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Michael Heffernan, Lonsec

BUY RECOMMENDATIONS

Transurban Group (TCL)

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

Australia’s premier toll road operator delivered an impressive September quarter traffic report. Its revenue expectations are robust, following the acquisitions of Queensland toll roads and Sydney’s Cross City tunnel at a good price. It should benefit from the Federal Government’s commitment to road expenditure.

Aristocrat Leisure (ALL)

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

This poker machine maker and online gaming market operator recently delivered an impressive half year report.  Further, the acquisition of US gaming business Video Gaming Technology looks to be a good deal, particularly amid continuing improvement in the US economy.

HOLD RECOMMENDATIONS

Telstra (TLS)

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

With the buyback now out of the way, and despite the recent rebound from its September share price retreat, Telstra is still sound value and pays a most attractive fully franked dividend. Even if the share price reaches $5.90, it will still be paying a 5 per cent fully franked dividend yield.

Sirtex Medical (SRX)

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

This biotechnology and medical device group is involved with liver cancer treatments, utilising advanced technologies. A key feature is Sirtex is making money, although it pays little by way of dividend. Demand for its treatments should continue and its growth prospects are strong.

SELL RECOMMENDATIONS

Treasury Wine Estates (TWE)

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

This iconic wine maker, which owns the prestigious Penfolds Wines, recently rebuffed a US takeover offer and its share price has suffered as a result. What’s absent is a much stronger economy to stimulate discretionary spending, which would help turn around the company’s fortunes.

BlueScope Steel (BSL)

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

Its share price continues to languish and its medium term outlook is uninspiring due to a subdued local economy, moderation in Chinese growth and import competition. Better options exist elsewhere in the market.

 

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

Sirtex Medical (SRX)

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

SRX has consistently grown sales revenue quarter on quarter on the back of FDA approved targeted therapy for liver cancer. The liver treatment SIR-Spheres is now being clinically trialled for kidney cancer, which has strong growth rates. The intellectual property has much wider applications than just liver cancer and this is getting reflected in the share price. Additionally, most earnings come from offshore.

Aristocrat Leisure (ALL)

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

Governments around the world are trying to address budget deficits and ideally without raising taxes in low growth environments. Gaming revenue offers one such possibility. Aristocrat Leisure, as a gaming machine manufacturer, is an obvious beneficiary. The company has been diversifying its product portfolio, growing market share and recently completed a smart acquisition. It generates most earnings offshore.

HOLD RECOMMENDATIONS

Echo Entertainment Group (EGP)

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

Echo is currently a front-runner to be awarded an additional Queensland casino license. Expect an announcement in early 2015. A win would provide the company with material earnings upside. Irrespective of this outcome, EGP offers relative value to its global peers and has no Macau gaming exposure, where monthly revenues are trending down.

CSL (CSL)

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

The company recently reached a new all-time high after announcing it agreed to acquire Novartis’ global flu vaccine business for $US275 million. This should work well with its existing product line. On top of a share buyback, the company generates most of its earnings offshore and benefits from a weaker Australian dollar. These factors should support the stock.

SELL RECOMMENDATIONS

Sundance Energy Australia (SEA)

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

Crude oil had a very lacklustre bounce relative to other risk assets and continues to appear vulnerable. Excess oil supply from US unconventional sources is killing the oil price. US crude oil production has more than doubled since 2008. Sundance Energy is fully exposed to US unconventional oil and is leveraged to the oil price. The company is currently cash flow negative on high capital expenditure.

Austex Oil (AOK)

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

Our original buy thesis for Austex Oil from August 2014 was based around greatly increasing production and strong well economics coming into year’s end. The significant slump in oil prices greatly offsets the positives of production increases and worsens well economics, which flaws the buy thesis. In applying capital protection to appropriately manage risk, we sold this position last month.

 

Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

Veda Group (VED)

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

After breaking the downtrend in August and punching through strong resistance around $2.10, VED rallied strongly on the back of a better than expected full year result. Since peaking in September, the stock has pulled back, but in a very corrective manner, which means the stock still looks bullish. By congesting under the March peak, VED is using up some time now before getting ready to push through to a new high. It may possibly get as low as $2.10 again, but a breakout from this flag formation should see it commence a move to a new high. This data analytics company was trading at $2.26 on October 30.

JB Hi-Fi (JBH)

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

JBH recently pulled right back towards strong support at $14.50 and had also become very oversold when looking at the Relative Strength Index. Following upbeat commentary from the AGM, the shares surged 9 per cent.  No doubt many shorters were looking to cover their positions after some better than expected numbers. In our opinion, it appears a floor in the share price has now been found. With the stock recently trading at a very cheap 12.2 times next year’s earnings, we expect it to rally towards the next resistance level in the high $17 levels. Shares in this consumer electronics giant were trading at $15.78 on October 30.

HOLD RECOMMENDATIONS

Rio Tinto (RIO)

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

Since bouncing hard from the October low, RIO has spent the past few weeks retreating. You will notice the rally lasted only three days, but the pull back has gone on for two weeks without finding a new low. The pull back has been done in three waves, which is counter to the trend, and volume has tapered off. From a charting perspective, this is quite bullish and RIO holders can expect an imminent rally back up towards $63 in the short term. The shares were trading at $59.20 on October 30.

ResMed (RMD)

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

A good investment but it’s also been a good trading stock. Right now, it looks like a good hold in anticipation of higher levels. Since breaking the downtrend in April, the stock has made higher highs and higher lows. It was recently oversold prior to its sales results, but managed to bounce straight back. The chart still indicates that levels above $6 are achievable. Those looking for an entry point should buy on any weakness. Shares in this medical device company were trading at $5.87 on October 30.

SELL RECOMMENDATIONS

Ardent Leisure (AAD)

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

Owns and operates leisure assets. AAD has trended very well, but has started to show some divergence with the momentum in the past few months. That is, as the share price was pushing to a new high, the momentum was already trending lower. Following the sell-off after its AGM, there’s a good chance that the overall uptrend is ending here and the stock could fall back towards support in the mid $2 levels. The shares were trading at $3.24 on October 30.

Aristocrat Leisure (ALL)

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

Short term weakness is likely to befall this gaming machine maker when we analyse the chart. It had shot up vertically and was momentarily oversold before forming a bearish engulfing pattern last week on the charts. This typifies the end of a trend, so we would expect weakness at least back down towards $6 before reassessing. The shares were trading at $6.57 on October 30.

Please note: Aristocrat Leisure is a sell and a buy this week as market experts offer different views about the company.

 

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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.