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Rudi’s View: Telix, Telstra, Treasury Wine & More

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Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Jan 19 2023

This story features AMCOR PLC, and other companies. For more info SHARE ANALYSIS: AMC

By Rudi Filapek-Vandyck

Less than two weeks out from February, when most companies listed on the local exchange will release financial results, analysts and market strategists have updated their conviction ideas for the year ahead. Below are some of the recent updates.

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UBS's recent strategy update carries the title From Stagflation to Disinflation. UBS strategists believe successful investing in 2023 will centre around identifying which companies can still grow when economies are decelerating or temporarily suffer from negative growth.

UBS has lifted its year-end price target for the ASX200 to 7500. While this is up from a prior 7250, as the index is trading close to 7400 already the upgraded target still suggests not much is on offer in terms of sustainable net gains, at least not at the index level.

UBS strategists' focus has therefore shifted to companies that can lift their dividends through the cycle. Three characteristics to look out for are: consistent revenue growth, lack of cyclicality, and a competitive advantage. Not surprising, also, UBS has reduced exposure to cyclical companies on the ASX.

On the broker's analysis, Infrastructure, Utility and Financial stocks have been most consistent in lifting annual dividend payments over the last 20 years. UBS has upgraded Infrastructure and utilities sectors to Overweight, joined by insurance, while mining companies have been downgraded to Neutral. Property-linked sectors remain key underweights. Energy remains an Overweight, as is Technology.

UBS is of the view that rising bond yields have had their impact throughout 2022. This impact is now running thin in 2023. Hence why so-called long duration companies are back on the menu. This also explains the Overweight for Tech stocks. UBS is still not a fan of healthcare or building materials.

When it comes to dividend growth reliability in Australia, the banks only come third on the broker's analysis, beaten by infrastructure and utilities, with packaging (thanks to Amcor ((AMC)), no doubt) the most reliable sector. Staples retailers and insurers are sectors four and five, respectively, on the dividend-growing reliability ladder.

At the other end, there is one sector that historically has proven even worse than chemicals, energy and mining companies; old media.

At the individual stock level, BHP Group ((BHP)) has been removed (downgrade to Sell) and replaced with South32 ((S32)) because of the former spin-off's more defensive commodity mix. Suncorp ((SUN)) has been added, while recent outperformance by Super Retail ((SUL)) now sees that stock removed.

Putting it all together, the broker's list of Most Preferred stocks on the ASX now comprises of:

Among resources:
-IGO ((IGO))
-Orica ((ORI))
-Santos ((STO))
-South32

Among financials:
-ANZ Bank ((ANZ))
-Netwealth Group ((NWL))
-QBE Insurance ((QBE))
-Steadfast Group ((SDF))
-Suncorp

Among industrials:
-Aristocrat Leisure ((ALL))
-Amcor
-IDP Education ((IEL))
-Qantas Airways
-Seek ((SEK))
-Seven Group ((SVW))
-Telstra ((TLS))
-Transurban ((TCL))
-Treasury Wine Estates ((TWE))
-Wesfarmers ((WES))
-Worley ((WOR))

UBS's selection of Least Preferred exposures (best to avoid) currently consists of:

-Bega Cheese ((BGA))
-Endeavour Group ((EDV))
-InvoCare ((IVC))
-National Australia Bank ((NAB))
-Pilbara Minerals ((PLS))
-Pinnacle Investment Management ((PNI))
-Vicinity Centres ((VCX))

Pinnacle and Vicinity Centres have just been added in replacement of Lifestyle Communities ((LIC)) and Magellan Financial ((MFG)) which are no longer included.

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Morgan Stanley's Australia Macro+ Focus List hasn't changed in composition since September last year when four of the ten inclusions were added.

Those four are: Domino's Pizza ((DMP)), IDP Education, Northern Star Resources ((NST)) and Treasury Wine Estates.

The other six consist of Aristocrat Leisure, CSL ((CSL)), Goodman Group ((GMG)), Macquarie Group ((MQG)), Telstra and Woodside Energy ((WDS)).

The average holding period is circa 8 months. Telstra is currently the longest held, having been added in May 2021.

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Over at Goldman Sachs, the Australia & New Zealand Conviction List has zero overlap with conviction calls at Morgan Stanley.

The ten ASX-listed stocks selected by Goldman Sachs are Elders ((ELD)), Fisher & Paykel Healthcare ((FPH)), Iluka Resources ((ILU)), Lifestyle Communities, NextDC ((NXT)), Omni Bridgeway ((OBL)), Qantas Airways ((QAN)), REA Group ((REA)), Webjet ((WEB)), Westpac ((WBC)) and Woolworths ((WOW)).

