FYI | Aug 12 2020
By Peter Switzer, Switzer Report
13 stocks I like with gains between 10-20%
Investing can be company specific and ideally should be, but it can be useful to look for themes that explain why a share price might be down and could, in all likelihood, rebound over time. Once you think about the external factors that tell you why a company’s valuation is down, then it’s wise to look into the pros and cons of the company.
I’ve looked at our top 200 companies and asked this: “what good companies are being belted because of the Coronavirus (and even the recent Victorian stage four lockdown) but one day have to reassert themselves as reliable performers when normalcy resumes?
I then looked at the analysts’ view of these companies hoping to find 20% plus potential gainers on the basis that even if it takes two years for normalcy to come around, then I’d make at least 10%, if the experts are on the money.
By the way, these numbers are not two year-forecasted expectations but more shorter-term views.
Also I’ve collected a group of companies that have good, predicted upside potential but are not in the 20 percenter class.
So let’s look at 13 companies that promise the bigger returns first, and then look at the best argument that the current share price reflects “this is now” and not “what it should be”. Remember, something a long-term investor has on his or her side is time, so use it.
Here are my potentially lucky 13 companies:
1. Qantas (QAN) has 25% upside, according to FNArena’s consensus of leading analysts. Your consideration process has to rest on: do you think one day we will be flying internally state to state and then eventually overseas? If the answer is yes, then this 25% gain looks like a decent bet.
2. Vicinity Centres (VCX). This has upside of 20.1% and you have to believe that its star shopping centres, such as Chadstone in Melbourne, will become a shadow of its former self even when we’re on top of the Coronavirus. Excuse the pun but I can’t buy that!
3. Scentre Group (SGR) has a potential share price rise of 24.1% and if you believe Westfield Shopping Centres are past it, then avoid this stock. But I was in Westfield Bondi Junction yesterday and it was packed! There’s an old anthropology saying that “men fell out of the trees and into shopping centres…”
4. Flight Centre (FLT) is predicted to be 20.1% under–priced and while it will take longer for normalcy to come to this business, when it does the gain could be a lot more than 20%. In July 2018, this was a $68 stock and before the virus it was a $47 stock. And it’s now $10.67!
5. ANZ + WBC + NAB are all around 20% under-priced and when normalcy returns — even if it takes two years — many of us will regret we did not believe that eventual economic recovery means eventual bounce back of the big four bank’s share prices and dividends.
6. The Star Entertainment Group (SGR) has 23.7% price rise potential. If you don’t think tourists will ever return to Australia and we will never beat the Coronavirus, then ignore this potential high return buy. But if you think the opposite, then you could be looking at a good gamble!
7. Webjet (WEB) is thought to be 29.6% under-priced but some experts worry about the potential survival of a company like this. I will soon interview the CEO, John Gusic, who is a straight shooter. This is one to watch.
They’re the 20 percenters, which one day should return to normal and could be nice ‘buy and forget’ stocks until we get back to our old ways.
Here are others that might have a quicker repayment timeframe:
8. Tyro (TYR): + 8.1%, would not be helped by Victoria’s stage four restrictions. This was a $4.49 stock before COVID-19, when we were all going out to restaurants and cafes, where this business has a big share. Currently it’s $3.37.
9. Sydney Airport (SYD): + 14.2%, when we travel again, this mob will be a huge beneficiary. This looks like the safest bets of all if you believe normalcy will one day return. I’m dying to fly!
10. Crown Resorts Ltd (CWN): + 11.7%, anyone who has been to Melbourne in racing, tennis or grand final seasons know how popular this business is in normal times. The willingness of locals and tourists to gamble makes an easy case for believing this company has post-COVID-19 upside.
11. CSL: +10.9%, this company has had a few challenges collecting blood because of the disruptions in the USA, where it does a majority of its business, but once again normalcy would be a plus for the company. It’s worth reminding you that this was a $341 company before COVID-19 and is now $277!
12. South 32 (S32): +14.5%, this is a ‘poor relation’ miner but if you believe the era of the Coronavirus will give way to a global economic recovery and even boom, then the diversified mining products this company sell should be in good demand.
13. Woodside Petroleum (WPL): +16.2%, and while on a recovery of the global economy being out there, somewhere down the track, it makes total sense that the demand for energy will also go with it. The oil price recently hit a recent high of $US41.68, since the April 27 low of $US12.78. The better the recovery going into 2021 the higher this price should go, which will help WPL’s share price.
So, there’s my lucky 13 stocks that currently look under-priced, but have a very believable potential to deliver over time.
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
