It’s reporting season this week, and that has caught the attention of our Switzer Super Report experts. Commonwealth Bank, Telstra and RIO are all announcing over the next few days (see James Dunn’s article).
Earnings reports
Director Paul Rickard was busy with the banks last week.
“I bought some Commonwealth Bank (CBA) last Wednesday when they got down near $72. I feel that the ‘market consensus’ about the banks being overpriced is now overdone – and I am looking to CBA’s report on Wednesday to re-ignite momentum in this sector,” he says.
Paul likes the bank’s tight cost control, steady margins, low bad debts and a small increase in revenue, which he believes should lead to a pretty impressive result.
As for the other behemoth reporting this week – Telstra (TLS) – Paul believes at around $5.01 it also starts to look like value.
On the grocery giant, Paul says: “Woolworths (WOW) produced a strong result last week and in a market that is down 3.5% since 1 January, Woolworths has risen by 3.3%. Though it’s now getting a little expensive.”
Peter Switzer agrees with this view, it is just an “OK buy” at these levels.
“If we get a big correction, I’d be trying to get Woolies around $32 something. It might not happen, as there are others like yours truly who want in, in the $32-mark. That said, I might have to be happy with a $33 plus price.”
Energy
Mike Kendall, executive director of JB Were, focussed on the energy stocks when he appeared on Switzer TV on Sky Business last week.
“Energy is one of the places to be over the next two or three years, particularly with the big gas revenues and Drill Search (DLS) is one of those thematics, so I think it’s one to keep an eye on,” he said.
“I think energy should be part of most shareholders’ portfolios.”
Mike likes Drill Search’s recent good production reports and its exposure to the Cooper Basin on the Queensland/South Australia border region.
Atlas Iron (AGO), which had a good run up of around 10% recently, is also on Mike’s radar.
He says that although the stock has been “all over the shop for a while” their recent production reports are encouraging and it offers an option to those who can’t afford to buy the giants BHP and RIO at significant volumes.
“We’ll actually see the stock price move up as the economy moves forward.”
Update
As for Peter’s shortlisted LogiCamms last week, it did suffer from a “we won’t do as well as we thought” announcement, but Peter says the response was a gross market overreaction.
Peter is still hanging in there, viewing it as a good company over the long term, but just wishes his timing could have been better!
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Also in the Switzer Super Report:
- Peter Switzer: How to play CBA earnings [2]
- James Dunn: Earnings season outlook – pressure to perform [3]
- Paul Rickard: The best rates on cash and term deposits [4]
- Tony Featherstone: Opportunities in emerging markets [5]
- Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say [6]
- Gary Stone: S&P 500 in perspective [7]
- Brittany Ruppert: Property market continues at speed [8]