Question 1: Any thoughts on artificial Intelligence (AI) stocks on the ASX that are worth a look?
Answer: It is very hard to play the AI theme directly because we have so few ASX companies involved in this space. Appen (APX) is one, but I am a little loathe to recommend it. The market is looking at more indirect plays. Goodman Group (GMG) and Next DC (NXT) have soared over the last few months in part because they are involved in data centres/property (there will be a huge need for specialist buildings/campuses to house the servers that AI will use). Another area to consider are companies that have large workforces involved in customer service/customer care/call centres…in the medium term, AI is expected to radically change what these centres do (and the cost base for the companies). The banks and telcos come to mind, but it could be too far down the track.
Maybe you play it indirectly by investing in an ETF on the ASX that tracks the NASDAQ index (and picks up the major companies in the USA). BetaShares has NDQ and HNDQ – the latter is the currency hedged version. Global X has FANG, which tracks 10 of the largest companies (including Nvidia). There are also actively managed international share funds that are trying to pick the eyes out of the AI market.
Question 2: In last week’s Boom, Doom, Zoom, Tony Featherstone mentioned a couple of smaller coal companies that he thought had potential. What were they?
Answer: The stocks mentioned were Stanmore Resources (ASX: SMR) and Coronado Global Resources (ASX: CRN).
Question 3: I hold shares in Xero (XRO), which have had a nice run up lately. Do the analysts see more upside?
Answer: Overall, the analysts see a bit of downside, with the consensus target price of $126.48, approx. 5.7% below Xero’s last ASX price of $134.08. However, there’s quite a range among the brokers. Ord Minnett (Morningstar) has a target price of just $78, while on the high side, Citi has a target price of $159. According to FN Arena, there are 4 “buy” recommendations, 1 “neutral” recommendation and 1 “sell” recommendation.
Ord Minnett isn’t convinced about Xero’s international plans (in particular, its targeted expansion in the USA), and hence the “sell” recommendation. From my perspective, this is the key watch point for Xero and why I’m not buying at these prices.
Question 4: As an investor with a small portfolio (which I am adding to weekly), what in your opinion is a profit in trading terms worthy of taking? 10% 20% 30% etc.? I have managed to have a few wins and do have a few stocks that are currently in the 20-40% range.
Answer: I don’t think there is a “right” answer to this question. Personally, for a short-term hold, I’d be happy with a profit of around 20%. However, if you come to the realisation that the purchase was a mistake, or the circumstances change for the worse, any profit might be good outcome. I really don’t think you should have a hard rule. It is a ‘case by case’ situation.