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Shaw and Partners is now also in the business of publishing selections for its Model Portfolio, including eight large cap (ASX100) favourites; James Hardie ((JHX)), Metcash ((MTS)), Qantas Airways, ResMed ((RMD)), Santos ((STO)), Telstra, Worley ((WOR)) and Xero ((XRO)).

Among smaller cap propositions ("emerging companies") Shaw has selected Audinate Group ((AD8)), Black Cat Syndicate ((BC8)), Boab Metals ((BML)), Calix ((CXL)), Catapult Group International ((CAT)), Hub24 ((HUB)) and Regal Partners ((RPL)).

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With the February local reporting season approaching, analysts are starting to look forward to what may or may not show up through market forecasts and financial results next month.

For Shaw and Partners this has been an opportunity to reiterate its positive view on Premier Investments ((PMV)) -"one of our top picks and re-iterate high conviction"- while Morgan Stanley analysts identified their number one stock to avoid: car parts distributor Bapcor ((BAP)).

Morgan Stanley anticipates FY23 for Bapcor will have a larger-than-usual skew to H2, which increases the risk for disappointment, but the analysts are equally cautious on management's transformation project and with market consensus assuming too many remaining tailwinds from covid lockdowns.

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Wilsons is not yet in full operational mode so its clientele has been receiving strategy updates originally put together in December. In it, Wilsons strategists express their caution on corporate earnings this year, while being optimistic on stock valuations.

Wilsons' favourite sector for the year ahead is healthcare (take that, UBS). Wilsons' Focus Portfolio has no less than 14% exposure to the sector through CSL, ResMed and Telix Pharmaceuticals ((TLX)).

This broker's top seven stocks for 2023 are:

-NextDC
-The Lottery Corp ((TLC))
-CSL
-ResMed
-Allkem ((AKE))
-Mineral Resources ((MIN))
-Lynas Rare Earths ((LYC))

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Bell Potter also released its stock picks for the year ahead in December. As all analysts at the firm get a say in this process, Bell Potter's selection tends to be plentiful:

Among Listed Investment Companies (LICs):
-L1 Long Short Fund ((LSF))
-MFF Capital Investments ((MFF))
-Regal Asian Investments ((RG8))

Agriculture and FMCG:
-Nufarm ((NUF))
-A2 Milk Company ((A2M))
-Synlait Milk ((SM1))

Technology
-Life360 ((360))
-ikeGPS Group ((IKE))
-Frontier Digital Ventures ((FDV))

Diversified Financials
-Perpetual ((PPT))
-Cedar Woods ((CWP))

Industrials
-IPD Group ((IPG))
-The Environmental Group ((EGL))
-DGL Group ((DGL))
-Cluey ((CLU))
-Ai-Media Technologies ((AIM))
-Droneshield ((DRO))

Retail
-Accent Group ((AX1))
-Propel Funeral Partners ((PFP))
-Best & less ((BST))

Healthcare
-Telix Pharmaceuticals
-Clarity Pharmaceuticals ((CU6))
-Mesoblast ((MSB))
-Aroa Biosurgery ((ARX))
-Cogstate ((CGS))
-Polynovo ((PNV))
-Immutep ((IMM))
-Monash IVF ((MVF))

Base Metals & Gold
-Chalice Mining ((CHN))
-De Grey Mining ((DEG))
-Nickel Industries ((NIC))

Energy
-Strike Energy ((STX))
-Boss Energy ((BOE))

Strategic Minerals
-Liontown Resources ((LTR))
-Red Dirt Metals ((RDT))
-Latin Resources ((LRS))
-Green Technology Metals ((GT1))
-Arafura Resources ((ARU))
-Dreadnought Resources ((DRE))
-Alpha HPA ((A4N))

Mining Services
-Mader Group ((MAD))
-DDH1 ((DDH))
Imdex ((IMD))

Best Wishes for the year ahead.

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi's View stories. Go to My Alerts (top bar of the website) and tick the box in front of 'Rudi's View'. You will receive an email alert every time a new Rudi's View story has been published on the website. 

