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18 Share Tips - 22 October 2018

18 Share Tips - 22 October 2018

By Anthony Black 22.10.2018



Janine Cox, Wealth Within

BUY RECOMMENDATIONS
 
ALS Limited (ALQ)
Chart: Share price over the year
 
This global testing, inspection and certification business traded up strongly in the September quarter, as the company reaffirmed its acquisition plans. ALQ recently pulled back from resistance around $9.50 and is testing support for the next rise between $10.50 and $11. The shares closed at $8.29 on October 18.

Charter Hall Retail REIT (CQR)
Chart: Share price over the year
 
Following the 52-week high of $4.415 on September 18, CQR experienced heavy selling. The share price dropped more than 8 per cent in just over a month. It’s not uncommon for CQR to fall and then strongly climb a short time later to recover the loss. Provided CQR trades back above $4.40, the price is likely to continue higher in 2019. The shares closed at $4.19 on October 18.
 
HOLD RECOMMENDATIONS
 
Brickworks (BKW)
Chart: Share price over the year
 
The building products provider has defied the recent sharemarket sell-off, with the current trend remaining bullish. Weekly price swings of around 5 per cent in either direction are typical for BKW. A rise from here would indicate further gains are likely in the lead up to the festive season, but a close below $16.50 would indicate a fall has commenced. The stock finished at $17.26 on October 18.
 
Rio Tinto (RIO)
Chart: Share price over the year
 
The global miner recently traded up swiftly on euphoric news of a $3.2 billion share buyback. The stock is currently trading in a holding pattern just below $80. Investors are excited about making a short term gain or receiving income. Remember, handing over stock means giving up a slice of future growth and income. The shares closed at $78.79 on October 18.

SELL RECOMMENDATIONS
 
Bega Cheese (BGA)
Chart: Share price over the year
 
Investors have been bearish about BGA in recent months. The chart indicates a triple top pattern is forming and, therefore, the shares will probably fall further, in my view. If BGA closes below $5.98 at the end of any week, a major decline may unfold into 2019. The stock finished at $6.36 on October 18.
 
Northern Star Resources (NST)
Chart: Share price over the year
 
We expect this gold producer’s share price to retreat in coming months as momentum slows. The stock has been trending up for the past 12 months to close at $8.77 on October 18. Keep a watchful eye on the stock. It’s a mistake to assume that any company is likely to go up indefinitely. A trailing stop loss will provide the opportunity to manage risk and lock in profit.

Michael Kodari, KOSEC

BUY RECOMMENDATIONS

Aristocrat Leisure (ALL)
Chart: Share price over the year

An opportunity for investors to buy a US dollar earner that’s been oversold, in my view. About two thirds of revenue is generated in the United States. We expect organic growth and earnings accretion via the Big Fish gaming acquisition. ALL has been a top performing stock in the past three years and offers an attractive entry level. Shares in this gaming company closed at $29.49 on October 18. 

ResMed (RMD)
Chart: Share price over the year

Makes products to treat and manage sleep apnea. The sleep apnea condition is widespread and RMD has a strong market position. The share price has fallen from $16.04 on October 1 to close at $14.89 on October 18. We believe the price decline provides an opportunity with limited downside risk. The company has a good track record of capital allocation. 

HOLD RECOMMENDATIONS

BlueScope Steel (BSL)
Chart: Share price over the year

Its North Star steel mill in the US has bolstered earnings. The company delivered a strong fiscal year 2018 result. In August, BSL announced a $250 million share buyback and forecast a 10 per cent lift in EBIT for the first half of fiscal year 2019. We’re optimistic BlueScope can reverse a recent softer share price leading into the new year.

InvoCare (IVC)
Chart: Share price over the year

The funeral provider recently released data revealing that the number of deaths in Australia had declined by 5.9 per cent between June and August compared to the prior corresponding period. But IVC enjoys a large market share in a defensive industry. At current levels, I’m happy to hold this business with a long history of increasing free cash flow and earnings per share.

SELL RECOMMENDATIONS

Afterpay Touch Group (APT)
Chart: Share price over the year

This buy now, pay later platform provider reached a 52-week high of $23 on August 24. But the stock has since been smashed, partly on the prospect of a tighter regulatory regime being introduced across the industry. News of a Senate inquiry into payday lenders, debt management firms and buy now, pay later businesses saw APT’s price fall more than 18 per cent in a single day. The stock has recovered some to close at $12.95 on October 18. My view is to sell this business while there’s still sufficient hype.

Speedcast International (SDA)
Chart: Share price over the year

Provides remote communication and IT services to the world. The stock has been punished on a guidance downgrade. The share price has fallen from $6.71 on August 27 to close at $3.97 on October 18. In my view, the company holds significant debt.

Russell Lees, Wattle Partners

BUY RECOMMENDATIONS

Ramsay Health Care  (RHC)
Chart: Share price over the year

The share price of this global private hospital operator has fallen from a year high of $71.15 on January 5 to close at $54.13 on October 18. The company reported a 20.6 per cent fall in statutory net profit after tax to $388.3 million for the year to June 30, 2018. But strong tailwinds include a global ageing population. RHC is a top private hospital operator and we like its prospects over the medium term.

Hazer Group (HZR)
Chart: Share price over the year

An interesting company to watch, HZR is developing technology to convert old world commodities, such as iron ore and natural gas, into new world commodities, such as graphite and hydrogen. The company continues to refine the technology and the results are impressive. The company is at the stage of building a new pilot plant in Western Australia and has entered into an agreement with Mineral Resources to sell graphite production. 

HOLD RECOMMENDATIONS

Carnarvon Petroleum (CVN)
Chart: Share price over the year

One of the few Australian oil and gas companies that remained committed to large exploration budgets when oil and gas prices were last relatively low. The company’s Phoenix project recently had huge success in offshore Western Australia, with one of the best oil discoveries in Australia in more than twenty years. 

AMP (AMP)
Chart: Share price over the year

The board has appointed a new CEO, who will be tasked with turning around the sales culture. Although first half profit fell, AMP Bank grew operating earnings by 20 per cent on the prior corresponding period. AMP Capital grew operating earnings by 2 per cent. AMP closed at $3.17 on October 18. Around these price levels or below, this represents a worst-case scenario and full breakdown of the business model. We believe this is highly unlikely.

SELL RECOMMENDATIONS

Australian Finance Group (AFG)
Chart: Share price over the year

One of Australia’s largest mortgage broking groups and financial solutions provider. AFG provides wholesale administration services to brokers as well as group branded mortgage products. We’re concerned the slowing property sector alongside tighter regulatory changes flowing from the banking Royal Commission may lead to increasing uncertainty regarding the company’s future earnings. 

Sydney Airport (SYD)
Chart: Share price over the year

The core business of serving passengers going through Sydney Airport remains strong. But, in our view, debt levels are too high and this concerns us in a climate of rising global interest rates. Rates may rise to a point that exceeds current expectations. 
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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