Rudi’s View: Corporate Travel, Hansen, IPH, NextDC & Macquarie Technology

This story features TECHNOLOGY ONE LIMITED, and other companies. For more info SHARE ANALYSIS: TNE

By Rudi Filapek-Vandyck, Editor

Part One of this week's two-part update was sent out in the form of an email to paying subscribers on Monday, and subsequently published on the FNArena website on Wednesday morning:

https://fnarena.com/index.php/2024/02/07/rudis-view-february-trepidation/

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Part One ended with: "Start preparing by drawing up your personal wish list."

John, a subscriber, had asked for my "most preferred" stocks in each of the market's prime segments. John's question was unrelated to my suggestion, but I spotted an opportunity to share more of my personal favourites, so here it goes (list of sectors provided by John):

-Information Tech: TechnologyOne ((TNE))

-Healthcare: CSL ((CSL))

-Materials: BHP Group ((BHP))

-Real Estate: Goodman Group ((GMG))

-Telecommunications: NextDC ((NXT)), I have taken a broad interpretation of 'telecommunication', stick with Telstra ((TLS)) for yield/income

 -Utilities & Infrastructure: Transurban ((TCL))

-Discretionary: Breville Group ((BRG))

-Staples: Woolworths ((WOW))

-Financials: Macquarie Group ((MQG)), or, specifically among banks, CommBank ((CBA)); as I always like to highlight, it's the only bank in Australia that has performed for its shareholders since the GFC. That's a fact, not an opinion.

-Energy: I don't have a preference in the energy sector. (I never invest in it). For anyone with a positive longer-term view: Karoon Gas ((KAR)) might be the most leveraged to the oil price on the ASX, with Jarden estimating every US$5 move in the price of oil translates into 32c in EPS for the company (in each direction).

-Industrials: this is essentially a loose amalgamation of largely small cap companies of various kinds and colours. Transurban is, strictly taken, officially part of this group. Put a gun to my temple and I'll say, okay, okay, pick Brambles ((BXB)).

As per my modus operandi, none of the above is an invitation to start buying any of the stocks mentioned. But if you have to start drawing up a list of quality achievers that are as yet not in your portfolio, but could be added in case of share market weakness, I think the above would be a great starting point.

Goes without saying: all have my preference with a longer term focus in mind (not necessarily at today's share prices).

Paying subscribers have 24/7 access to my curated lists of quality, sustainable achievers on the ASX: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

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Stockbroker Morgans' list of Best Ideas on the ASX has undergone a few changes ahead of the February reporting season. Have been removed (because of share prices rallying): Westpac ((WBC)), Wesfarmers ((WES)), Goodman Group, Santos, and Super Retail Group ((SUL)).

In their place came only two fresh additions: Woodside Energy and Camplify Holdings ((CHL)).

The updated selection contains 31 companies, including Macquarie Group, CSL, QBE Insurance ((QBE)), Transurban, Aristocrat Leisure ((ALL)), Qantas Airways ((QAN)), ResMed and NextDC. Only two resources companies are included, Mineral Resources ((MIN)) and South32 ((S32)), and two REITs; Dexus Industria REIT ((DXI)) and HomeCo Daily Needs REIT ((HDN)).

Among the smaller cap names selected are GQG Partners ((GQG)), Acrow ((ACF)), Lovisa Holdings ((LOV)), Tyro Payments ((TYR)), Objective Corp ((OCL)), Inghams Group ((ING)) and three of the local travel agencies; Corporate Travel Management ((CTD)), Flight Centre ((FLT)), and Helloworld ((HLO)).

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As far as February results are concerned, Morgans' strategists continue to see room for upside surprises, anticipating quality of earnings will come into focus this month, not just the quantity of it, as investors will increasingly start paying attention to corporate fundamentals.

Have been identified as Key Tactical Trades this month: CSL, ResMed, a2 Milk ((A2M)), Domino's Pizza ((DMP)), Tyro Payments, and Megaport ((MP1)).

Also, cyclical names that "look interesting" include Acrow, GQG Partners, Alliance Aviation ((AQZ)), Baby Bunting ((BBN)), and Santos.

Investors looking to benefit from the anticipated rotation into smaller cap companies are advised to consider Helloworld, Credit Corp ((CCP)), IPH Ltd ((IPH)), Clinuvel Pharmaceuticals ((CUV)), Veem ((VEE)), Vulcan Steel ((VSL)) and DGL Group ((DGL)).

Morgans is equally convinced REITs are making a comeback in 2024. Preferred ideas are Goodman Group, Qualitas ((QAL)), HomeCo Daily Needs REIT, and Dexus Industria REIT.

Morgans had singled out Pro Medicus ((PME)) and The Star Entertainment Group ((SGR)) for potentially negative outlook statements, while Megaport had been identified for a disappointing market update. The latter has since been proven wrong with this week's quarterly trading update.

A positive bias towards ResMed has proven correct, but Domino's Pizza keeps disappointing. The latest market update by GQG Partners proved strongly positive.

Morgans favourite technology exposure is currently Ansarada Group ((AND)).

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Stock pickers at UBS have predicted potential for negative surprise from Bapcor ((BAP)) and Objective Corp ((OCL)). Bapcor did issue another profit downgrade, but the share price enjoyed a positive response on the day. Too many positioned for an even more negative update?

