Brett Schreuders, Alto Capital

BUY RECOMMENDATIONS

Antares Energy (AZZ)

Fracturing of the Frances Dilworth No. 2 well and subsequent testing will provide highly anticipated data on the production capability and condensate yield of the Eagle Ford shale located on Antares acreage. Successful testing will support resource estimates of 1.38 trillion cubic feet of gas across Antares Energy’s permits and may provide substantial share price upside. This is a speculative buy.

GrainCorp (GNC)

Its recent United Malt acquisition transforms it from a national storage and handling service provider to an international agribusiness operating across four countries. A more stabilised and diversified earnings base should attract investors wanting to rotate out of currencies and into hard assets. A global food shortage should help underpin the share price, and any signs of inflation will be a bonus too.

HOLD RECOMMENDATIONS

BHP Billiton (BHP)

With such a diverse range of resource activities, BHP is increasingly viewed as a commodity exchange traded fund. Currency trading contracts suggest there’s now a rotation from all currencies in to hard assets, and many of these appear to be bottoming when priced in Aussie dollars. This should see some of that money heading into BHP shares. The price breaking $40 a share is positive and a move above $42 would be very bullish.

Vmoto (VMT)

Vmoto, a motor scooter maker, has achieved several milestones in the past 12 months, including raising capital, retiring debt, completing stage one of its Chinese manufacturing facility, buying out its joint venture partner and locking in key management. With a growing order book and stage 2 of the manufacturing facility due for completion in 2010, profits are just around the corner.

SELL RECOMMENDATIONS

National Australia Bank (NAB)

After a stellar run in the past six months, it’s time to take some of those NAB bank profits and put the money to work elsewhere. With headwinds from the global financial crisis still prevailing, the big four banks all look to be over-bought and appear a little wobbly on the technical side of things.

Seek Limited (SEK)

A premier online job classifieds provider, with almost 60 per cent of the Australian and New Zealand markets. The company’s fortunes are closely tied to recovering economies, but the share price has rallied 240 per cent in the past eight months and has met resistance around $7. Take profits and look for a cheaper entry next year.

Ben Potter, RBS Morgans

BUY RECOMMENDATIONS

Whitehaven Coal (WHC)

Offers considerable growth through its coal projects located in the Gunnedah region of New South Wales. After a capital raising earlier this year, the company is financially sound with a $240 million cash position. With more consolidation expected within the coal sector, WHC is a potential takeover target, which may push the share price higher.

Tabcorp Holdings (TAH)

Tabcorp has made a significant commitment to build its casino division by investing $575 million in Sydney’s Star City. Both gaming and non-gaming capacity will substantially increase at Star, with the gaming floor area growing more than 50 per cent. At current prices, Tabcorp is a good buying opportunity.

HOLD RECOMMENDATIONS

Transurban Group (TCL)

The Transurban board has rejected a takeover bid from two Canadian pension funds pitched at $5.25 a share, but it may be open to higher offers. Shareholders should continue holding this toll road stock in anticipation of a higher bid, possibly around the $6 level.

Toll Holdings (TOL)

This transport and logistics giant provides excellent leverage to an improving economic cycle and, with a strong balance sheet, looks set to make further acquisitions next year. Its Asian operations continue to provide solid growth and investors should look to accumulate shares on any price weakness.

SELL RECOMMENDATIONS

BT Investment Management (BTT)

BTT is an Australian-based funds management business. While the first half 2009 profit result demonstrated strong cost-cutting ability, it also highlighted the negative margin effect from investors shifting from equity investments to cash. BTT is trading on an expensive price multiple and better value can be found elsewhere in the sharemarket.

Sims Metal Management (SGM)

Operations include buying, processing and selling ferrous and non-ferrous recycled metals. We recognise SGM’s earnings will improve considerably should scrap flows and margins normalise, but this could still be 12-to-18 months away. On a full-year 2010 price earnings multiple of 22 times, there’s cheaper opportunities to play a recovery in steel markets.

 

George Tsarouhas, Alpha Equities & Futures

BUY RECOMMENDATIONS

Coca-Cola Amatil (CCL)

With a price/earnings ratio around 16 times based on next year’s consensus numbers and a dividend yield of 4.5 per cent, CCL is priced for moderate growth. Recent profit guidance was re-iterated and is expected to come in at the high single digit for EBIT (earnings before interest and tax) and NPAT (net profit after tax) growth. This is a great achievement for a staple like CCL. It’s one for the portfolio.

Cochlear (COH)

Makes and markets cochlear implants used to stimulate impaired hearing. Many in the industry know that Cochlear’s implantable stgice is the gold standard for enabling profoundly impaired patients to hear. By no means a mature market, there’s still plenty of growth in existing and unstgeloped markets, such as South America, Eastern Europe and China A high quality growth stock.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

The improving outlook for coal prices, a strong food and liquor environment and speculation about corporate activity in the insurance sector have all helped the company’s share price beat the market lately. It’s certainly outperformed Woolworths recently and is trading at a premium to its rival. A great company that’s well positioned for the year ahead. However, it’s fully valued based on fairly aggressive outlook forecasts. Not much is left to chance.

Perpetual (PPT)

Perpetual has copped a clobbering of late and is now trading in line with most brokers’ medium term valuations. However, with a price/earnings ratio of about 19 times and a yield of just below 6 per cent, it’s a hold. Expect margins to recover next year. Management’s strong track record is a reason to stick with this stock.

SELL RECOMMENDATIONS

David Jones (DJS)

A recent positive update has sent it’s price back up as management continues to flood the market with news.  A quality company in the consumer discretionary space and one with strong operational leverage if consumer spending continues to rebound. My take is a little contrarian – sell at $6. Even with a potential earnings upgrade through the Christmas season, I can’t help but wonder where to from a price/earnings ratio of 17.5 times? Profit taking is in order, with the possibility to re-enter at more attractive levels.

BlueScope Steel (BSL)

Global steel production has been turned back on and capacity utilisation rates are rising, but input and final product prices have been falling. There’s also talk of China having over-produced steel, putting further downward pressure on prices as they seek to dump it on the global market. The stock is highly leveraged to a recovery, so it’s vulnerable to disappointment if evidence grows of global re-stocking coming to an end.             

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.

Other articles in this week’s newsletter

Portfolio Watch: Oil Aboard – Value Oil Stocks For The Future

18 Share Tips – 30 November

Top-Down Analysis: Finding The Right Stocks And Sectors

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Managed Funds: Does Size Really Matter?

Uranium junior miner on BUY List

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