Read This And Buy These Stocks

This story features RESMED INC, and other companies. For more info SHARE ANALYSIS: RMD

By Peter Switzer, Switzer Super Report

Despite what the Budget might bring in terms of negative tidings via some media outlets and Labor politicians — that’s their job — the Oz economy is on the way up and the Budget will actually help, not hinder, the improving outlook, even with a politically ridiculous and economically questionable debt levy.

Given the impact of the tax might be $9.50 a week on 7% of Aussies, or 650,000 people, the economic impact won’t be huge, but it will mean that the Government will have to face the tirades concerning broken promises from Labor which could spook consumers and business.

That said I think the economic case for confidence is building, even with the Budget threatening pain for everyone.

The good news

Here’s the good news in a nutshell:

• On the jobs front, its been the strongest start to a year in six years with 106,000 jobs created in four months!

• Unemployment is at a good 5.8% and it’s now been for two months at that level after previously topping out at 6.1%.

• The RBA pumped up its economic growth number from 2.75% to 3% by June 2014 but they have a 4.25% figure across 2015-16!

• $10 billion worth of infrastructure spending is coming with the Budget this week.

• The RBA admitted inflation is not a worry, saying “Inflation is forecast to remain consistent with the inflation target.”

• On interest rates, the tough Budget should keep interest rates low for longer and the RBA is already hinting that it will be on the sidelines with rates for some time. This is what the Bank said in Friday’s Monetary Policy Statement: “..the Board’s view is that the current accommodative monetary policy setting is likely to be appropriate for some time yet.”

• The US economy is set to grow faster than 3% this year and it will mean interest rates will rise next year in the States and that should push the greenback up and out dollar down, which will also help our growth.

• A faster growing economy should underpin improving earnings that should feed higher share prices.

It sounds like a virtuous circle of positivity rather than the vicious cycle of negativity that created the Great Recession overseas and our GFC. And that’s why I have been advising our subscribers to buy the dips and it explains why the dips have been so shallow.

What to buy

So what looks like good value? I still like the banks on dips for income and a small capital gain. If the economy is going to grow at 4% plus, the banks will see their profits spike.

I like the dollar play and ResMed ((RMD)) is the company that ticks plenty of boxes for me and many of my expert mates agree with me. WAM’s Geoff Wilson, now holds 40% cash in his fund and admits he can’t see value right now, but he likes ResMed even without a dollar dive. With it he would be even more keen.

A company called Greencross ((GXL)), which owns Pet Barn, looks like a good long-term speculative hold.

Kathmandu ((KMD)) will do better with a lower dollar and it has been delivering on earlier suggestions here that it was a company on the up.

A company that has takeover possibility is nib Holdings ((NHF)) and it’s a damn good company. I also like National Storage REIT and Prime Value’s S.T. Wong is also a big fan! He also like Veda Group ((VED)) pointing out that like National Storage ((NSR)) there are few players in this space and it makes for reliable earnings.

That should keep you thinking and investing. Enjoy the Budget and the improving economy that lies ahead which should deliver some good stock market returns.

Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.

Content included in this article is not by association the view of FNArena (see our disclaimer).

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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