Shortlisted – resources and Resmed

Editorial director of Switzer
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As reporting season kicks off, analysts have been pleasantly surprised by the lack of warnings.

Chief market strategist for CMC Markets, Michael McCarthy, says that so far the results have been encouraging.

“We have seen a few companies warning on earnings but not at the volumes we’ve seen recently and that suggests we might get some positive surprises over the next three weeks,” he said on Switzer TV last week.

He wouldn’t be surprised if he saw overall earnings growth for the S&P/ASX 200 of close to 9%.

Resource focus

“I believe the market hasn’t sufficiently priced the pick up in volumes in resource stocks … the whole sector could be one of the outperformers and that could start with this reporting season,” he said.

He also believes, like Charlie Aitken last week, that the laggards, or dogs, could do well.

He says to look out for poor performers that show evidence their earnings falls are bottoming.

“That’ll see analysts revising up their estimates for next year and some of those dogs of the market…could be the big performers over the next six months or so.”

He likes Oil Search (OSH) and in the mining services sector, Mermaid Marine (MRM).

“Oil Search is a company in transformation. It’s turning into a producer and I don’t believe the market has correctly priced that. I expect that’ll be in double digits by the end of this year,” he said.

And he suggests Boart Longyear (BLY) as a play for the speculators.

“Boart Longyear is either going to fail or double in price.”

Boart Longyear (BLY)

Source: Yahoo! 7 Finance

Offshore players

Peter Switzer points out that as the US dollar rises, and the Aussie falls, companies that could benefit include Myer (MYR).

“Some analysts think that Myer could become a takeover target when the Australian dollar falls,” he said.

McCarthy agrees and Ben Griffiths, co-founder of small cap manager Eley Griffiths, also likes companies that have been getting the runs on the ground overseas.

“There is a growing hoard of Australian small companies that have headed offshore. [They’ve] gone over to develop their business models from their Australian roots,” he said on Switzer TV.

He lists companies like Ardent Leisure (AAD), Dominos (DMP), Slater & Gordon (SGH) and Breville Group (BRG) as companies that have successfully been able to do that.

“It’s a move that’s happened and a softer currency will certainly benefit the earnings lines.”

Resmed

Paul Rickard likes Resmed (RMD) after it took a caning on Friday following disappointing June quarter sales numbers.

“Softer sales in the US were partially offset by growth in international markets,” he says.

“Hopefully it’s a temporary hick-up in their long-term growth story – at around $5.23, it looks like good value.”

Resmed (RMD)

Source: Yahoo! 7 Finance

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