Rudi’s View: ANZ, Aurizon, Cochlear, Newmont, Telix & More

This story features COCHLEAR LIMITED, and other companies.
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By Rudi Filapek-Vandyck, Editor

UBS strategist Richard Schellbach has moved his Model Portfolio allocation to a sector Overweight for the ASX-listed healthcare sector.

Healthcare, as investors probably know all too well, has experienced a very uncharacteristic post-GFC period to date, with relative valuations now at their ‘cheapest’ levels in ten years.

Schellbach believes EPS downgrades for the sector (mostly on margin pressures) have now run their course. Or to put this in his words: downgrades have been “exhausted”.

Add the fact that, forward looking, the sector stands out as one of prime locations for EPS growth, while investors have become rather uninterested and apathetic (where once they all wanted to have their slice of ownership), not to mention the prospect of slowing economic growth globally.

The latter prospect traditionally has always placed healthcare back on investors’ radar.

No doubt at least partially inspired by the US administration’s colourful stance on vaccines (let’s call it that, shall we?), UBS’s Model Portfolio is now Overweighted the sector through the inclusion of Cochlear ((COH)) and ResMed ((RMD)).

Fun fact; UBS recently upgraded Cochlear to Buy. Something that hadn’t been seen since 2021.

Other changes made to the Model Portfolio include Northern Star ((NST)) being replaced by Newmont Corp ((NEM)) while Life360 ((360)) has now been replaced by NextDC ((NXT)). WiseTech Global ((WTC)) is preferred over Xero ((XRO)). Mirvac Group ((MGR)) was added to provide more exposure to the residential housing cycle locally.

Post the sectorial upgrade, UBS’s Model Portfolio is now Overweighted Healthcare, Insurance and ‘TMT’. The latter acronym was incredibly popular some 25 years ago and stands for Technology, Media & Telecom.

Three segments remain Underweighted: Banks, Energy, and small caps.

UBS remains bearish the US dollar.

(For UBS’s latest update on Most Preferred and Least Preferred ASX-listings, see further below).

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Analysts at Wilsons have put the ASX-listed gold sector in the limelight, arguing if the price of bullion at the very minimum holds its ground around the current pricing level, the sector in Australia will see upgrades to forecasts flowing in.

Against this perspective, Wilsons sees the sector as still attractively priced. Wilsons’ Model Portfolio remains Overweighted the local gold sector, but has trimmed exposure to Evolution Mining ((EVN)) while also adding Northern Star Resources ((NST)) as a fresh inclusion.

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Analysts at Bell Potter have updated their sector preferences for the financial year ahead.

Listed Investment Companies ((LICs)
-Australian Foundation Investment Company ((AFI))
-Metrics Master Income Trust ((MXT))
-MFF Capital Investments ((MFF))

Agricultural & Fast Moving Consumer Goods (FMCG)
-Bega Cheese ((BGA))
-Rural Funds Group ((RFF))
-Elders ((ELD))

Technology
-WiseTech Global ((WTC))
-Gentrack ((GTK))
-Seek ((SEK))

Diversified Financials
-Cuscal ((CCL))
-Praemium ((PPS))
-Regal Partners ((RPL))

Real Estate
-Aspen Group ((APZ))
-Cedar Woods ((CWP))
-Region Group ((RGN))

Retail
-JB Hi-Fi ((JBH))
-Universal Store Holdings ((UNI))
-Propel Funeral Partners ((PFP))

Industrials
-LGI Ltd ((LGI))
-Environmental Group ((EGL))

Healthcare
-Telix Pharmaceuticals ((TLX))
-Neuren Pharmaceuticals ((NEU))
-Monash IVF ((MVF))

Gold
-Minerals 260 ((MI6))
-Santana Minerals ((SMI))
-Evolution Mining ((EVN))

Base Metals
-Aeris Resources ((AIS))
-Nickel Industries ((NIC))
-AIC Mines ((A1M))

Strategic Minerals & Processing Technologies
-Alpha HPA ((A4N))
-IperionX ((IPX))

Energy
-Boss Energy ((BOE))

Mining & Industrial Services
-Develop Global ((DVP))
-ALS Ltd ((ALQ))
-Duratec ((DUR))

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Macquarie’s latest strategy update starts off on a positive note. While the US economy is still slowing, the broker doesn’t see any sizeable corrections happening as long as the US jobs market stays firm/resilient.

