (CSR)

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

An improving residential construction sector should be a major benefit to associated supply businesses. CSR’s latest market update was positive and its share price responded positively.

ResMed (RMD) 

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

This company makes medical devices that treat sleep disordered breathing. It’s been a good performer recently, and exposure in the US means it’s likely to benefit from a weaker Australian dollar.

SELL RECOMMENDATIONS

WorleyParsons (WOR)

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

This sharemarket favourite recently disappointed with a significant profit downgrade, resulting in a sharp share price decline. The question is whether investors should stick with WOR, or possibly cut losses and chase better opportunities.  My view is move to other stocks offering less uncertainty.

OZ Minerals (OZL)

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

This copper and gold producer has been doing it tough for the past few years. Weaker gold and copper prices pressure growth prospects. Better opportunities exist elsewhere.

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