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CHARTS

360 A2M A4N AD8 AIM ALL AMC ANZ ARU ARX AX1 BAP BC8 BGA BHP BML BOE BST CAT CGS CHN CLU CSL CU6 CWP CXL DDH DEG DGL DMP DRE DRO EDV EGL ELD FDV FPH GMG GT1 HUB IEL IGO IKE ILU IMD IMM IPG IVC JHX LIC LRS LSF LTR LYC MAD MFF MFG MIN MQG MSB MTS MVF NAB NIC NST NUF NWL NXT OBL ORI PFP PLS PMV PNI PNV PPT QAN QBE RDT REA RG8 RMD RPL S32 SDF SEK SM1 STO STX SUL SUN SVW TCL TLC TLS TLX TWE VCX WBC WDS WEB WES WOR WOW XRO

For more info SHARE ANALYSIS: 360 - LIFE360 INC

For more info SHARE ANALYSIS: A2M - A2 MILK COMPANY LIMITED

For more info SHARE ANALYSIS: A4N - ALPHA HPA LIMITED

For more info SHARE ANALYSIS: AD8 - AUDINATE GROUP LIMITED

For more info SHARE ANALYSIS: AIM - AI-MEDIA TECHNOLOGIES LIMITED

For more info SHARE ANALYSIS: ALL - ARISTOCRAT LEISURE LIMITED

For more info SHARE ANALYSIS: AMC - AMCOR PLC

For more info SHARE ANALYSIS: ANZ - ANZ GROUP HOLDINGS LIMITED

For more info SHARE ANALYSIS: ARU - ARAFURA RARE EARTHS LIMITED

For more info SHARE ANALYSIS: ARX - AROA BIOSURGERY LIMITED

For more info SHARE ANALYSIS: AX1 - ACCENT GROUP LIMITED

For more info SHARE ANALYSIS: BAP - BAPCOR LIMITED

For more info SHARE ANALYSIS: BC8 - BLACK CAT SYNDICATE LIMITED

For more info SHARE ANALYSIS: BGA - BEGA CHEESE LIMITED

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

For more info SHARE ANALYSIS: BML - BOAB METALS LIMITED

For more info SHARE ANALYSIS: BOE - BOSS ENERGY LIMITED

For more info SHARE ANALYSIS: BST - BEST & LESS GROUP HOLDINGS LIMITED

For more info SHARE ANALYSIS: CAT - CATAPULT GROUP INTERNATIONAL LIMITED

For more info SHARE ANALYSIS: CGS - COGSTATE LIMITED

For more info SHARE ANALYSIS: CHN - CHALICE MINING LIMITED

For more info SHARE ANALYSIS: CLU - CLUEY LIMITED

For more info SHARE ANALYSIS: CSL - CSL LIMITED

For more info SHARE ANALYSIS: CU6 - CLARITY PHARMACEUTICALS LIMITED

For more info SHARE ANALYSIS: CWP - CEDAR WOODS PROPERTIES LIMITED

For more info SHARE ANALYSIS: CXL - CALIX LIMITED

For more info SHARE ANALYSIS: DDH - DDH1 LIMITED

For more info SHARE ANALYSIS: DEG - DE GREY MINING LIMITED

For more info SHARE ANALYSIS: DGL - DGL GROUP LIMITED

For more info SHARE ANALYSIS: DMP - DOMINO'S PIZZA ENTERPRISES LIMITED

For more info SHARE ANALYSIS: DRE - DREADNOUGHT RESOURCES LIMITED

For more info SHARE ANALYSIS: DRO - DRONESHIELD LIMITED

For more info SHARE ANALYSIS: EDV - ENDEAVOUR GROUP LIMITED

For more info SHARE ANALYSIS: EGL - ENVIRONMENTAL GROUP LIMITED

For more info SHARE ANALYSIS: ELD - ELDERS LIMITED

For more info SHARE ANALYSIS: FDV - FRONTIER DIGITAL VENTURES LIMITED

For more info SHARE ANALYSIS: GMG - GOODMAN GROUP

For more info SHARE ANALYSIS: GT1 - GREEN TECHNOLOGY METALS LIMITED

For more info SHARE ANALYSIS: HUB - HUB24 LIMITED

For more info SHARE ANALYSIS: IEL - IDP EDUCATION LIMITED

For more info SHARE ANALYSIS: IGO - IGO LIMITED

For more info SHARE ANALYSIS: IKE - IKEGPS GROUP LIMITED

For more info SHARE ANALYSIS: ILU - ILUKA RESOURCES LIMITED

For more info SHARE ANALYSIS: IMD - IMDEX LIMITED

For more info SHARE ANALYSIS: IMM - IMMUTEP LIMITED

For more info SHARE ANALYSIS: IPG - IPD GROUP LIMITED

For more info SHARE ANALYSIS: IVC - INVOCARE LIMITED

For more info SHARE ANALYSIS: JHX - JAMES HARDIE INDUSTRIES PLC

