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Rudi’s View: Ramsay Health Care, Xero And Computershare

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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 | Apr 12 2018

In this week’s Weekly Insights (this is Part Two):

-Looking For Answers
-Conviction Calls
-Rudi On TV
-Rudi On Tour

[Note the non-highlighted items appear in part two on the website on Thursday]

Conviction Calls

By Rudi Filapek-Vandyck, Editor

Stockbroker Morgans has added Cleanaway Waste Management ((CWY)) to its selection of Conviction Calls in the Australian share market. Cleanaway joins Suncorp ((SUN)), Link Administration ((LNK)), BHP ((BHP)), Westpac ((WBC)) and Oil Search ((OSH)) among large caps, and Senex Energy ((SXY)), PWR Holdings ((PWH)) and CML Group ((CGR)) outside of the Top100.

Cleanaway joins the selection after a presentation by the CEO which “helped reinforce confidence” in the stockbroker’s positive outlook for the company.

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Ord Minnett also has used a general update on investment matters -Investment Insights June Quarter Update- to line up its favourites among listed Australian entities.

Among so-called blue chip stocks, still considered “core” for longer term investment portfolios, Ord Minnett has selected the following nine:

AGL Energy ((AGL)), ANZ Bank ((ANZ)), CSL ((CSL)), GPT Group ((GPT)), Oil Search ((OSH)), Ramsay Health Care ((RHC)), Rio Tinto ((RIO)), Transurban ((TCL)), and Westpac ((WBC)).

For Value investors, the following selection of favourites applies:

AMP ((AMP)), APA Group ((APA)), Charter Hall ((CHC)), Event Hospitality and Entertainment ((EVT)), National Australia Bank ((NAB)), Suncorp, and Wesfarmers ((WES)).

Growth oriented investors have the following seven favourites to choose from:

Aristocrat Leisure ((ALL)), Boral ((BLD)), Caltex Australia ((CTX)), Macquarie Group ((MQG)), Magellan Financial Group ((MFG)), Orora ((ORA)), and Treasury Wine Estates ((TWE)).

Ord Minnett’s selected favourites among small caps include:

Afterpay Touch ((APT)), Austal ((ASB)), Corporate Travel Management ((CTD)), Hansen Technologies ((HSN)), Hub24 ((HUB)), People Infrastructure ((PPE)), Pinnacle Investment Management ((PNI)), RCR Tomlinson ((RCR)), Service Stream ((SSM)), Steadfast Group ((SDF)), and WorleyParsons ((WOR)).

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Here’s one casual observation in relationship to the list of Conviction Calls published by Wilsons; components tend to drop off not because their share price has rallied hard, but because of operational disappointment which then leads to significant weakness in the share price. The latest victim, so to speak, has been Opthea ((OPT)), small cap biotech trying to develop commercial solutions in ophthalmology (eye diseases).

With the share price down approximately by -50% over the year past, Wilsons has now kicked Opthea off its Conviction Calls list. Reason: “A lack of consistent catalysts … could cause short-term underperformance“.

Remaining on the list: Afterpay Touch, Bravura Solutions ((BVA)), Melbourne IT ((MLB)), Ruralco ((RHL)), Collins Foods ((CKF)), Ridley Corp ((RIC)), ImpediMed ((IPD)), Nanosonics ((NAN)), Citadel Group ((CGL)), and Pinnacle Investment.

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CLSA updated their local favourites through the Australia Top15 selection. The following new members have been added: Qantas ((QAN)), Transurban, Link Administration, CYBG ((CYB)), Xero ((XRO)) and Mirvac Group ((MRG)). The following names have been removed: AGL Energy, Scentre Group ((SCG)), Challenger ((CGF)), Ramsay Health Care, Sydney Airport ((SYD)), and Computershare ((CPU)).

This leaves the following components retaining their inclusion: Rio Tinto ((RIO)), a2 Milk ((A2M)), Speedcast International ((SDA)), Macquarie Group, National Australia Bank, CSL, Tabcorp Holdings ((TAH)), Treasury Wine Estates, and OZ Minerals ((OZL)).

