Short n Sweet – Drillsearch, Tatts and Tabcorp

Editorial director of Switzer
Print This Post A A A

Each fortnight at the Switzer Super Report, we ask a professional investor i.e. a fund manager, for their favourite stock and why they love it.

One month ago, we had Elan Miller, senior portfolio manager of Pengana Capital’s Australian Equities Market Neutral Fund, explain why they are a big believer in Drillsearch (DLS).

“The stock scores very favourably on upward earnings revision and profit growth, as Drillsearch’s oil production guidance remains conservative and its wet gas commercialisation will be accelerated through the Santos JV. Drillsearch trades at a deep discount to its intrinsic value and provides exposure to the long-term potential of Drillsearch’s unconventional gas program,” he said.

The stock had returned over 20% in the six months since the fund manager bought the stock. Since our report, the stock is up almost 5%.

On the money

As the horses were off and racing for the one day of the year that we all stop, Tabcorp and Tatts Group were cheering. It seems you can’t lose money, betting on companies that bet. Last month we had James Dunn talking about those two behemoths.

“The traditional state TAB businesses run by Tabcorp and Tatts still represent almost 70% of the $26 billion wagered in Australia every year. The pair make up a highly lucrative wagering duopoly, but differ in the focus of their revenue: the lion’s share of Tabcorp’s revenue, just over three-quarters, comes from wagering; while TattsBet only contributes 21% of Tatts Group’s revenue – compared to lotteries, which generate 70% of the top-line. Tabcorp also has businesses in keno and gaming support services,” he said.

There may be some threats from offshore, as international companies rush in to get a piece of our very attractive gambling game, but these two companies will give them a run for their money. Tatts Group may not have had a fantastic month but Tabcorp is holding up quite nicely since our report.

Christmas bells

Although economic data released this week for the September quarter wasn’t that promising – GDP growth slowed to 2.3% from 2.4% for the year – the experts are pointing to a bumper few months for retail. It looks like this year will be one of the first years since the GFC that we really let our hair down. That means stocks like JB HiFi, Woolworths and Funtastic could be worth filling your stockings with.

Check out Charlie Aitken’s few on the first two here – he believes the East Coast recovery story will help push them along – and Roger Montgomery’s view on Funtastic one here.

PS: This week the Channel Nine IPO closed and will be priced at the bottom of its range at $2.05. It is due to list tomorrow. We didn’t like it when it came out, and despite being a little cheaper than expected, we still don’t think it’s a great buy.

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.

Also in the Switzer Super Report:

Also from this edition

View More Articles