Shifting Stockbroker Preferences

This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG

By Rudi Filapek-Vandyck

Shares in Fortescue Metals ((FMG)) may be under significant pressure on Thursday morning as one of the iron ore producer's major shareholders (Temasek) has decided to exit with a profit, BA-ML market strategist Tim Rocks reports the stockbroker's model portfolio for the year ahead recently added the stock on the expectation that prices will remain elevated for longer and as the share price has failed to keep up with rising prices for iron ore recently.

BA-ML also has the intention to add Incitec Pivot ((IPL)), reports Rocks, and has moved Overweight discretionary retailers through JB Hi-Fi ((JBH)) and David Jones ((DJS)), in addition to Wesfarmers ((WES)) which was already represented.

In general, the major themes in BA-ML's Model Portfolio are energy, global plays and diversified financials. The latter means Rocks likes Macquarie Group ((MQG)) while retaining a Neutral stance on Australian banks. The portfolio remains Underweight property, telcos, utilities and healthcare.

Over at Citi, healthcare analysts have once again updated their projections for Australian healthcare stocks. And once again, the impact has been negative. Blame the strong Aussie dollar, or the weak USD, if you want, but currencies have persistently acted as a headwind for the sector throughout 2010 and 2011 doesn't seem to have changed the pattern. (One would have to assume the impact this year will be milder than last year).

Cochlear ((COH)) has become the main victim in the sector with Citi downgrading the stock to Sell on the expectation the AUD will continue to strenghten against both USD and EUR into 2012. No surprise, future estimates (in AUD) have been lowered. ResMed ((RMD)) has kept its Buy rating. All others are rated Hold, with the exception of New Zealand based Fisher and Paykel Healthcare ((FPH.NZ) which is currently rated Sell.

Most price targets have taken a hit, including ResMed's.

Elsewhere, analysts at Deutsche Bank note utilities have outperformed in 2010. They expect this to repeat in 2011. Clearly, the analysts would have raised an eyebrow or two when reading about Tim Rock's sector choices for the year ahead. Deutsche Bank very much likes AGL Energy ((AGK)) and APA Group ((APA)) while Infigen Energy ((IFN)) is seen as the higher risk/higher potential option.

While most strategists remain neutral, if not negative, on the outlook for Australian banks, sector analysts at RBS put forward the thesis that this year's results will likely prove the bottom in the sector's negative cycle and on improved prospects for FY12 and FY13 the sector looks good value, argue the analysts. RBS likes ANZ Bank ((ANZ)) most.

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