This week, one of the big banks and an energy giant feature in our experts’ stable of picks, while healthcare and an embattled supermarket features in their dislikes list.
For the second week in a row, Morgans’ managing partner, Raymond Chan, nominated Origin Energy as his pick after a 5% weekly gain. He remains positive on how its Australia Pacific LNG Project is ramping up, and says its balance sheet looks OK after last year’s capital raising.
To Chan, stocks Ramsay and Sonic Healthcare look too expensive, with their Friday closing prices at $71.25 and $21.65 respectively.
Evan Lucas of IG markets remains upbeat on the “switch trade” he has witnessed over the last few weeks. That is, the shift from Westpac Bank to the National Australia Bank.
“So far, NAB is up 6.5% versus WBC’s 2.1% move month-to-date. It is down to yield, thanks to the shift from the RBA. However, NAB’s cleaner CET (Common Equity Tier) position at this point in the cycle is likely to give it just that little bit more room to move up on its rival before the next reporting season, and possible changes to reporting of BDD (Bad and Doubtful Debts)”.
“I do see the momentum in the banking space running out of steam in the next few weeks, but believe that until that trigger point, remaining positive on NAB will be advantageous,” Lucas says.
Michael McCarthy of CMC Markets likes James Hardie after its good report last week revealed a solid 10% underlying profit growth.
McCarthy says these profits, coupled with US earnings that look better at lower Australian dollar levels, a US $100 million buyback, and a technical break to all-time highs, could mean James Hardie continues on its winning streak.
McCarthy still doesn’t like supermarket giant Woolworths, with “no sign yet that the new management group is getting traction.”
“Sales results across WOW’s segments suggest [the company] is either missing out on a sector upswing, or is being eaten alive by its competitors,” he says.
Consumer discretionary stocks are in the good and bad books for Lincoln Indicators Elio D’Amato.
D’Amato likes the satisfactory financial health of Aristocrat Leisure, and says its position as a global developer for social gaming is a natural one that “completely opens up their market potential” with little restrictions at this stage.
Tabcorp is the consumer discretionary stock out of favour with D’Amato, with “substantial increasing competitive pressures” in the domestic online gaming market.
“Participating in a highly regulated industry, regulatory risks remain with the Federal Government’s review into illegal offshore wagering continuing,’’ D’Amato says.
Our resident chartist Gary Stone has also nominated Tabcorp for his dislikes list.
Stone is optimistic on Carsales.com, as the share price has broken out to new all-time highs “after a 20 month consolidation.’’ Carsales.com shares closed on Friday at $12.72.
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