Rudi’s View: ANZ, AUB, Beach Energy, CSL, Flight Centre & Newmont

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By Rudi Filapek-Vandyck, Editor

It is the eye-catching recurring theme in investment strategy reports and investor surveys this month: investors have become more confident about the medium-term outlook, despite delays to future rate cut expectations.

And as I highlighted in my Weekly Insights earlier this week, corporate results and market updates have made a crucial contribution to this boost in general market sentiment.

The graphic below is taken from the latest investment managers survey organised by S&P Global, which, unsurprisingly, shows global risk appetite has rapidly recovered from the April confusion to its highest level since late 2021.

The graphic shows how expectations have turned into a net positive on the basis of quarterly corporate financial releases in the USA. Weekly Insights this week suggested, arguably, the underlying picture/trend for Australia is a net positive too.

Post this week's Federal Budget, which yet again has amped up the public debate about inflation versus growth, Macquarie strategists stated the following:

"With more than 50 countries around the world holding elections in 2024 (incl Biden vs Trump), Australia is unlikely to be the only government that delivers a pro-growth budget as they look to re-election.

"At this point, downside risks to growth are more likely in 2025 when governments would be expected to deliver some typical post-election discipline."

And that, as the Devil's Advocate would suggest, sums it up quite nicely.

For what it's worth, I view the latest $300 power bill compensation as announced by Treasurer Chalmers as simply the government playing the rules of the game. It will reduce official CPI readings by an estimated -0.5%, simply because that's the way these things are measured and included in the CPI calculation.

As wealthy Australians are less likely to spend the extra benefit, or maybe they will do it overseas, that statistical trickery might actually outweigh the spending by less-wealthy households. With cost-of-living pressures continuing, nobody was seriously thinking any government was simply going to watch disasters unfold and do nothing?

Model Portfolios, Best Ideas & Conviction Calls

Meanwhile, about that other 'hot' topic in Australia, Wilsons strategists remain undeterred in their "challenged for longer" outlook for Australian banks, despite a not-as-bad-as-feared results season from the sector.

Wilsons portfolio positioning therefore remains Underweight the local banking sector. In line with many other sector analysts and local market strategists, Wilsons sees lower earnings for the banks in FY25 and that makes current valuations "stretched".

ANZ Bank ((ANZ)) is preferred and the sole bank stock that is enjoying an Overweight allocation in the Focus Portfolio.

****

Evans and Partners' Best Ideas have seen a number of changes recently. The broker's ideas (essentially Conviction Calls) are spread over several categories, and Quality stocks is one of them.

Current Quality ideas are:

-Aristocrat Leisure ((ALL))
-Brambles ((BXB))
-Flight Centre Travel Group ((FLT))
-Macquarie Group ((MQG))
-Rio Tinto ((RIO))

Flight Centre was moved from the list of Tactical Recommendations to the Quality basket given the broker's anticipation of ongoing growth and sustainable, attractive returns on invested capital.

Best Ideas in the Growth category:

-Block Inc ((SQ2))
-Mineral Resources ((MIN))
-NextDC ((NXT))

Block was recently added with the company expected to enjoy strong growth for many more years.

Best Ideas for investors looking for dividend yield:

-APA Group ((APA))
-Arena REIT ((ARF))
-Qantas Airways ((QAN))
-Telstra ((TLS))

Qantas Airways was moved out of Tactical Recommendations to the yield category with Evans and Partners expecting significant fully-franked dividends over the medium term.

Tactical Recommendations:

-Beach Energy ((BPT))
-Monadelphous Group ((MND))
-Tabcorp Holdings ((TAH))
-Treasury Wine Estates ((TWE))

Beach Energy and Tabcorp were recently added to the list.

****

Post the 26th Macquarie Australia Conference, which took place in the first week of May, Macquarie analysts have listed their preferences among A-REITs as follows:

Among large caps: Charter Hall ((CHC)), Mirvac Group ((MGR)) and Goodman Group ((GMG))
Among smaller caps: Qualitas ((QAL)) and Centuria Industrial REIT ((CIP))

****

Morningstar's Best Equity Ideas for ASX-listed stocks currently contains 14 inclusions. Morningstar's approach is centred around 'cheap value', more so than around 'growth':

-TPG Telecom ((TPG))
-Domino's Pizza ((DMP))
-Bapcor ((BAP))
-a2 Milk Co ((A2M))
-Santos ((STO))
-AUB Group ((AUB))
-ASX Ltd ((ASX))
-Aurizon Holdings ((AZJ))
-Ventia Services ((VNT))
-Lendlease Group ((LLC))
-Pexa Group ((PXA))

As well as Fineos Corp ((FCL)), ResMed ((RMD)) and Newmont Corp ((NEM)) among international ideas.