Also, on Monday CLSA issued two 60 page reports on Incitec Pivot and Ramsay Health Care respectively. Both exercises in in-depth analysis resulted in positive revisions. Regarding Incitec Pivot, CLSA analysts note how over-supply concerns for fertilisers in Australia have kept a lid on the share price, but it is their prediction the market is migrating towards under-supply. Hence an upgrade to Buy from Outperform, with a price target of $21.

For Ramsay Health Care, investors should expect below average growth in FY19, but with momentum projected to pick up again into double digit percentage thereafter. The number of new operating theatres is expected to pick up again, while competitors are looking the other way, and current problems with regard governments in the UK and in France are expected to be resolved by then as well. On a three year horizon Ramsay shares look significantly undervalued on CLSA’s projections. Hence the upgrade to Buy from Outperform, with a rise in price target to $77.80 from $74.50.

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And finally, the latest update on Citi’s High Conviction list contains Aristocrat Leisure, ALS ltd ((ALQ)), BlueScope Steel ((BSL)), Computershare, Downer EDI ((DOW)), Incitec Pivot, Galaxy Resources ((GXY)), Star Entertainment Group ((SGR)), and Xero on the “long” side (positive view), with JB Hi-Fi ((JBH)) the only one listed on the “short” side (negative view).

Rudi On TV

This week my appearances on the Sky Business channel are scheduled as follows:

-Tuesday, 11.15am Skype-link to discuss broker calls
-Thursday, noon-2pm
-Friday, 11am Skype-link to discuss broker calls

Rudi On Tour

-An Evening With Rudi, Paddington, 11 April (sold out)
-Presentations to ASA members and guests Gold Coast and Brisbane (2x), on 12 & 13 June
-ATAA members presentation Newcastle, 14 July
-AIA National Conference, Gold Coast QLD, late June-August 1
-Presentation to ASA members and guests Wollongong, in September
-Presentation to AIA members and guests Chatswood in October

(This story was written on Monday 9th April and the first part was published on the day in the form of an email to paying subscribers at FNArena, and again on Wednesday as a story on the website. This is Part Two).

(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. All views are mine and not by association FNArena’s – see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: info@fnarena.com or via the direct messaging system on the website).

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BONUS PUBLICATIONS FOR FNARENA SUBSCRIBERS

Paid subscribers to FNArena (6 and 12 mnths) receive several bonus publications, at no extra cost, including:

– The AUD and the Australian Share Market (which stocks benefit from a weaker AUD, and which ones don’t?)
– Make Risk Your Friend. Finding All-Weather Performers, January 2013 (The rationale behind investing in stocks that perform irrespective of the overall investment climate)
– Make Risk Your Friend. Finding All-Weather Performers, December 2014 (The follow-up that accounts for an ever changing world and updated stock selection)
– Change. Investing in a Low Growth World. eBook that sells through Amazon and other channels. Tackles the main issues impacting on investment strategies today and the world of tomorrow.
– Who’s Afraid Of The Big Bad Bear? eBook and Book (print) available through Amazon and other channels. Your chance to relive 2016, and become a wiser investor along the way.

Subscriptions cost $420 (incl GST) for twelve months or $235 for six and can be purchased here (depending on your status, a subscription to FNArena might be tax deductible): Signup Now

(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.

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.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

(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.

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.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

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CHARTS

A2M AGL ALL ALQ AMP ANZ APA APT ASB BHP BLD BSL CGF CGL CGR CHC CKF CPU CSL CTD CTX CWY CYB DOW EVT GPT GXY HSN HUB IPD JBH LNK MFG MQG MRG NAB NAN OPT ORA OSH OZL PNI PPE PWH QAN RCR RHC RHL RIC RIO SCG SDA SDF SGR SSM SUN SXY SYD TAH TCL TWE WBC WES WOR XRO