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John Athanasiou, Red Leaf Securities
BUY RECOMMENDATIONS
Coles Group (COL)
Chart: Share price over the year
The supermarket giant has been benefiting from Coronavirus fears, in our view. Fearful shoppers have resorted to panic buying, stripping shelves of toilet paper, tissues and hand sanitiser among other products. The company’s recent dividend yield of about 3.5 per cent is most attractive in an environment where the Reserve Bank cash rate continues to fall.
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year
During the global financial crisis, the Domino’s share price held up relatively well. We’re not suggesting the Coronavirus will lead to another GFC, but a likely short term outcome is increasing home deliveries of take away food, such as pizza. We expect DMP to benefit at the expense of restaurants – at least for the next few months.
HOLD RECOMMENDATIONS
The A2 Milk Company (A2M)
Chart: Share price over the year
This infant formula company has been one of the better performing stocks on the ASX during the broader sharemarket correction. We believe A2M has also benefited from panic buying. On February 27, the company reported first half total revenue of $NZ806.7 million, an increase of 31.6 per cent on the prior corresponding period.
CSL (CSL)
Chart: Share price over the year
Shares in this blood products company were hammered on March 12 along with the broader market. Prior to March 12, the share price was off its highs, but had held up relatively well in what we now believe is an oversold bear market. Investors should consider holding unless company specifics change and suggest otherwise.
SELL RECOMMENDATIONS
Betashares Australian Equities Bear Hedge Fund (BEAR)
Chart: Share price over the year
Historically, sharemarkets do rebound after a market correction, but when? During previous corrections, astute investors have benefited from buying oversold stocks in gloomy markets and selling them in boom times. But investors should regularly weigh up their individual objectives and take into account their personal circumstances. We believe the Australian sharemarket is oversold. Investors should consider taking profits in BEAR. The price has risen from $11.05 on February 20 to close at $14.47 on March 12.
Northern Star Resources (NST)
Chart: Share price over the year
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NST is one our preferred gold stocks on the ASX. Shareholders should consider taking profits, as we believe there’s better value outside the precious metals sector. Our sell recommendation isn’t a reflection of company performance, but rather our view of limited upside in the gold price.
Justin Klimas, Wilsons
BUY RECOMMENDATIONS
Cochlear (COH)
Chart: Share price over the year
This hearing implants maker should benefit from a competitor’s voluntary recall of several models. Clinical reviews of Cochlear’s latest Osia 2 System have been encouraging. A new speech processor for the existing Nucleus 7 product should boost growth when market volatility subsides. We retain an overweight rating on the stock.
ResMed (RMD)
Chart: Share price over the year
RMD develops, makes and sells medical devices for treating sleep disordered breathing and other respiratory diseases. Sales of masks have been strong, and automated re-supply solutions are gaining popularity. I see short term upside in ventilator sales, particularly from China due to the Coronavirus resulting in growing hospital admissions. Also, US and European patient numbers are increasing due to the Coronavirus. We retain an overweight rating on the shares.
HOLD RECOMMENDATIONS
Capitol Health (CAJ)
Chart: Share price over the year
Provides diagnostic imaging and related services to the Australian health care sector. In our view, the company reported satisfactory organic revenue growth in the 2020 first half, but there’s potential for rapid growth by deploying its balance sheet for mergers and acquisitions. We retain a market weight rating.
Think Childcare Group (TNK)
Chart: Share price over the year
Operates childcare centres. TNK has been acquiring more mostly in Victoria. Full year 2019 underlying EBITDA of $14.8 million on a like-for-like basis was in line with guidance. Encouragingly, direct impacts from recent bushfires were minimal. The relatively higher valuation compared to peers dampens my enthusiasm at current prices. We retain a market weight rating.
SELL RECOMMENDATIONS
Nanosonics (NAN)
Chart: Share price over the year
This manufacturer and distributor of the trophon ultrasound probe disinfector posted solid results for the 2020 first half. However, no further material information was provided on the company’s second product platform. I feel the share price reflects overly optimistic expectations for the second product platform given a lack of information to support the valuation. We retain an under perform recommendation.
Wagners Holding Company (WGN)
Chart: Share price over the year
This diversified construction materials provider experienced pricing pressure in the cement and concrete market in south east Queensland during the 2020 first half. Pricing pressure significantly impacted margins. A decline in Queensland construction activity amid increasing competition and softer residential activity provide further headwinds for the company. We retain an under perform recommendation.
Tim Montague-Jones, ASR Wealth Advisers
BUY RECOMMENDATIONS
ResMed (RMD)
Chart: Share price over the year
Investing in developing and expanding digital home health care services, via its Brightree acquisition, is a growth strategy. State governments can generate cost savings by using RMD’s cloud-based software and hardware to remotely monitor the health of patients. We expect the Coronavirus to pressure US hospital capacity. We believe RMD revenue will grow in response to a US health care system increasingly adopting and using more remote health care technology.
Ansell (ANN)
Chart: Share price over the year
The company makes and sells personal protection equipment, such as gloves, to the global health care industry. Due to the global spread of Coronavirus, we expect a significant increase in underlying demand for ANN’s products. Consequently, we expect input costs to fall as the global economy enters a period of slowing output.
HOLD RECOMMENDATIONS
Spark Infrastructure Group (SKI)
Chart: Share price over the year
Owns equity interests in electricity networks across South Australia, Victoria and New South Wales. Lower returns from cash deposits increases the relative attraction of corporate yield, particularly from companies such as SKI because its returns are largely regulated. Regulated returns offer a stable revenue stream. The fall in bond yields is largely priced into the value of SKI. We expect little capital growth, but the income remains attractive.
AusNet Services (AST)
Chart: Share price over the year
Owns and operates the Victorian electricity transmission network. Like SKI, this company has benefited from investors searching for defensive corporate yield. AST generates income from a largely regulated industry delivering power to many homes and businesses. Regulated returns are attractive because they deliver consistent cash flow, while reducing borrowing costs that support shareholder returns. Hold for appealing income yield.
SELL RECOMMENDATIONS
Fortescue Metals Group (FMG)
Chart: Share price over the year
This iron ore producer benefited from stronger iron ore prices in 2019. However, we’re concerned about potentially weaker iron ore and other commodity prices going forward due to the Coronavirus painting a softer global economic outlook in 2020. We expect mining companies, such as FMG, face a contraction in demand for commodities, and that’s likely to impact earnings and valuations.
Orica (ORI)
Chart: Share price over the year
Surging commodity prices in 2019 buoyed the mining industry, as China stimulated its economy in response to the US trade war. Orica provides explosives to the mining industry. We’re expecting weaker mining activity and softer commodity prices. This, in turn, is likely to have a negative impact on Orica’s performance.
The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing.
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.
