ADVISOR WATCHLIST
Michael Burrell
Director - Compliance Advisor - Individually Managed Portfolios mburrell @ burrell . com . au ( 07 ) 3006 7226
You can ’ t open the financial section of the paper without reading about rising interest rates and inflation . It seems increasingly likely that there will be multiple rate rises this year , so how does one invest with this in mind ? Our central case is higher PE stocks , and growth companies priced on multiples of revenue , will struggle in a rising interest rate environment . ‘ Boring ’ may well be the new black . I ’ m investing my money in companies with real earnings , and are either large enough to have pricing power in an inflationary environment , or can pass on costs . So what ’ s on my list and why :
‐ Banks will be a beneficiary of rising rates as it will increase their margins . Among other things the banks can borrow long , and lend short with increased margin . ANZ and WBC still look ok at current levels ;
‐ The energy sector will continue to benefit from the oil price . But be prepared for volatility from announcements of more supply ( Iran deal ?), or a resolution to the Russian conflict . Notwithstanding these factors , demand will continue to be strong . WPL , STO and BPT should be solid long term ;
‐ Base metals and materials will continue to be strong , the likes of BHP , NCM , S32 ( under $ 5 if it comes back );
‐ Many stocks in the food sector have been hit by rising costs , further inflation concerns , and supply chain issues from Covid and war . I think there is upside in the likes of TGR , UMG , and ING . These companies can weather the storm in my opinion ;
I ’ m in no way ‘ anti-growth ’ companies but we need to be smart . In the technology space Hansen Technologies ( HSN ) looks to be reasonably priced ( estimated PE around 17 , pays a div of around 2.3 %). HSN is pretty boring when it comes to technology stocks , they provide software to the energy sector and telecommunications . Resmed ( RMD ) is also starting to interest me . In the smaller space we have had some interesting presentations on Shaver Shop Group ( SSG ), Motorcycle Holdings ( MTO , and Genex Power ( GNX ) that are worth discussing with your adviser . Despite current economic and geopolitical risks , there are many companies that still present value .
Shannon McShane
Tassal Group ( TGR ) is an Australian based salmon and prawn farming company , supplying domestic and international markets . Earnings growth in salmon will be driven by a normalisation in freight costs , improved sales mix and pricing . Salmon prices have seen a strong recovery , particularly in international markets . The prawn strategy has significant potential to increase earnings as volumes increase . Returns are expected to be higher in prawns , with a shorter working capital cycle and greater margins than salmon .
Advisor - Gold Coast & Brisbane SMcShane @ burrell . com . au ( 07 ) 5583 7815
Page 10 of 22