Rudi’s View: Banks, Cimic, Coles, And PWR Group

rudi-views
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 | Mar 22 2019

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

-Central Banks Keep The Worries Away
-BC *Extra* Puts Small Caps In Focus
-Changing Climate Has RBA's Attention
-Conviction Calls
-February Reporting Season: Final Observations
-Rudi On TV
-Rudi On Tour


[Non-highlighted parts appeared in Part One on Thursday]

By Rudi Filapek-Vandyck, Editor FNArena

BC *Extra* Puts Small Caps In Focus

FNArena's daily Australian Broker Call Report focuses solely on eight stockbrokerages, and so does the permanent Corporate Results Monitor we are running all-year around on the website. This can have the disadvantage that sometimes smaller cap stocks, albeit promising and/or interesting, fall through the cracks, in particular when the team of journalists is extremely busy.

This year we have tried to compensate for this through two updates of the Australian Broker Call *Extra* Report; two editions published last week that are chock-a-block filled with lesser-known ASX-listed names such as Bigtincan Holdings ((BTH)), Elanor Investors Group ((ENN)), Fluence Corp ((FLC)), and Macquarie Telecom ((MAQ)), as covered by a wider group of brokers.

The added value is now that investors can also search for these companies on the website, with share price information and price charts included. Above all, for all that are specifically interested in finding the next small cap opportunities, there's a whole new bunch to read about, consider and add to your watch list.

We are awaiting for the tech development team to introduce an easy-to-locate archive for these *Extra* editions next to the archive for daily Broker Call Reports on the website. In the meantime, I have to admit it's not easy to find where exactly are these two special editions in between all the stories we publish and update every day.

Hence why I have included two direct links:

https://www.fnarena.com/index.php/2019/03/11/australian-broker-call-extra-edition-mar-11-2019/

https://www.fnarena.com/index.php/2019/03/13/australian-broker-call-extra-edition-mar-13-2019/

One of the obvious observations to make from these two *Extra* February reporting season-inspired updates is that small cap engineers and specialist services providers to miners and energy companies are back on analyst radars. Whereas many would argue the share price for a sector stalwart such as Monadelphous ((MND)) already reflects a lot of future optimism about both sectors ramping up spending in the years ahead, judging from a whole lot of comparable companies mentioned, this doesn't seem to be the case for everyone in that sector.


That idea is further fuelled by analysis such as the one published by UBS on 11 March recently, in that infrastructure construction spending across Australia is still looking healthy, offering engineers and contractors visible growth potential at least out to 2021 from public infrastructure spending on top of the resources sector.

UBS's favourites to play the theme are Seven Group ((SVW)), Downer EDI ((DOW)), and Cimic Group ((CIM)).

The main caveat here is that this theme is by no means new, and recent years have also exposed many disappointments for investors who jumped on board the wrong stocks, believing they could benefit from what, from the outside at least, looks like a cannot-lose situation for contractors. Wagners Holding ((WGN)) comes to mind, as well as RCR Tomlinson (no longer in existence), while Adelaide Brighton ((ABC)) has been nothing but a disappointment as well.

Conviction Calls

Stockbroker Morgans has released what is possibly best described as a negative conviction list; stocks that are either too expensive, or unattractive for other reasons, with investors advised to trim holdings, or sell out completely, and seek better rewards elsewhere.

Note that Morgans is, and has been, worried about how quickly the local share market recovered from its December low, with a rather mixed and lukewarm reporting season to support current share price levels.


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