The resources and energy sectors remain challenging and this week businesses in these sectors were out-of-favour with two of our stock selectors.
Raymond Chan from Morgans doesn’t like Fortescue Metals Group (FMG) because of debt issues.
“Fortescue is still a bit of a concern because of its debt profile despite some recovery in iron ore prices,” Chan says.
Lincoln Indicators’ Elio D’Amato doesn’t like Origin Energy (ORG) despite the business trading at a discount.
“Origin continues to operate in a weak commodity price environment and there may be further downside ahead,” he says.
D’Amato sees better opportunities in other sectors.
A stock that D’Amato does like is the Mantra Group (MTR). The business provides accommodation in the properties located in central business districts and resorts. Management upgraded full-year guidance following recent acquisitions.
“We believe the company is well-placed to consider further acquisitions both domestically and abroad, while Mantra Group should also be able to capitalise on increased tourism for regions that it operates in,” D’Amato says.
This week, CMC Markets’ Michael McCarthy likes a stock in the resources sector – Oil Search (OSH). The stock has been downgraded in today’s Buy, Sell, Hold – what the brokers say, but McCarthy says the share price is showing clear signs of stabilisation.
“Oil prices are steadier and less volatile and the company report shows expansion is ongoing. Useful to those seeking energy exposures in the long term,” McCarthy says.
Slater and Gordon (SGH) continue to remain in the headlines and McCarthy sees the 90% fall in its share price as a “value trap”.
This week he doesn’t like the stock and believes there are still problems around its ability to renegotiate borrowing facilities.
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