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18 Share Tips - 22 January 2018

18 Share Tips - 22 January 2018

By Anthony Black 22.01.2018



Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

Fortescue Metals Group (FMG)

Chart: Share price over the year

The chart for this iron ore producer looks bullish. In December 2017, FMG retested the previous low then broke higher on strong volume. It now looks like staging a strong recovery. We have an initial target of $5.50. If it clears that, then we expect FMG should go on to trade above $6. The shares closed at $5.15 on January 17.

Telstra (TLS)

Chart: Share price over the year

The telecommunications giant retested a prior low towards the end of 2017 and then rebounded on strong volume. The shares look like heading higher from here and, at current levels, present a buying opportunity. The first line of resistance is near $4. The shares closed at $3.60 on January 17.

HOLD RECOMMENDATIONS

Oz Minerals (OZL)

Chart: Share price over the year

Price action for the past year resembled a symmetrical triangle, where the share price had been consolidating against the recent uptrend. OZL finally broke out of this triangle several weeks ago on good volume. We expect this copper and gold company to resume the uptrend and rally towards $11. The shares finished at $9.17 on January 17.

Vocus Communications (VOC)

Chart: Share price over the year

The company has been heading higher since its September low and has managed to push through several key resistance levels. We need to see it achieve a few more milestones on the chart before considering it a buy. But we expect the stock to continue its gradual increase. 


SELL RECOMMENDATIONS

Origin Energy (ORG)

Chart: Share price over the year

In November, we had ORG as a buy with targets up towards $10. The stock was priced at $9.76 on January 9 this year. In our view, the stock had been over bought and we expect it to continue on correcting from here. Traders can consider taking profits now as I expect support to return near $8. The shares closed at $9.19 on January 17.


BHP Billiton (BHP)
Chart: Share price over the year

In October, we suggested the BHP chart looked positive enough for it to rally above $30 levels. After the recent run, we are now taking profits and looking to re-enter at levels closer to $28. Shares in the global miner closed at $30.74 on January 17.

Jonathon Howe, Red Leaf Securities

BUY RECOMMENDATIONS

iBuyNew Group (IBN)
Chart: Share price over the year

Operates an online real estate platform, connecting residential developers with owner occupiers and investors. Recent cost out initiatives amid what we’re expecting to be good sales momentum in fiscal year 2018 should see this stock re-rate. The shares closed at a cent on January 17. We have a speculative buy on the stock. I own shares in IBN.

MyFiziq (MYQ)
Chart: Share price over the year

The company’s technology enables accurate body measurements from a mobile phone image. Using more than 1400 data points, the app creates a representation of you in the form of a 3D avatar. This technology is not only suitable for the fitness and lifestyle space, but could also be used in medical insurance and online clothes shopping. I own shares in MYQ.

HOLD RECOMMENDATIONS

Telstra (TLS)
Chart: Share price over the year

We believe investors have focused too much on the negative NBN issues and are pricing in a worst case scenario. However, there will be plenty of upside from mobile data applications and the impending 5G rollout. Telstra has the largest customer base and, in my view, the best mobile network.

Dragontail Systems (DTS)
Chart: Share price over the year

The company provides a full suite of artificial intelligence and a tech offering called the Algo dispatching system. From food preparation to customer delivery, the algorithm efficiently manages the entire process. The company recently signed an agreement with Domino’s Pizza Enterprises to roll out the pizza checker camera system. DTS appears to offer better value than its competitors at this point. 

SELL RECOMMENDATIONS

Pilbara Minerals (PLS)
Chart: Share price over the year

The company is an emerging lithium and tantalum producer. The development to production stage carries the most risk, so investors could consider taking profits. The shares enjoyed a great run last year. Recently, the market capitalisation was $1.85 billion. In my view, the current lithium thematic may be nearing its peak.

Flight Centre Travel Group (FLT)
Chart: Share price over the year

Positive momentum from the second half is continuing into 2018. But we believe online players will provide stronger competition going forward. Investors could consider reducing holdings at these levels and lock in gains. The shares finished at $46.65 on January 17.


Tony Paterno, Ord Minnett

BUY RECOMMENDATIONS

Transurban Group (TCL)

Chart: Share price over the year

Infrastructure remains an attractive asset class for global investors, providing access to relatively predictable growing cash flows. The company’s $9 billion development pipeline and management initiatives should assist it to continue growing toll revenues and EBITDA at a rate in excess of the local economies. We also note the potential for acquisitions to enhance revenue, whether it be a stake in WestConnex, or a US toll road that possibly comes up for sale as part of any asset recycling.

Fortescue Metals Group (FMG)
Chart: Share price over the year

Sentiment towards this iron ore producer is at a low point based on concerns the iron ore index discount of 30 per cent is unlikely to fall anytime soon. In our view, uncertainty exists around the strategic outlook given the recent change in CEO. Our base case shows Fortescue is now a value play, recently trading on a price/net present value multiple of 0.76 times. But we do acknowledge the uncertainty in long run discounts and therefore valuation. 

HOLD RECOMMENDATIONS

QBE Insurance Group (QBE)

Chart: Share price over the year

The company is undertaking claims and expense initiatives to improve profitability, and it has leverage to rising global interest rates. But as a global commercial insurer, QBE is subject to the vagaries of the insurance cycle. Trends in the cycle are currently unfavourable, providing headwinds for significant earnings growth. 

Telstra (TLS)

Chart: Share price over the year

We expect Telstra’s dominance in the Australian telecommunications market to continue. But recent structural changes in the industry due to the NBN and the entry of TPG Telecom as a fourth mobile operator could pressure growth and profitability in the near term. However, we find the recent dividend yield of about 6 per cent to be attractive, especially when compared to other incumbent telecom operators around the world.

SELL RECOMMENDATIONS

Tabcorp Holdings (TAH)
Chart: Share price over the year

In our view, TAH is exposed to declining wagering yields given stiffer competition from corporate bookmakers. This was a challenge in fiscal year 2017 and we expect it to remain so. Execution risks exist regarding Sun Bets and the integration of the UBET brand following the merger with Tatts Group. In our view, valuation support is modest post weaker trading in the core wagering division.

Qantas Airways (QAN)

Chart: Share price over the year

Since July last year, Qantas has significantly outperformed the broader market. In our view, a weaker domestic air travel market and challenging international conditions mean investors should consider taking a profit. The shares were trading at $5.06 on January 18.


Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions. 


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