This week, the preferences of our ‘super stock selectors’ have been influenced by news delivered at recent company AGMs.
Michael McCarthy of CMC Markets likes SEEK (SEK), after the AGM confirmed its strategy and outlook.
In 2016/17, the company expects to post an annual net profit between $215 million and $220 million before one-off items. That’s up from the $179 million posted in 2015/16.
Another key AGM update was that SEEK continues to hold discussions with potential partners for its Chinese jobs business – Zhaopin.
“A PE/G [price/earnings to growth] ratio below 2 means SEEK is in my buy zone,” says McCarthy.
Seek
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Raymond Chan says there were no surprises at NextDC’s (NXT) AGM, which suggests the recent share price weakness has been overdone.
NextDC
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But that’s not the only share price correction that appears to have run too hard.
Premier Investments (PMV) has lost 23% over the past six weeks on the back of consumer discretionary concerns, notes Evan Lucas of IG Markets.
However, the business looks structurally sound to Lucas. He says its Smiggle business expansion in Europe is on track and in-line with estimates, and that the “margins Smiggle extracts will more than offset the collapse in the GBP”.
“Continued double digit earnings growth at Peter Alexander suggests that the current correction is due to reverse, as these two businesses make up 66% of earnings, and are trading in line with FY17 expectations.”
He sees solid upside going into PMV’s December 2 AGM.
“[PMV] currently trading on a forward blended P/E of 17.8 times, which is the lowest level since December 2014 and is a discount to its historical average. I would expect PMV to move towards $14.20, which would see PMV’s forward blended P/E moving to 20 times, which is still below PMV’s historical average of 22 times earnings.”
“The probably of PMV appreciating due to these factors is high and therefore I would look to buy at current price with a stop loss at $12.80. This level suggests the fundaments are being ignored and the downtrend is continuing.”
Premier Investments
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Chartist Gary Stone of Share Wealth Systems is bullish on the share price of a2 Milk (A2M) after it hit its highest ever closing price last week.
He says this milestone completed a trading price movement, which has lasted around 11 months, “and could see A2M’s share price push higher from this price breakout.”
A2 Milk
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A brickbat goes to Woolworths this week after an “underwhelming” AGM, says McCarthy.
“The AGM underwhelmed with lack of strategy development, and little explanation of the departure of the BigW CEO after less than a year are two key concerns.”
Stone says the Cochlear (COH) share price appears to be caught up in one of its typical pullbacks, which might run further before it finds support.
He suggests that support levels may be found around the $108 to $110 zone.
“Or more likely … around the 61.8% retracement area where COH’s share price typically retraces to, which is between $98 and $102.”
“When Cochlear does find support, its share price tends to track sideways for a few months before continuing its long-term rise,” he notes.
Cochlear
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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.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.