****

Morgan Stanley's Australia Macro+ Focus List contains the following 10 stocks:

-Aristocrat Leisure
-Car Group ((CAR))
-CSL ((CSL))
-Macquarie Group ((MQG))
-Origin Energy ((ORG))
-Paladin Energy ((PDN))
-QBE Insurance ((QBE))
-Suncorp Group ((SUN))
-Treasury Wine Estates ((TWE))
-Woodside Energy

****

Morgan Stanley's Macro+ Model Portfolio consists of the following 32 constituents:

-ANZ Bank
-CommBank ((CBA))
-National Australia Bank ((NAB))
-Westpac Bank ((WBC))
-Macquarie Group
-QBE Insurance
-Suncorp Group
-Goodman Group
-Scentre Group ((SCG))
-Stockland ((SGP)
-Aristocrat Leisure
-Car Group
-Domino's Pizza ((DMP))
-The Lottery Corp ((TLC))
-Wesfarmers ((WES))
-James Hardie ((JHX))
-Orica ((ORI))
-Coles Group ((COL))
-Treasury Wine Estates
-CSL
-ResMed ((RMD))
-AGL Energy ((AGL))
-Origin Energy
-Telstra
-Transurban Group ((TCL))
-BHP Group ((BHP))
-Newmont Corp 
-Rio Tinto
-South32 ((S32))
-Paladin Energy
-Santos ((STO))
-Woodside Energy

****

Wilsons' list of Highest Conviction Investment Ideas has seen the allocation increase to Woodside Energy, Xero ((XRO)) and Netwealth Group (NWL)).

Other Most Preferred Ideas are Aristocrat Leisure and Collins Foods ((CKF)).

More ideas come with "long term growth" profiles:

-Ridley Corp ((RIC))
-TechnologyOne ((TNE))
-Universal Stores ((UNI))
-ARB Corp ((ARB))
-Neuren Pharmaceuticals ((NEU))
-Pinnacle Investment Management ((PNI))

Among Resources stocks, there are two favoured ideas:

-Beach Energy
-Liontown Resources ((LTR))

And there's a Speculative basket too:

-Immutep ((IMM))
-Clarity Pharmaceuticals ((CU6))

****

Wilsons' Focus Portfolio's largest overweight remains towards growth companies, including a large overweight to the healthcare sector. The largest underweight allocation remains for local banks. The Portfolio also holds a slight overweight allocation to resources, but this is due to "active positioning" in green metals and energy (underweight iron ore).

In terms of individual stocks, the Focus Portfolio encompasses the following:

Consumer Discretionary
Aristocrat Leisure, IDP Education ((IEL)), Lottery Corp, Collins Foods, Breville Group ((BRG)), Webjet ((WEB))

Energy
-Woodside Energy

Financials
-ANZ Bank, National Australia Bank, Westpac, Macquarie Group, Insurance Australia Group ((IAG)), Netwealth Group, Steadfast Group ((SDF))

Healthcare
-CSL, ResMed, Telix Pharmaceuticals ((TLX))

Industrials
-Worley ((WOR))

Information Technology
-Xero

Materials
-BHP Group, Amcor ((AMC)), Evolution Mining ((EVN)), Mineral Resources, Arcadium Lithium ((LTM)), Sandfire Resources ((SFR)), South32 ((S32))

Real Estate
-Goodman Group, HealthCo Healthcare & Wellness REIT ((HCW))

****

Macquarie Wealth's recommended Growth Portfolio currently includes the following stocks:

-Goodman Group
-Seek ((SEK))
-Aristocrat leisure
-Northern Star ((NST))
-CSL
-Computershare ((CPU))
-NextDC
-The Lottery Corp
-Flight Centre
-Mineral Resources
-Cleanaway Waste Management ((CWY))
-Steadfast Group
-Arcadium Lithium
-ResMed
-Pexa Group
-Treasury Wine Estates
-Viva Energy ((VEA))

Macquarie Wealth's recommended Income Portfolio currently has the following composition:

-Suncorp Group
-Telstra
-National Australia Bank
-Westpac Bank
-ANZ Bank
-BHP Group
-CommBank
-Premier Investments ((PMV))
-Coles Group
-Viva Energy
-Atlas Arteria ((ALX))
-Aurizon Holdings
-APA Group
-GPT Group ((GPT))
-Deterra Royalties ((DRR))
-Metcash ((MTS))
-GUD Holdings ((GUD))
-Charter Hall Retail REIT ((CQR))
-Amcor

Weekly Insights this week: https://fnarena.com/index.php/2024/05/15/rudis-view-more-positives-than-negatives/

(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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