Despite the negative news surrounding resource major Rio Tinto (RIO) – which was recently downgraded by Citi analysts – CMC Markets’ Michael McCarthy likes the stock. McCarthy says its reported fiscal 2015 earnings “were broadly in line.”
“Cutting the progressive dividend policy and further reducing capital expenditure are signs of prudent management at this point in the commodity cycle,” McCarthy said.
According to McCarthy, the miner’s share price is not fully reflecting the 2016 turnaround in iron ore prices.
McCarthy does not like the Tatts Group (TTS), “at least not this week”. He reckons that the stock is priced more than its market growth prospects and could face a “savage sell off” when it announces its results on Thursday. Having said that, McCarthy will keep an eye on TTS with a view to “buying back in on any sell off”.
Prime Value’s Shih Thin Wong likes Baby Bunting (BBN), a stock favoured by Switzer Super Report expert Charlie Aitken.
Wong was pleased with BBN’s first-half results last week “that underlined good top-line sales growth due to market share gains and the benefits of a growing store network”.
A potential legislative change could have adverse impacts for the Lifehealthcare Group (LHC), which is the key reason why Wong does not like the stock. The Health Minister announced a working group to implement changes to the Federal Prostheses list (PL).
The company has about 35% of sales set by the PL. This legislative change also spurred UBS stock analysts to downgrade the stock in last Thursday’s report, Buy, Sell, Hold – what the brokers say.
IG Markets’ Evan Lucas still remains firm with his call that the banks have been heavily discounted.
National Australia Bank (NAB) and Westpac Banking Corporation (WBC) are his preferred calls this week.
Both banks are due to provide trading updates.
“Asset quality and the underlying capital on the balance sheets are very strong and the pessimism built into the banks has moved too far”, Lucas says.
Given that reporting season is now in full swing, Lucas prefers “to pass” on what stocks he dislikes this week and prefers to see the upcoming results to “judge where things could head”.
Our Super Stock Selectors is a survey of prominent analysts, brokers and fund managers. Each week we ask them to name a stock they like, and one they don’t like. We purposely ask for ‘likes’ and ‘dislikes’ instead of recommendations, so it provides an idea of what the market is looking at, rather than firm buys or sells.
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