Market Strategists Make Some Stock Adjustments

Array
(
    [0] => Array
        (
            [0] => ((COH))
            [1] => ((SHL))
            [2] => ((PBG))
            [3] => ((WPL))
            [4] => ((BBG))
            [5] => ((TEN))
            [6] => ((WAN))
            [7] => ((AMP))
            [8] => ((CSL))
            [9] => ((PRY))
            [10] => ((UGL))
            [11] => ((JHX))
            [12] => ((ERA))
            [13] => ((PDN))
            [14] => ((JBH))
            [15] => ((STO))
            [16] => ((BOQ))
            [17] => ((MGX))
            [18] => ((RIO))
            [19] => ((ASX))
            [20] => ((NAB))
            [21] => ((AIO))
            [22] => ((FMG))
            [23] => ((IPL))
            [24] => ((AQP))
            [25] => ((BHP))
            [26] => ((ILU))
            [27] => ((NWS))
            [28] => ((PNA))
            [29] => ((SEK))
            [30] => ((TEN))
            [31] => ((WES))
        )

    [1] => Array
        (
            [0] => COH
            [1] => SHL
            [2] => PBG
            [3] => WPL
            [4] => BBG
            [5] => TEN
            [6] => WAN
            [7] => AMP
            [8] => CSL
            [9] => PRY
            [10] => UGL
            [11] => JHX
            [12] => ERA
            [13] => PDN
            [14] => JBH
            [15] => STO
            [16] => BOQ
            [17] => MGX
            [18] => RIO
            [19] => ASX
            [20] => NAB
            [21] => AIO
            [22] => FMG
            [23] => IPL
            [24] => AQP
            [25] => BHP
            [26] => ILU
            [27] => NWS
            [28] => PNA
            [29] => SEK
            [30] => TEN
            [31] => WES
        )

)

This story features COCHLEAR LIMITED, and other companies.
For more info SHARE ANALYSIS: COH
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck

Market strategists at RBS have decided to take profits on their shares in Cochlear ((COH)) and replace the company with Sonic Healthcare ((SHL)) as preferred exposure to the Australian healthcare sector instead. Earlier this week we couldn't help but noticing that Cochlear shares have once again surged well above their current consensus price target of $76.13 and history shows, especially Cochlear's history, that gravity should gradually start kicking in for the share price. Within this context, RBS's loss of conviction seems well-placed.

The strategists cannot help but remain positive on Australian retailers — a view which seems to be based upon two key factors. One is the market is likely too bearish on the medium-term outlook for consumer spending in Australia, despite prospects for more RBA tightening next year. Secondly, and as always happens under these circumstances, share prices simply look too cheaply priced. The strategists have added Pacific Brands ((PBG)) to their Model Portfolio.

On FNArena's observation, RBS's price target for Pacific Brands is some 45% above the current share price, which would more than justify the strategists' move. But RBS's price target is also near the top of the range of price targets for all eight stockbrokers in the FNArena universe. However, take out BA-ML (with an unusually low target) and it would seem most peers are in agreement that Pacific Brands shares are well-undervalued. No wonder thus the shares are located near the top of the R-Factor rankings, which is another signal leading to the same conclusion: cheap, but where's the catalyst?

For what it's worth, RBS analysts believe Pacific Brands is en route to at least meet market expectations this fiscal year, and this, the strategists surmise, should drive a re-rating for the shares. Maybe investors will have to wait until February?

RBS analysts recently also discovered the daily updates by ASIC on short positions in the market can provide some guidance on the direction of individual shares in the Australian market. As such, RBS analysts have now discovered a few glaring similarities between a negative in-house view (not always on fundamentals) and some stocks that happen to also stand out in ASIC's short reports; these companies include Woodside petroleum ((WPL)), as well as Billabong ((BBG)), Ten Network ((TEN)), West Australian News ((WAN)), AMP ((AMP)), CSL ((CSL)), Primary Healthcare ((PRY)), UGL ((UGL)) and James Hardie ((JHX)), plus uranium stocks Energy Resources of Australia ((ERA)) and Paladin Energy ((PDN)).

Market strategists at Macquarie are not singing from the same songsheet when it comes to discretionary retailers. They just removed JB Hi-Fi ((JBH)) from their so-called Marquee Ideas (loosely translated: stocks rated Buy that have that extra Conviction). A second stock that has been removed is Santos ((STO)), which this week also received a recommendation downgrade from BA-ML (where there's smoke?).

Also remarkable: following the removal of JBH and STO, Macquarie's Marquee Ideas only consist of three positive suggestions and two negative ones. The positive ideas are Bank of Queensland ((BOQ)) which is expected to benefit from increased government intervention in the Australian banking sector, iron ore junior Mount Gibson ((MGX)) and iron ore major Rio Tinto ((RIO)). The two negatives are ASX ((ASX)) and National ((NAB)).

Market strategists at UBS made some noticeable changes as well yesterday, trimming back their Overweight position on the Mining sector and reducing the Underweight position on the banks. Note UBS continues to like the Big Diversifieds, and cites cheap valuations for banks as one reason for the changes made. Note UBS remains moderately Underweight the energy sector.

As far as individual stocks go, UBS's Model Portfolio now includes Asciano ((AIO)) but no longer Fortescue Metals ((FMG)) and Incitec Pivot ((IPL)).

On Monday, Goldman Sachs updated its so-called Conviction List. No changes were made which leaves the following eight names as positive Conviction Ideas; Aquarius Platinum ((AQP)), BHP Billiton ((BHP)), Iluka ((ILU)), News Corp ((NWS)), PanAust ((PNA)), Seek ((SEK)), Ten Network ((TEN)) and Wesfarmers ((WES)).

Clearly, Goldmans disagrees with RBS on Ten and there's disagreement with UBS on exposure to the miners.

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