But equities are richly valued and the advice to investors is to manage portfolios for potential earnings risks. This week yet again saw the likes of Adairs ((ADH)) and Aurizon Holdings ((AZJ)) –among others– issue profit warnings, hence Macquarie’s advice doesn’t seem too far astray.

Adairs shares got punished to the tune of -20% while shares in Aurizon as I write these sentences are only down less than -2%, but that share price has been on a long and elongated downsloping trajectory since …(wait for it)… 2019.

Back to Macquarie, where the current environment favours companies that clearly enjoy operational momentum as well as positive momentum behind their share prices, such as:

-QBE Insurance ((QBE))
-GPT Group ((GPT))
-ResMed ((RMD))
-Metcash ((MTS))
-Atlas Arteria ((ALX))
-APA Group ((APA))
-Orica ((ORI))

Smaller cap companies that equally fit those criteria include:

-Growthpoint Properties ((GOZ))
-Chorus ((CNU))
-GrainCorp ((GNC))
-AUB Holdings ((AUB))
-oOh!media ((OML))
-Monadelphous ((MND))
-Ventia Services ((VNT))

Stocks better avoided, according to Macquarie’s assessment, include:

-ASX Ltd ((ASX))
-REA Group ((REA))
-Computershare ((CPU))
-ANZ Bank ((ANZ))
-AMP Ltd ((AMP))
-Flight Centre ((FLT))
-CSL ((CSL))
-Endeavour Group ((EDV))
-Treasury Wine Estates ((TWE))
-Reliance Worldwide ((RWC))
-Orora ((ORA))
-James Hardie ((JHX))

Macquarie would also add major mining companies and lithium exposures to the best to avoid selection.

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Chris Watling & Co at Longview Economics in the UK have been busy-busy convincing as many investors as possible that a new cycle is in the making (and has been for a while now) that should see share market momentum shift away from the Mag7 (and technology and data centres in their slipstream) in favour of cyclicals.

It would be a nice change for the miners and energy producers, and everything relating to them, as the years past haven’t exactly been accommodating.

Longview’s explanation is that covid and post-covid have pretty much disrupted the normal cycle and the result has been no cycle since 2022. Tight monetary policy is to blame. Hence why various Western economies have struggled to grow and why various parts of the world’s stock market have stagnated.

With central banks now cutting interest rates, a re-acceleration of the industrial cycle should follow next. Enter: those segments that have been left behind but will see their earnings boosted by better global economic momentum.

Longview sees more upside for global equity markets, but this time it will be carried by the cyclicals that have been lagging thus far.

But… don’t get excited just yet. Longview acknowledges money remains too tight in the US. But conviction remains it’ll happen.

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UBS’s Most Preferred Stocks in Australia

In Resources segment:
-BHP Group ((BHP))
-BlueScope Steel ((BSL))
-Newmont Corp ((NEM))
-Orica ((ORI))
-Origin Energy ((ORG))

Among Financials & A-REITs:
-Dexus ((DXS))
-Lifestyle Communities ((LIC))
-Mirvac Group ((MGR))
-Medibank Private ((MPL))
-QBE Insurance ((QBE))
-Steadfast Group ((SDF))

Among Industrials:
-Brambles ((BXB))
-Collins Foods ((CKF))
-Cochlear ((COH))
-Coles Group ((COL))
-NextDC ((NXT))
-REA Group ((REA))
-ResMed ((RMD))
-SGH Ltd ((SGH))
-TechnologyOne ((TNE))
-Telstra Corp ((TLS))
-Telix Pharmaceuticals ((TLX))
-WiseTech Global ((WTC))

UBS’s Least Preferred Stocks in Australia

-Aurizon Holdings ((AZJ))
-ASX Ltd ((ASX))
-Bank of Queensland ((BOQ))
-CommBank ((CBA))
-Charter Hall Group ((CHC))
-Computershare ((CPU))
-Evolution Mining ((EVN))
-Temple & Webster ((TPW))

In comparison with the previous update, one month ago, Northern Star ((NST)), Light & Wonder ((LNW)), Xero ((XRO)) and Life 360 ((360)) have all been removed from the Most Preferred list, while Newmont Corp ((NEM)), Mirvac Group ((MGR)), Cochlear ((COH)), NextDC ((NXT)), ResMed ((RMD)) and WiseTech Global ((WTC)) have all been added.