For more info SHARE ANALYSIS: LIC - LIFESTYLE COMMUNITIES LIMITED

For more info SHARE ANALYSIS: LRS - LATIN RESOURCES LIMITED

For more info SHARE ANALYSIS: LSF - L1 LONG SHORT FUND LIMITED

For more info SHARE ANALYSIS: LTR - LIONTOWN RESOURCES LIMITED

For more info SHARE ANALYSIS: LYC - LYNAS RARE EARTHS LIMITED

For more info SHARE ANALYSIS: MAD - MADER GROUP LIMITED

For more info SHARE ANALYSIS: MFF - MFF CAPITAL INVESTMENTS LIMITED

For more info SHARE ANALYSIS: MFG - MAGELLAN FINANCIAL GROUP LIMITED

For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED

For more info SHARE ANALYSIS: MQG - MACQUARIE GROUP LIMITED

For more info SHARE ANALYSIS: MSB - MESOBLAST LIMITED

For more info SHARE ANALYSIS: MTS - METCASH LIMITED

For more info SHARE ANALYSIS: MVF - MONASH IVF GROUP LIMITED

For more info SHARE ANALYSIS: NAB - NATIONAL AUSTRALIA BANK LIMITED

For more info SHARE ANALYSIS: NIC - NICKEL INDUSTRIES LIMITED

For more info SHARE ANALYSIS: NST - NORTHERN STAR RESOURCES LIMITED

For more info SHARE ANALYSIS: NUF - NUFARM LIMITED

For more info SHARE ANALYSIS: NWL - NETWEALTH GROUP LIMITED

For more info SHARE ANALYSIS: NXT - NEXTDC LIMITED

For more info SHARE ANALYSIS: OBL - OMNI BRIDGEWAY LIMITED

For more info SHARE ANALYSIS: ORI - ORICA LIMITED

For more info SHARE ANALYSIS: PFP - PROPEL FUNERAL PARTNERS LIMITED

For more info SHARE ANALYSIS: PLS - PILBARA MINERALS LIMITED

For more info SHARE ANALYSIS: PMV - PREMIER INVESTMENTS LIMITED

For more info SHARE ANALYSIS: PNV - POLYNOVO LIMITED

For more info SHARE ANALYSIS: PPT - PERPETUAL LIMITED

For more info SHARE ANALYSIS: QAN - QANTAS AIRWAYS LIMITED

For more info SHARE ANALYSIS: QBE - QBE INSURANCE GROUP LIMITED

For more info SHARE ANALYSIS: RDT - RED DIRT METALS LIMITED

For more info SHARE ANALYSIS: REA - REA GROUP LIMITED

For more info SHARE ANALYSIS: RG8 - REGAL ASIAN INVESTMENTS LIMITED

For more info SHARE ANALYSIS: RMD - RESMED INC

For more info SHARE ANALYSIS: RPL - REGAL PARTNERS LIMITED

For more info SHARE ANALYSIS: S32 - SOUTH32 LIMITED

For more info SHARE ANALYSIS: SDF - STEADFAST GROUP LIMITED

For more info SHARE ANALYSIS: SEK - SEEK LIMITED

For more info SHARE ANALYSIS: SM1 - SYNLAIT MILK LIMITED

For more info SHARE ANALYSIS: STO - SANTOS LIMITED

For more info SHARE ANALYSIS: STX - STRIKE ENERGY LIMITED

For more info SHARE ANALYSIS: SUL - SUPER RETAIL GROUP LIMITED

For more info SHARE ANALYSIS: SUN - SUNCORP GROUP LIMITED

For more info SHARE ANALYSIS: SVW - SEVEN GROUP HOLDINGS LIMITED

For more info SHARE ANALYSIS: TCL - TRANSURBAN GROUP LIMITED

For more info SHARE ANALYSIS: TLC - LOTTERY CORPORATION LIMITED

For more info SHARE ANALYSIS: TLS - TELSTRA GROUP LIMITED

For more info SHARE ANALYSIS: TLX - TELIX PHARMACEUTICALS LIMITED

For more info SHARE ANALYSIS: TWE - TREASURY WINE ESTATES LIMITED

For more info SHARE ANALYSIS: VCX - VICINITY CENTRES

For more info SHARE ANALYSIS: WBC - WESTPAC BANKING CORPORATION

For more info SHARE ANALYSIS: WDS - WOODSIDE ENERGY GROUP LIMITED

For more info SHARE ANALYSIS: WEB - WEB TRAVEL GROUP LIMITED

For more info SHARE ANALYSIS: WES - WESFARMERS LIMITED

For more info SHARE ANALYSIS: WOR - WORLEY LIMITED

For more info SHARE ANALYSIS: WOW - WOOLWORTHS GROUP LIMITED

For more info SHARE ANALYSIS: XRO - XERO LIMITED