The big event ahead is reporting season that starts in earnest this week. To get myself in the excitement mood, I invited my old friend and Switzer Super Report colleague, Rudi Filapek-Vandyck to trawl through his own FNArena website and add in his own ‘magic dust’ to give me three stocks he thinks will report well.
If he’s right, then we could get a jump on the market that’s bound to pounce on better-than-expected reporting companies.
I asked for three, but Rudi has never heard of “promise more and deliver less”, which is good for us.
Rudi thinks this will be one of the best “we have seen in many, many years”. However, while this sounds exhilarating, he says these companies’ show-and-tells are about “yesterday’s news”. And as the outlook isn’t as great as it might’ve been, the statements about where the companies might be going could put a dampener on the positivity of reporting season.
Why? Well, try these: the strong Aussie dollar, questions about commodity prices going higher, subdued consumer spending, Donald Trump’s failures so far, the impact on housing with regulators trying to slow it down, etc.
That said, Rudi still found a group of companies he thought were poised for a good report.
He thinks the best sector will be the resources sector and said there could be some dividend or buyback surprises.
He says Rio is an obvious choice but pointed out that Fortescue (FMG) is becoming one of the great dividend payers on the ASX. “Higher than Telstra!” he added forcefully.
He thinks gold miner St. Barbara (SBM) might start paying a dividend and South 32 simply has too much cash. Whitehaven Coal could also provide a nice surprise.
The second category has high P/E stocks and Rudi says that as a group they usually report well, though a one-off bad performance by one or two brings excessive criticism for these sorts of companies. In this group, he thinks REA Group (REA), Carsales (CAR) and CSL (CSL) will all surprise to the upside.
The final group that has attracted Rudi is labelled the “beaten down ones.”
He says many of these are often sold off as a result of sector-wide selling but the market hasn’t really correctly noted their points of difference. He thinks there’s opportunity to do well out of these stocks even if there are a lot of short sellers around.
He likes and owns Bapcor (BAP) and thinks this is a classic case in point. Only last week, the company did come out with good news that made you think that Rudi is beeping the horn on an outfit that could surprise in coming weeks.
For Beatles fans, he likes an oddly-named company called Here There and Everywhere, which is the old APN News & Media. And under HT&E (HT1), they do have outdoor media as well!
In the tech-space, he says the analysts have the hots for APPEN (APX) and Integrated Research (IRI). He says APPEN has already taken off, indicating good news is expected but thinks IRI has better days ahead and reporting season could be the start of something big.
Easy bets look like STW (SPDR S&P/ASX 200 Fund) and IOZ (iShares S&P/ASX 200 ETF), with the S&P/ASX 200 Index at 5702, at the time of writing. And if we see 6000 this year, which I think looks very likely, then that would be a 5.2% gain plus 2.5% for dividends and then franking. And if I’m wrong, you still hold the country’s best 200 companies.
I also like my SWTZ fund (Switzer Dividend Growth Fund), with the September and December quarters being the best for dividends. And once again, even if a market curve ball hits stocks, you will be holding an exchange traded product with some of the country’s best dividend payers wrapped up inside it.
Over last week, Charlie Aitken reckons Telstra (TLS) was good value at $4 and I know some smarties who thought $4.12 looked OK!
The telco sector is troubled but you’d have to think CEO Andy Penn knows he has to pull a pretty damn big rabbit out of that huge hat of Telstra’s.
It’s going to be the biggest story of reporting season and it all happens on August 17.
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