The selection of Least Preferred stocks has seen the fresh inclusion of Charter Hall Group ((CHC)), Computershare ((CPU)), Evolution Mining ((EVN)) and Temple & Webster ((TPW)) while IDP Education ((IEL)), Lovisa Holdings ((LOV)) and Reece ((REH)) are no longer included.

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Goldman Sachs‘ selection of local Conviction Buys currently consists of:

-Iluka Resources ((ILU))
-NextDC ((NXT))
-ResMed ((RMD))
-Worley ((WOR))

The global list also includes Unibail-Rodamco-Westfield ((URW)), with main listing in Paris but also listed on the ASX (as a leftover from the old Westfield empire), as well as Rio Tinto’s ((RIO)) London listing.

Other familiar inclusions are Anheuser-Bush InBev, AstraZeneca, Bank of America, Novo Nordisk, Volvo Group, Panasonic, Philip Morris, Snowflake, TSMC, and Uber Technologies

Best Buys & Conviction Calls

Crestone’s Best Sector Ideas:

-Ampol ((ALD))
-APA Group ((APA))
-Aristocrat Leisure ((ALL))
-Beach Energy ((BPT))
-Brambles ((BXB))
-Cochlear ((COH))
-CSL ((CSL))
-Goodman Group ((GMG))
-IGO Ltd ((IGO))
-James Hardie Industries ((JHX))
-Lottery Corp ((TLC))
-Macquarie Group ((MQG))
-Metcash ((MTS))
-Monadelphous Group ((MND))
-REA Group ((REA))
-ResMed ((RMD))
-Suncorp Group ((SUN))
-Xero ((XRO))

Crestone’s selection for sustainable income:

-Amcor ((AMC))
-Ampol ((ALD))
-ANZ Bank ((ANZ))
-APA Group ((APA))
-Atlas Arteria ((ALX))
-Beach Energy ((BPT))
-BHP Group ((BHP))
-Car Group ((CAR))
-Coles Group ((COL))
-Dalrymple Bay Infrastructure ((DBI))
-Iress ((IRE))
-Lottery Corp ((TLC))
-Macquarie Group ((MQG))
-Metcash ((MTS))
-Mirvac Group ((MGR))
-Pro Medicus ((PME))
-QBE Insurance ((QBE))
-RAM Essential Services ((REP))
-ResMed ((RMD))
-Suncorp Group ((SUN))
-Tabcorp Holdings ((TAH))
-Telstra Group ((TLS))

If anyone wonders whether these lists are ever updated, the answer is ‘yes’. Does Crestone make regular changes? No.

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Jarden’s monthly update on Emerging Companies (i.e. smaller caps) showcases 16 stock picks in Australia; unchanged from the update in May. The following seven have been highlighted as representing the potential highest return, ranked in order of total shareholder return:

-GQG Partners ((GQG))
-Qualitas ((QAL))
-Dicker Data ((DDR))
-Universal Store Holdings ((UNI))
-EVT Ltd ((EVT))
-SiteMinder ((SDR))
-Temple & Webster ((TPW))

Apart from their order of appearance, nothing has changed to that selection. In contrast, the other ten have seen a number of changes:

-Arena REIT ((ARF))
-Genesis Energy ((GNE))
-Harvey Norman ((HVN))
-Integral Diagnostics ((IDX))
-Karoon Energy ((KAR))
-Michael Hill ((MHJ))
-Pepper Money ((PPM))
-Symal Group ((SYL))
-Vault Minerals ((VAU))

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Morgan Stanley’s Macro+ Focus List in Australia is currently made up of:

-Aristocrat Leisure ((ALL))
-ANZ Bank ((ANZ))
-Car Group ((CAR))
-Goodman Group ((GMG))
-GPT Group ((GPT))
-James Hardie Industries ((JHX))
-Orica ((ORI))
-Santos ((STO))
-Suncorp Group ((SUN))
-Xero ((XRO))

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Morgan Stanley’s Australia Macro+ Model Portfolio is currently made up of the following:

-ANZ Bank ((ANZ))
-CommBank ((CBA))
-National Australia Bank ((NAB))
-Westpac ((WBC))

-Macquarie Group ((MQG))

-Suncorp Group ((SUN))

-Goodman Group ((GMG))
-GPT Group ((GPT))
-Scentre Group ((SCG))
-Stockland ((STG))

