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Joshua Stega, JAS Wealth

BUY RECOMMENDATIONS

Rio Tinto (RIO)

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

We believe it’s time to start looking at the materials sector again and RIO is one of our preferred investment options. RIO provides a solid combination of valuation support, strong long term production growth and balance sheet flexibility. We believe the market is overlooking the long term free cash flow improvement story, coupled with a renewed focus on shareholder value. Recently trading on a price/earnings ratio of 9.7 times and a dividend yield of 3.15 per cent, we are accumulators of RIO at current levels.

Adelaide Brighton (ABC)

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

An integrated supplier of cement and lime to the resource, construction, engineering and infrastructure sectors. ABC has steadily followed a strategy of strengthening its core business, as well as vertically integrating both up and down the value chain. We now believe growth in residential activity will be stronger than expected. We believe this is a good time to buy into a quality business like ABC.

HOLD RECOMMENDATIONS

Macquarie Group (MQG)

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

A global provider of banking, financial, advisory, investment and funds management services. Post the GFC, Macquarie has undergone a series of cost out strategies to reduce the capital intensive nature of its operations. Due to the recent strong share price performance, we believe the stock is fairly priced at current levels.

Wesfarmers (WES)

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

Offers a diversified revenue stream, which appeals to investors in the current climate. Most business operations have performed well in recent times. But the supermarkets and hardware chain face increasing competition amid a slowing resources sector. Recently trading on a price/earnings ratio above 20 times and a dividend yield of 4 per cent, we rate WES a hold at current levels.

SELL RECOMMENDATIONS

SCA Property Group (SCP)

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

This real estate investment trust was spun out of Woolworths Group. It owns a portfolio of 69 retail assets. Our investment thesis remains cautious, predicated on what we see as weak near term income growth prospects. In our view, few if any of the Woolworths tenancies from the IPO are likely to reach turnover thresholds for at least another five years. Recently trading on a price/earnings ratio of 12.25 times and a dividend yield of 3.6 per cent, we believe the stock is expensive considering our view about growth prospects for this business.

Caltex Australia (CTX)

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

Caltex has a very strong position in the Australian petroleum market. The petroleum market is transitioning as imports increase. Caltex is closing its Kurnell refinery and converting it to a fuel import terminal. In the near term, there may be some downside to company earnings from conversion costs. Recently trading on a price/earnings multiple of 16.5 times and a dividend yield of 1.6 per cent, we believe better opportunities exist elsewhere.

 

Andrew Arvanitopoulos, Alpha Securities

BUY RECOMMENDATIONS

Aristocrat Leisure (ALL) 

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

One of the world’s biggest gaming machine makers and software developers. Aristocrat’s operating leverage to a cyclical recovery makes it attractive. It offers earnings growth potential from a strong market position. The longer term outlook for the gaming industry is favourable.

Mayne Pharma Group (MYX)    

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

A pharmaceutical manufacturer with a portfolio of branded and generic drugs. In response to acquisitions, more products and increasing market penetration, it’s now expecting half year revenue between $68 million and $71 million, a 20 per cent improvement compared to the 2013 second half.

HOLD RECOMMENDATIONS

Woodside Petroleum (WPL)                

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

Woodside has advanced to a non-binding memorandum of understanding regarding the Leviathan gas field joint venture off the coast of Israel. The company will now take a 25 per cent interest in the Leviathan field rather than 30 per cent. Leviathan would provide a further growth option that isn’t fully reflected in the price. Woodside could retain its 80 per cent payout ratio and develop both Browse and Leviathan.

News Corporation (NWS)

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

Market leading assets generate robust cash flows and the balance sheet is well capitalised. As the newspaper assets re-invent themselves, we believe the digital assets (pay TV and online portals) can deliver ample returns amid potential for acquisitions.

SELL RECOMMENDATIONS

Cochlear (COH)        

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

First half results were disappointing for the hearing implant maker. We’re cautious about how long it will take to gain sales traction amid competitive threats and a growing reliance on emerging markets and uptake among adults. We have lowered our profit forecasts between financial years 2014 and 2016 by 6 per cent to 15 per cent.

Sims Metal Management (SGM)

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

We are cautioning that any recovery is likely to be slow and patchy. Also, we expect that new mid cycle returns are likely to be lower than previous cycles given structural changes and cyclical over-capacity.

 

Les Szancer, Blueribbonoptionsonline.com

BUY RECOMMENDATIONS

Condor Blanco Mines (CDB)

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

CDB has recently acquired a coking coal project in South Africa. Condor is about too stitch up a 10 million Euro debt financing deal. The funds will be used too accelerate both the Marianas iron ore project in Chile and the coking coal project. A most speculative buy and only for those with an appetite for risk.

Alkane Resources (ALK)

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

A major problem for many small miners is generating sufficient cash flow. Many a penny is spent before actual production. Alkane has poured its first gold bars and is now a producer. It expects to deliver up to 27,000 ounces by June 30. There’s more than 900,000 ounces in three deposits at the Tomingley Gold project in New South Wales.

HOLD RECOMMENDATIONS

Lamboo Resources (LMB)

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

LMB has just completed a significantly over-subscribed placing bringing in $4.2 million. LMB’s flake graphite assets are high purity. If you bought at 6.5 cents, when first recommended, you may be tempted to sell. But, in my view, LMB is still significantly undervalued when compared too its peers. The shares were trading at 30 cents on February 20.

Wesfarmers (WES)

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

A conglomerate of a company, with retail, insurance, mining, fertilisers and much more. Just watch the $44 level as it approaches a triple peak  – it’s struggled to stay above that level. A really well managed diversified company that can be part of any balanced investment portfolio.

SELL RECOMMENDATIONS

Woodside Petroleum (WPL)

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

I wouldn’t buy this stock for the dividend. When the share price rises above $39, it retreats to $37 and then bounces back up again. I’ve been watching this happen for the past seven months. The shares were trading at $38.50 on February 20. A price at $37 appeals more.

Insurance Australia Group (IAG)

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

This is another stock that’s meandering along but, in my view, doesn’t seem to have any growth potential. IAG has mostly traded between $5.40 and $5.90 for some time. If you’re looking for growth, I would sell this stock and look elsewhere. The shares were trading at $5.49 on February 20.

Click on the links below to read other articles from this week’s newsletter

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2. 18 Share Tips – 24 February 2014: 18 Share Tips to BUY, SELL & HOLD from…

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9. Stocks on a roll: ASX rolling 52-week highs for the previous…

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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.