Michael Gable, Fairmont Equities
Distributes automotive aftermarket parts and accessories. Near term earnings risks are low and the stock isn’t expensive at current levels. The technical chart looks strong and the shares have been trending higher for several months. We believe the uptrend should continue and we’re happy to buy at current levels. The shares closed at $7.07 on October 11.
Qube Holdings (QUB)
We expect this logistic services provider to continue delivering solid profit growth going forward. Price action remains bullish, with the longer term trend remaining robust. Short term price weakness has presented a buying opportunity. The stock finished at $2.50 on October 11.
BHP Billiton (BHP)
Prior to a share price fall of 3.8 per cent on October 11, price action for this global miner had been most bullish. It made new highs for the year and we expect this uptrend to continue. Our technical levels suggest that a retest of the $40 region is possible in the next few months. The stock finished at $33.40 on October 11.
The chart for this energy giant has been strong for more than a year. Despite takeover speculation subsiding, the share price has continued to climb alongside stronger crude oil prices. Momentum remains strong and we’re targeting resistance levels near $8. The shares closed at $6.97 on October 11.
Bank of Queensland (BOQ)
Price action has been weak. After breaking support in late September, selling pressure has continued, with volumes kicking in on the way down. We expect the stock to retest the June lows below $10. The stock closed at $10.38 on October 11.
AGL Energy (AGL)
AGL broke below support in early August and the share price has remained under pressure. Poor price action leads us to believe that we could see lower levels. The next level of major support is down near $18. The shares closed at $19.03 on October 11.
Simon Herrmann, wise-owl.com
ALS Limited (ALQ)
ALS undertakes food and pharmaceutical quality assurance. It’s also involved in commodity certification, equipment maintenance and asset care operations. Following last year’s divestment of its oil and gas services unit, ALQ’s financial position has been getting stronger. Surplus capital was used for share buybacks and acquisitions in the less cyclical life sciences industries. Earnings growth is the primary share price driver and is behind our recommendation.
Australian Ethical Investment (AEF)
AEF has been a standout performer in the superannuation and funds management industry. Increasing demand for ethically managed funds with a low carbon footprint has, in turn, fuelled demand for AEF’s services. Ethical investing is a mega trend that’s poised to accelerate over the coming decade.
The value of this veterinary services provider and pet care retailer has halved since 2014 after growing its footprint at a staggering pace. Despite ongoing challenges to grow margins and earnings, the stock is starting to look attractive at today’s valuation. Greencross confirmed that it’s in discussions with several parties regarding “credible proposals”. Shareholders should sit tight and see how this scenario plays out.
Noni B (NBL)
This fashion retailer was recently trading near a multi year high, and acquisitions have the potential to deliver significant shareholder value over coming years. Hurdles include integration risks and competition, but the company has enjoyed solid momentum and appears well positioned to outperform the retail sector.
Fortescue Metals Group (FMG)
This iron ore producer has de-risked its balance sheet by cutting debt significantly since 2013. But we believe the company remains vulnerable to global trade tensions. Fortescue is exposed to economic risks associated with China and other emerging economies in Asia.
Ainsworth Game Technology (AGI)
Posted declining revenues and earnings in fiscal year 2018, but we expect further downside amid structural challenges and regulatory hurdles in the gambling sector. International expansion and new product launches are designed to revive the business, but we believe there’s more exciting sectors to invest in. Besides, AGI doesn’t pass our ethical investing screen.
Tom Ledgerwood, Medallion Financial Group
Aristocrat Leisure (ALL)
A leading gaming machine maker and solutions provider to clients across the globe. The north American division is a standout – a strong gaming pipeline positions the company to capture further growth. Merger and acquisition investment has bolstered the digital strategy, with total daily active users increasing sixfold. ALL generates high levels of recurring revenue. It generates 75 per cent of earnings in the US, so Australian dollar weakness should provide a boost to its full year report.
CGF is an investment management business and the largest provider of Australian annuities and guaranteed income products. Expanding to Japan is a strategic play in response to an ageing population. CGF also benefits from higher returning foreign currency annuities becoming an increasingly popular option. Despite the underwhelming recent result, the company remains financially sound.
CSL is a global plasma provider, with about 85 per cent of earnings generated from plasma fractionation. Increasing demand for immunoglobulin amid supply constraints among competitors should be key drivers during 2019. Its influenza vaccine has UK regulatory approval and is preferred by public health authorities. We expect margin expansion to continue.
IDP Education (IEL)
Provides international student placements and English language testing services. IEL also owns and operates several English language schools in South East Asia. We believe major business growth will come from exploiting available capacity in the overseas student placement market and from favourable changes to Indian Student Visa Assessment rankings. Fewer barriers to the Australian market provide an ideal opportunity for IEL to take advantage of the large Indian market, which is also exhibiting a burgeoning middle class.
Primary Health Care (PRY)
PRY has a network of medical, diagnostic imaging and pathology centres across Australia. We’re concerned as to whether PRY can extract enough synergies after acquiring seven Montserrat day hospitals capped at $138.5 million. Current valuations seem high given recent modest trends in earnings growth and operating margins. The price/earnings multiple was recently trading at a premium compared to earnings growth.
A wealth management company, with retail banking operations. With longer term systemic issues uncovered during the banking royal commission, the extent of downgrades linked to fee reductions and the downsizing of certain businesses still remains unclear. We’re concerned the risk of outflows may squeeze margins further.
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