Shawn Uldridge, William Shaw Securities

BUY RECOMMENDATIONS

AMP (AMP)

Chart: Share price over the year to versus ASX200 (XJO)

AMP has underperformed the broader market in the past month and was trading at $4.37 a share on February 9. The disappointing price can only be justified, in my view, by the poor QBE Insurance report last month, which saw the dividend slashed by 60 per cent. We believe AMP will perform better as it offers a very different business model.

Fortescue Metals Group (FMG)

Chart: Share price over the year to versus ASX200 (XJO)

This iron ore producer, from a technical basis, has moved through resistance at $5.20 a share, and now looks set to climb to $6. The company was recently granted a further mining approval. We expect the stock to be supported by strong buying and short covering as momentum builds. The shares were trading at $5.35 on February 9.

HOLD RECOMMENDATIONS

Westpac Bank (WBC)

Chart: Share price over the year to versus ASX200 (XJO)

Interest rates are still expected to fall this year and WBC’s grossed up dividend yield is above 10 per cent. The yield is most attractive compared to bank deposits. Retain your exposure, or even buy.

BHP Billiton (BHP)

Chart: Share price over the year to versus ASX200 (XJO)

The share price is up about 8 per cent since recent lows two months ago. And we expect more share price upside from here. BHP is trading on a price/earnings ratio below 10 times and profits are growing. Hold for the long term.

SELL RECOMMENDATIONS

Quickstep Holdings (QHL)

Chart: Share price over the year to versus ASX200 (XJO)

This manufacturing technology company had been a mainstay in our portfolio for eight years, but we have moved to a sell recommendation. It has just completed another capital raising at 16 cents after raising money last year. Unless the company begins to make a profit, investors will continue to sell in the face of ever-higher funding requirements.

Harvey Norman (HVN)

Chart: Share price over the year to versus ASX200 (XJO)

Even though the share price is low, the internet has forever changed the retailing sector. HVN has high fixed overheads in its premium retail space. Consumers are browsing in shops then finding the best deal online. Sell and invest elsewhere. The shares were priced at $2.08 on February 9.

Clive Briggs, RBS Morgans

BUY RECOMMENDATIONS

Bradken (BKN) 

Chart: Share price over the year to versus ASX200 (XJO)

We believe the drivers of an expected stronger second half include integrating the Norcast business, the rollout of the GET (ground engaging tools) product range and organic growth. BKN’s full year 2012 guidance is premised on the execution of existing work rather than the need to fill its order book. As market focus gradually shifts to full year 2013, we note a very reasonable forward valuation - 7 times earnings before interest and tax.

Lend Lease (LLC)

Chart: Share price over the year to versus ASX200 (XJO)

Lend Lease is a standout, with an update on the Barangaroo development expected to be a positive catalyst for the stock. We continue to believe LLC is undervalued, with the business well placed to grow earnings from a ramp-up in activity on major projects.

HOLD RECOMMENDATIONS

APA Group (APA)

Chart: Share price over the year to versus ASX200 (XJO)

Since the start of the financial year, APA is up almost 25 per cent on a total shareholder return basis versus around a negative 5 per cent for the S&P/ASX200 at February 8. We like its exposure to rising gas usage, but given its strong outperformance, we have moved to a hold recommendation.

Brickworks (BKW)

Chart: Share price over the year to versus ASX200 (XJO)

Following its annual general meeting and first quarter trading update, we have downwardly revised our forecasts for the building products division. While BKW’s earnings should be supported via its cross holding in Washington H Soul Pattinson, we believe conditions remain challenging in its primary market.

SELL RECOMMENDATIONS

Energy Resources of Australia (ERA)

Chart: Share price over the year to versus ASX200 (XJO)

We have made material changes to our base case valuation for this uranium producer, factoring in higher capital expenditure, rehabilitation costs, along with revised assumptions for its Ranger 3 Deeps resource. We believe the company outlook remains too uncertain from an investment point of view, so we retain our sell recommendation.

Aquila Resources (AQA)

Chart: Share price over the year to versus ASX200 (XJO)

Our valuation per share has decreased on the back of a 10 per cent increase in shares on issue – post the bonus offer. It appears unlikely that the Washpool coal asset will be sold before March. Following a review of the definitive feasibility study for its Gravenhage manganese project, we aren’t convinced a satisfactory sale could be achieved in the next 12 months.

Mark Lennox, Think Technically

BUY RECOMMENDATIONS

Hastings Diversified Utilities Fund (HDF)

Chart: Share price over the year to versus ASX200 (XJO)

This company recently received a 50 cents cash offer plus 0.326 APA Group stapled securities for each HDF security. The Hastings board regarded the offer as opportunistic and entirely inadequate and advised HDF shareholders to take no action and reject the APA bid. The HDF price had risen to $2.10 by February 9 on heavy daily volumes. Investors may be presuming that a sweetened bid is on the horizon.

Lynas Corporation (LYC)

Chart: Share price over the year to versus ASX200 (XJO)

Malaysia’s Atomic Energy Licensing Board has approved a temporary operating licence for the Lynas plant. There had been uncertainty surrounding this rare earths stock after the Malaysian Government imposed additional safety standards following concerns from residents. I believe Lynas is on track for full production in 2013.

HOLD RECOMMENDATIONS

Newcrest Mining (NCM)

Chart: Share price over the year to versus ASX200 (XJO)

Its recent December quarter report showed a 3 per cent increase in gold production to 579,073 ounces. As the gold price improves on further US Federal Reserve indications of low interest rates and a weakening US dollar, NCM’s share price should continue to climb.

Liquefied Natural Gas (LNG)

Chart: Share price over the year to versus ASX200 (XJO)

LNG is finalising an engineering, procurement and construction contract with China’s HQC ahead of offtake agreements and financing. Each completed component in the supply, construction, offtake and financing chain should increase LNG’s value. Progress towards confirming a gas supply source during the next three months would be another positive for LNG.

SELL RECOMMENDATIONS

Woolworths (WOW)

Chart: Share price over the year to versus ASX200 (XJO)

The supermarket giant is selling 100 Dick Smith stores.  Food and liquor sales only increased by 1.1 per cent in the December quarter compared to 2.5 per cent in the previous corresponding period. Given increasing competition from Coles, the outlook remains subdued at best.

Origin Energy (ORG)

Chart: Share price over the year to versus ASX200 (XJO)

The company recently released a quarterly report for its exploration and production business. For the quarter to December 31, 2011, it reported production of 29 petajoules compared to 31 petajoules in the prior corresponding period.

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