Likes
First up today, CMC Markets’ Chief Market Strategist, Michael McCarthy likes Coles (COL) because the now stand alone supermarket business is trading at a PE discount to its major rival Woolworths (WOW), despite a recent rally. “Given concerns about the international outlook, Australian focussed businesses with steadier earnings profiles could receive further support, and COL looks like a stand out to me,” he says.
Next up, ST Wong, CIO & Portfolio Manager, Equities, Prime Value Asset Management Ltd, likes Northern Star Resources (NST) because he says that with the continuing market volatility, some portfolio exposure to gold is probably a good idea. “NST is an Australian gold producer with three operating mines at Jundee and Kalgoorlie in WA and Pogo in Alaska. The company produced 575koz of gold in FY18 and is aspiring to lift production towards 1Moz,” he says.
“The share price has fallen 12% since late October to $8.20 and appears comparatively attractive to its (competitors) on a valuation basis given the quality of NST’s assets and growth potential.
Dislikes
Michael doesn’t like IOOF (IFL), nor does he see it as a bargain. “Despite the c. 35% share price fall, I struggle to see value here. In my view any company management pushing back strongly against a regulator’s findings is usually digging a deeper hole for itself, especially in the current fraught financial services industry environment,” he says.
ST doesn’t like QBE (QBE) believing it remains a highly complex organisation and while efforts are being made to simplify it, risks remain high. “QBE has been a beneficiary of the market short-termism with its share price well supported due to rising US bond yields. QBE benefits from rising bond yields as its investment returns will benefit from the uptick in rates,” he says. “As quickly as bond yields rose in recent months, yields are unwinding – QBE’s share price will be correlated, he adds.
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 regard to your circumstances.
