Likes
Michael McCarthy, chief market strategist at CMC markets has picked Invocare (IVC) for his like this week.
He says that despite a 37% lift in full year profit the stock is under pressure.
“Investors have reacted badly to management’s plan to re-invest in the business. In the short term earnings will likely fall as facilities are taken off line for refurbishment, but in my view this will further cement IVC’s leading position in its key markets.”
He says he is a ‘backfoot buyer’ between $13 and $14 for long-term value.
Our chartist Gary Stone from Share Wealth Systems likes ComputerShare (CPU),
He says the 15-year chart (below) shows that there is a high probability that CPU is well entrenched in a long-term uptrend that started a year ago when it broke above $13 – a 7-year resistance zone – and out of a wide-ranging 10-year sideways consolidation move that followed an eight-fold rise in price.
And looking overseas, Peter Wilmshurst, portfolio manager at Templeton Global Growth Fund Ltd likes Citigroup (NYSE:C). He says it is now returning to health following a rough patch during the global financial crisis.
“The bank went through a multi-year restructuring which included closing branches as well as exiting various businesses and countries. The stock has now appreciated and is trading at a slight premium to book value of $62/share,” he says.
“The management has a long-term goal of a return on tangible equity of 16% from their pared down set of businesses. Should they deliver, the shares would be on a single digit P/E ratio.”
Dislikes
Michael is not a fan of Woolworths. He says that although the half year result strongly indicates a turnaround due to CEO Banducci’s plan, the valuation looks stretched above $27.
“At around 20 times earnings he would need a magic wand to transform this stable earner to a growth stock. Additionally, the stock initially broke through previous resistance at $27.75, only to fall back through after the announcement, a stronger technical sell signal.”
Gary doesn’t like Ramsay Health Care (RHC).
“Ramsay’s share price is currently battling to break through a resistance zone between $67.50 and $69,” he says.
“At this stage there is a higher probability of a retracement around the $60 mark than an advance above this resistance zone.”
And as for Peter Wilmshurst’s least favourite stock this week, it’s another big international name – Colgate-Palmolive.
He says that although consumer staples have been a market favourite, should interest rates rise, which has been the trend so far in 2018, staples are likely to underperform the market.
“Colgate-Palmolive is trading at 22 times 2018 earnings but offering a yield of only 2.3%. The revenue has shrunk 10% over the last five years with increasing competition beating down the prices (more than 2% in Americas and Europe). In summary, it’s a stock with an expensive valuation and declining business,” he explains.
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