-Aristocrat Leisure ((ALL))
-Eagers Automotive ((APE))
-CAR Group ((CAR))
-Domino’s Pizza ((DMP))
-The Lottery Corp ((TLC))
-Wesfarmers ((WES))
-WiseTech Global ((WTC))
-Xero ((XRO))

-James Hardie ((JHX))

-Amcor ((AMC))
-Cleanaway Waste Management ((CWY))
-Orica ((ORI))

-Coles Group ((COL))

-CSL ((CSL))
-ResMed ((RMD))

-AGL Energy ((AGL))
-Telstra ((TLS))
-Transurban ((TCL))

-BHP Group ((BHP))
-Newmont Corp ((NEM))
-Rio Tinto ((RIO))
-South32 ((S32))

-Santos ((STO))
-Woodside Energy ((WDS))

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Morningstar’s list of Best Buy Ideas: 

-APA Group ((APA))
-ASX Ltd ((ASX))
-Auckland International Airport ((AIA))
-Aurizon Holdings ((AZJ))
-Bapcor ((BAP))
-Brambles ((BXB))
-Dexus ((DXS))
-Domino’s Pizza Enterprises ((DMP))
-Endeavour Group ((EDV))
-Fineos Corp ((FCL))
-IDP Education ((IEL))
-IGO Ltd ((IGO))
-Ramsay Health Care ((RHC))
-SiteMinder ((SDR))
-TPG Telecom ((TPG))
-Woodside Energy ((WDS))

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Ord Minnett’s High Conviction calls (all nominations made by sector analysts on a 12 month horizon):

-Aussie Broadband ((ABB))
-Brazilian Rare Earths ((BRE))
-Bubs Australia ((BUB))
-Cuscal ((CCL))
-Qoria ((QOR))
-Regis Healthcare ((REG))
-SiteMinder ((SDR))
-Vault Minerals ((VAU))
-Waypoint REIT ((WPR))
-Zip Co ((ZIP))

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Shaw and Partners’ Large Caps Model Portfolio:

-ANZ Bank ((ANZ))
-Aristocrat Leisure ((ALL))
-BlueScope Steel ((BSL))
-Brambles ((BXB))
-Dexus ((DXS))
-Macquarie Group ((MQG))
-Newmont Corp ((NEM))
-South32 ((S32))

Shaw and Partners’ emerging companies Top Picks:

-AML3D ((AL3))
-Australian Vanadium ((AVL))
-Bannerman Energy ((BMN))
-Chrysos ((C79))
-Humm Group ((HUM))
-Metro Mining ((MMI))
-Santana Minerals ((SMI))
-Southern Cross Electrical ((SXE))

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Wilsons’ Focus Portfolio currently contains the following:

-ANZ Bank ((ANZ))
-Aristocrat Leisure ((ALL))
-BHP Group ((BHP))
-Brambles ((BXB))
-Car Group ((CAR))
-Collins Foods ((CKF))
-CSL ((CSL))
-Evolution Mining ((EVN))
-Goodman Group ((GMG))
-HealthCo Healthcare & Wellness REIT ((HCW))
-Hub24 ((HUB))
-James Hardie ((JHX))
-Mac Copper ((MAC))
-Macquarie Group ((MQG))
-ResMed ((RMD))
-Sandfire Resources ((SFR))
-Santos ((STO))
-South32 ((S32))
-TechnologyOne ((TNE))
-Telix Pharmaceuticals ((TLX))
-The Lottery Corp ((TLC))
-Westpac Bank ((WBC))
-WiseTech Global ((WTC))
-Woolworths Group ((WOW))
-Worley ((WOR))
-Xero ((XRO))

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Wilsons’ analysts selected the following five as Key Investment Opportunities:

-ResMed ((RMD))
-Goodman Group ((GMG))
-Xero ((XRO))
-Brambles ((BXB))
-WiseTech Global ((WTC))

Wilsons’ High conviction investment ideas across the industrials (ex resources) part of the market; typically businesses with attractive structural growth prospects:

-Pinnacle Investment Management ((PNI))
-Nanosonics ((NAN))
-Ridley Corp ((RIC))
-ARB Corp ((ARB))
-SiteMinder ((SDR))

Wilsons’ number one speculative idea:

-Clarity Pharmaceuticals ((CU6))

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Paying subscribers have 24/7 access to my curated lists, including All-Weather Performers at: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

(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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