FYI | Jul 03 2019
By Peter Switzer, Switzer Super Report
Buried in data I was recently trawling was a list of the ASX Top 100 biggest losers for 2018-19. I thought it would be intriguing to see if the analysts/experts think these losers could become winners in 2019-20. The answer? A resounding "Yes" to 24 of them!
Thanks to a great half year in 2019, our S&P/ASX 200 Index was up 6.49% for the financial year, closing at 6618.8. Morgan's Raymond Chan calculated that the trading range was a huge 1,281 points (or 20%) with a high of 6691 on 27 June and a low of 5410 on 24 December.
Ray did a few more data collections to tell us that iron ore was up 71%, due to Chinese demand and problems for Vale in Brazil, after a tailings dam disaster. Meanwhile, gold was up 13% on central bank easing, recession fears and Trump versus Iran concerns.
Coal was down 37% and oil was off about 15%, despite rising more recently, with Iran geopolitical curve balls the prime cause.
Buried among his data drop was the list of the ASX Top 100 biggest losers for 2018-19. I thought it would be intriguing to see if the analysts/experts think these losers could become winners in 2019-20. And the answer is a resounding "Yes"!
In fact, only one, Scentre Group, which lost 8% last financial year, is expected to lose 0.2% this year. But in the world of rubbery figures, I'd call it flat.
Based on what these 24 losers shed in 2018-19 and looking at what's tipped for the year ahead, a company such as Whitehaven Coal (WHC) could have a 65% turnaround, with the analysts surveyed by FNArena expecting a 35.1% rise in share price after a 30% slump this year!
Even a bigger turnaround story is the Clydesdale & Yorkshire Banking Group or CYB, which was down 38% but is expected to rebound by 29.7% this year. That would be a 67.7% change in share price for the better! Clearly, a Brexit solution and a new PM inclined to pump up the UK economy (which frontrunner candidate Boris Johnson is advocating), would be a plus for the stock.
The short term could still prove tricky for CYB but over a 3-4 year period, the current share price could prove to be cheap.
AMP is another. It lost 37% last year and the tip is for a 0.2% gain this year. I think the company, now chaired by my mate David Murray, will need a fair bit of time to rebuild that brand and share price.
Among some of the big potential gainers are some companies that have been quality performers in the past, so taking a longer view on them might pay dividends. These include Challenger (CGF), which dropped 41% last year but is expected to pick up 9.6% this year. Link Administration Holdings, with a 39.9% upside forecast, could gain from a better Brexit outcome under Johnson, but that's something we can only guess.
In the same Brexit-affected and also Royal Commission impacted way is the Pendal Group Limited. This is the old BT Financial Group but it has a substantial exposure to the UK.
Another UK-Brexit affected stock is URW or Unibail-Rodamco Westfield but the analysts still see a 13.2% upside. Sticking to the Brexit-troubled stocks and Treasury Wine Estates has copped a bit of the backwash, however, again, the experts think an 18.9% pick up in share price is on the cards.
While Donald Trump and his trade war dominates the front pages of the Wall Street Journal and FT.com, for those investing in the above companies, Brexit and the UK leadership battle should be your chief concerns.
Sticking to the potential big winners, Reliance Worldwide (RWC) (with a predicted 34.7% gain), James Hardie (JHX) up 15.4%, Worley Parsons 25.7%, Boral (BLD) up 12.7%, Lendlease (LLC) up 19.7% and Star Entertainment Group (SGR) 17.9% are all good companies but have issues, which could be worked through over time. Many of these challenges are related to an unexpected slowdown in the US and global economies, though there are also some company specific issues too. But with rate cuts coming and probably a trade deal, forecasted earnings could pick up over time.
With this group, I can't get too excited but they're not bad long-term holders for those who are patient.
In the material space, I tipped Bluescope a month ago and it saluted, as the chart shows below:
The company now only has 4% predicted upside, so I'll pass on BSL now.
In the material and energy space, Origin (ORG) 13.2% and Oil Search (OSH) 16.1% are both good companies that wouldn't be out of place in a collection portfolio of losers that could be poised to be winners.
Others on the list such as Domino's Pizza (DMP) 12.1%, Nine (NEC) 9.6%, Computershare (CPU) 5.5% and Caltex (CTX) 1.4% are all ownable, with good reasons to support them but they all have question marks over their immediate future.
Qantas (QAN) 9.4% is a good company but I remain nervous about airlines, especially after a good run. And Flight Centre, with a 32% fall last year and a 9% rise expected this year, is always a hard company to call. That said, its founer and CEO, Graham Turner, has a happy knack of turning around this company when you least expect it.
Running my eye over these 24 stocks, you could easily put them into a loser-to-winner portfolio. I wouldn't be surprised to see this collection of companies deliver decent returns over the next couple of years.
So here's my list of last year's losers that could be winners this financial year:
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
Content included in this article is not by association the view of FNArena (see our disclaimer).
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual's objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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.
FNArena is proud about its track record and past achievements: Ten Years On