At risk of showering investors with a negative outlook, according to UBS, are Eagers Automotive ((APE)), APM Human Services International ((APM)), Autosports Group ((ASG)), and, still, Bapcor. APM Human Services has been in a down-cycle for at least six months, resulting in two severe profit warnings.

On the more optimistic side, UBS sees potential for a positive surprise coming from Corporate Travel, Flight Centre, Hansen Technologies ((HSN)), Megaport, and Siteminder ((SDR)). Candidates include Infomedia ((IFM)), Inghams Group, NRW Holdings ((NWH)), NextDC, and Sercorp ((SRV)) through a better-than-anticipated guidance for the period ahead.

Smaller cap companies that are very much liked either way include Breville Group, GrainCorp ((GNC)), GUD Holdings ((GUD)), Kelsian Group ((KLS)), Ridley Corp ((RIC)), and Webjet ((WEB)).

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Over at Barrenjoey, 18 High Conviction stock ideas have been identified at the start of February:

-Cheap mining exposure: IGO Ltd ((IGO)) and Perseus Mining ((PRU));
-Best in class global franchise: ResMed and Xero ((XRO));
-Earnings recovery: Incitec Pivot ((IPL)), QBE Insurance and Service Stream ((SSM));
-Cheap growth: Pinnacle Investment Management Group ((PNI)), Cettire ((CTT)), Pepper Money ((PPM)), Viva Energy Group ((VEA)), Reliance Worlwide ((RWC)) and Brambles;
-Quality franchises: National Australia Bank ((NAB)), The Lottery Corp ((TLC)), Hansen Technologies and GQG Partners;
-Preferred REIT: Lifestyle Communities ((LIC)).

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Citi's freshly updated list of global convictions contains two ASX-listed companies; Mineral Resources and Stockland ((SGP)).

Other names included are the London Stock Exchange, Boeing Co, Intuitive Surgical, and Capgemini.

Elsewhere, Citi's sector analysts this week issued warnings about small cap non-bank lenders, such as Pepper Money ((PPM)), Resimac Group ((RMC)) and Latitude Group ((LFS)), and companies reliant on selling new cars, including dealerships such as Eagers Automotive ((APE)) and Peter Warren Automotive ((PWR)).

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Small cap specialists at Goldman Sachs are keeping a watchful eye on outlook commentary to gauge how much of an impact the economic slowdown might have. The ability to withstand margin pressure, and preferably increase margins sits, high on the team's wish list.

Goldman Sachs' preference lays with those smaller caps that enjoy structural growth tailwinds and that can still perform under more challenging conditions. Such companies include Lifestyle Communities, Macquarie Technology ((MAQ)), TechnologyOne, and Life360 ((360)).

As far as February results are concerned, the team has identified four favourites, hereby ranked in order of preference: Macquarie Technology, IPH Ltd, Life360, and ReadyTech Holdings ((RDY)).

Two candidates singled out for a negative outcome are Dicker Data ((DDR)) and Inghams Group.

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Analysts at Wilsons are expecting outperformance from Pinnacle Investment Management (confirmed), EQT Holdings, formerly Equity Trustees ((EQT)), Pro Medicus, NextDC, Corporate Travel, Monash IVF ((MVF)), Avita Medical ((AVH)), and Austosports Group.

Two candidates have been identified for a negative surprise: Strike Energy ((STX)) and a2 Milk Co.

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Jarden too has communicated its favourites among Australia's emerging companies, which is simply a fancy description for smaller and mid-cap companies on the ASX.

The analysts are anticipating positive surprises from both AUB Group ((AUB)) and PSC Insurance ((PSI)) in the insurer brokers segment, while Perpetual ((PPT)) remains the favourite among fund managers.

With ongoing robust supply and demand dynamics, and in contrast to Citi's warning, Jarden still very much likes car dealers Eagers Automotive, Peter Warren Automotive, and Autosports Group ((ASG)).

Mortgage servicing platform operator Pexa Group ((PXA)) should finally start generating better news flow, while similar expectations surround IDP Education ((IEL)).

IP services provider IPH Ltd ((IPH)) is, simply put, considered too cheaply priced.

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Over at Shaw and Partners, analysts are pointing out a global shortage in olive oil is pushing up prices and keeping momentum positive for producers. Cobram Estates ((CBO)) should benefit too.

The broker's Large Cap Model Portfolio has selected Altium ((ALU)), CSL, Evolution Mining ((EVN)), James Hardie Industries ((JHX)), Goodman Group, Metcash ((MTS)), Qantas Airways, South32, Treasury Wine Estates, and Xero.

Among smaller caps ("emerging companies"), the broker's selection includes AIC Mines ((A1M)), Austin Engineering ((ANG)), Chrysos ((C79)), FireFly Metals ((FFM)), Gentrack ((GTK)), Metro Mining ((MMI)), MMA Offshore ((MRM)), Peninsula Energy ((PEN)), ReadyTech Holdings, and Silex Systems ((SLX)).

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Insights, predictions and anticipations from analysts will continue to feature in the weeks ahead.

FNArena's Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/

(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.)  

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P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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