Despite ongoing negativity about the domestic economic outlook, and overseas concerns with Putin flexing his muscles, there is still some significant good news at home.
For example over 80,000 full-time jobs were added to the economy in February. It is possible that things could be getting better, which would mean consumer discretionary stocks are in for a little bit of a rise, in the short-term at least.
Last week Charlie Aitken called a “boom” for discretionary retail and singled out JB Hi-Fi. It’s important to realise that calls like Charlie’s are not necessarily for the long-term – i.e. he also mentioned Myers and David Jones, which could do well if we do see a pick-up in activity but would need some major structural changes for them to be long-term i.e. five to 10 year holds.
This week Peter Switzer quizzed his Switzer TV guests for their picks in the retail sector.
Senior analyst at Citi Research Craig Woolford has been keeping an eye on the luxury retail sector in Australia.
“[It’s] one of the [sectors] that we’re seeing outperform, and contradict some of the challenges that we see for some other big retailers,” he said.
He sees luxury spending as over a $5 billion market, which is growing at double digits.
Craig also mentioned Super Retail Group (SUL) as a company that is dealing with challenges in the retail market well and Citi also has a buy on small retailer, Speciality Fashion Group (SFH).
“They are dealing with, and grappling with, and making changes for all these structural challenges that are facing retailers,” Woolford said.
Morgan’s Simon Bond was a little harder to draw on retail picks. He mentioned Woolworths as “expensive certainty” and realestate.com even though it has had a big run-up in price.
Peter Switzer also heard on the grapevine that UBS added QBE to one of its model portfolios – the broker reaffirmed its Buy rating on the stock on 26 February after its results.
And then early last week in an update, the broker said about adding QBE: “While the CEO has had five downgrades on his watch, this has at least left the balance sheet $1.5 billion n stronger, with key reserve metrics now at levels last seen in June 2008 and interest rates potentially providing more upside over the medium- term.”
But given the outcome of the Crimea vote this week, Peter also says that insurance companies could be in for a hiding if war talk escalates.
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Also in the Switzer Super Report:
- Paul Rickard – Bring out the Sangria – Leighton’s shareholders celebrate!
- Peter Switzer – Profitable Dirty Harry moment to buy BHP and Rio
- James Dunn – Potential M&A targets are to buy
- Roger Montgomery – The next chapter in the Sirtex story
- Rudi Filapek-Vandyck – Buy, Sell, Hold – what the brokers say
- Staff Reporter – Property continues to rise
