Michael Gable, Fairmont Equities
BHP Billiton (BHP)
We consider any share price weakness in this global miner as a buying opportunity. Stable US interest rates should sustain demand for commodities, leading to higher prices. Any resolution to US and Chinese trade tensions could see BHP push through major resistance near $35.50. From a charting perspective, a move through $35.50 could see BHP attempt a rally towards $40. The shares closed at $34.83 on January 31.
Goodman Group (GMG)
Shares in this global property group have been trending up for several years. Industrial property is the pick of the REIT’s (real estate investment trusts). I expect GMG’s share price to be supported by forecasts of longer than expected stable interest rates, as opposed to near term increases. Any dips are worth buying, as I expect GMG to do well over the longer term.
Newcrest Mining (NCM)
We are bullish on gold this year, so NCM is back on our radar. After spending the past two years trading sideways in a large triangular formation, NCM has now broken free of that pattern. This means it should start trending higher from here and we can see levels above $30. Shares in this gold producer finished at $24.45 on January 31.
We believe crude oil prices have bottomed and STO provides the best leverage. Recent quarterly results beat prior guidance. Price action since the December lows has been impressive, and the charts indicate much more upside going forward for this energy giant.
The prospect of offloading franking credits saw buying support for this retail giant. However, the stock met resistance above $30. In our view, it trades on an excessive price/earnings ratio for a company offering little to modest earnings growth. If the interim result disappoints, the share price could slide. The stock closed at $29.37 on January 31.
IOOF Holdings (IFL)
The shares plunged in December 2018 after the Australian Prudential Regulation Authority (APRA) alleged IOOF had failed to act in the best interests of superannuation members. The company announced it would vigorously defend the allegations. Consider selling into share price strength, as the stock has been gradually gaining ground. Better opportunities exist elsewhere.
Michael McCarthy, CMC Markets
BUY RECOMMENDATIONS Lovisa Holdings (LOV)
A speciality, fast fashion bricks and mortar retailer. It owns and operates more than 320 stores in Australia and overseas. After identifying the latest trends, it provides a broad product range for fashion conscious women aged between 25 and 45. An innovative company offering a higher risk, but potentially higher reward investment. If it continues to successfully implement its strategy, the share price could regain 2018 highs around $12. The shares finished at $7.20 on January 31.
Costa Group Holdings (CGC)
Shares in this fruit and vegetable grower plunged from above $7 to mid $4 levels following a profit warning in early January. The stock has partially recovered to close at $5.53 on January 31. A lower share price may present an opportunity for long term investors to take a stake in a consumer exposed growth story. The two-year citrus cycle may be a catalyst for further share price recovery. HOLD RECOMMENDATIONS BHP Billiton (BHP)
The mining giant has continued to thrive despite worries about global growth and the Chinese economy. The recent tragedy at Vale’s iron ore facilities in Brazil is disrupting supply that’s unlikely to resume soon. The crude oil price has rallied. Previous concerns about the commodity outlook may mean the stock is under held, and BHP may continue to climb a wall of worry. ANZ Bank (ANZ)
Risks stemming from the banking Royal Commission inquiry are considerable, but they’re already reflected in a much more defensive positioning of banking and finance share prices. Compared to competitors, ANZ is further down the track in terms of divesting capital intensive business units. ANZ’s shrink to greatness strategy sets it apart from its peers. SELL RECOMMENDATIONS BWP Trust (BWP)
This real estate investment trust is generally considered a better choice in the sector, and consequently was recently trading near all time highs. However, its clients may be exposed to a further housing downturn, and, combined with a modest, unfranked dividend yield, its securities may suffer if current expectations of lower interest rates are dashed.
Transurban Group (TCL)
This toll road operator is well managed. However, the share price was recently trading near all time highs and on what can be considered a lofty price/earnings multiple of between 50 times and 65 times. Given exposure to rising interest rates amid potential earnings vulnerability to a rising Australian dollar, it’s difficult to consider TCL as a defensive stock, so the share price may correct. Dividends carry little franking, eroding its appeal.
Peter Moran, Wilsons
Amcor’s proposed takeover of US packaging company Bemis has been delayed due to the recent US Government shutdown impacting the approval process. However, integration planning is continuing and synergies from the merger are still likely to start benefit Amcor this year. The share price of packaging giant Amcor closed at $13.65 on January 31.
The company specialises in preventing infection. NAN technology disinfects medical devices unable to be sterilised by conventional means. Demand for its Trophon product has fuelled growth, initially in the US, but increasingly across the world. Several new products are being developed that will contribute to future growth. HOLD RECOMMENDATIONS
ARB Corporation (ARB)
This market leading developer and manufacturer of 4-wheel drive accessories has a strong brand and is poised to grow over the longer term. However, the shorter term outlook is more subdued as a result of softer new vehicle sales in Australia amid increasing costs. NextDC (NXT)
We expect solid growth to continue for this data centre owner and operator. However, we expect NXT to face increasing competition and narrowing margins in a growing industry. The shares have risen from $5.77 on December 24 to close at $6.85 on January 31. SELL RECOMMENDATIONS
Bendigo and Adelaide Bank (BEN)
BEN is one of the more heavily exposed banks to mortgage lending. This concerns us in a softer housing market, as bad debts tend to rise, particularly among over-stretched borrowers trying to meet higher household charges. In our view, better options exist elsewhere at this point in the housing cycle. Metcash (MTS)
Despite successfully cutting costs, Metcash’s supermarket business has struggled in recent years due to fierce and growing competition. Its hardware business has been a solid performer. But we’re expecting the hardware business to face challenges moving forward, as we see the construction pipeline starting to fade.
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