This week, CMC Markets’ Michael McCarthy makes a big contrarian call – he puts ANZ (ANZ) on his likes list. The stock is currently in the not-so-good books in Buy Hold, Sell – what the brokers say.
McCarthy doesn’t believe the bank confronts a debt crisis after it announced it would take a $100 million in credit provisions and market concerns remain about further doubtful debts. With the share price under pressure, a dividend yield (with franking) close to 11% and the stock trading at a price-to-earnings (PE) around 9.5 times, McCarthy is “happy to add to holdings”.
McCarthy doesn’t like Wesfarmers (WES). While the conglomerate responded quickly to the distortion of revenue numbers at Target, McCarthy says that the “revisions undermine the rationale for viewing WES as superior to Woolworths (WOW)”.
“The retail wars may be heating up, and at a lofty valuation WES share price could be vulnerable. This is on top of further potential rotation away from consumer staples into discretionary, which will increase share price pressure,” McCarthy says.
In the materials sector, Morgans’ Raymond Chan has put BHP Billiton (BHP) on his likes list but he doesn’t like Arrium (ARI). He notes BHP’s price is attractive despite last week’s fall in oil price. He does not like iron ore miner and steelmaker Arrium (ARI) because of the company’s debt levels. Today, the company announced a trading halt after its lenders rejected its recapitalisation plan with GSO Partners.
Lincoln Indicators’ Elio D’Amato likes TPG Telecom (TPM) but not industrial stock Spotless Group Holdings (SPO).
D’Amato says that TPM announced a “particularly strong” half-year 2016 result with “increased contribution from the corporate segment, offsetting some weakness arising from the NBN margin pressure”. He also notes that its purchase of AAPT and iiNet now “successfully integrated”, will position the company for further earnings growth.
In contrast, SPO will struggle to deliver earnings because the business is “highly reliant on renewal of contracts in order to sustain revenue”. The company also recently downgraded earnings guidance due to unexpected costs.
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