FYI | Sep 23 2020
By Peter Switzer, Switzer Report
9 companies that have been ignored but are now worth a look
In the past few months, I’ve looked at stocks that have been beaten up but are ones that analysts think have potential when a reopening of the economy happens, along more normal lines.
But where do we go next to search for future value? Well, the experts think the easy wins might be behind us and that stock pickers, particularly those trolling the value stocks (which have been ignored for ages) will start coming into their own.
The look at beaten up stocks with reopening potential has meant a stock like Qantas has gone from $2.14 on March 23 (the low point of the Coronavirus crash) to $3.98 on Friday. That gutsy play to believe our biggest airline would one day recover would have netted you 85%! And there’s more to come, but it will take time.
The analysts surveyed by FNArena think in the near term there’s a 2.8% gain up for grabs, but given that huge gain that’s understandable.
So, I trawled the top 300 stocks to look for stocks that could offer about an 8% plus gain over the next 12 months. I know you’d like more but in a world offering around 1% on term deposits, an 8% gain (plus franking and dividends) means you could be looking at 12% plus, which isn’t to be sneezed at.
As we approach normal times, abnormal returns of 85% on the likes of Qantas become harder to find. Funny that.
So, what I’ll offer you is a list of companies that are in the 8% plus category and where their respective industries have potential over the next year based on my belief that:
- A vaccine will be out and about in early 2021 at the latest.
- Second-wave infections will be managed.
- The level of fiscal stimulus will ensure solid growth for the overall economy.
- Normalcy, such as open borders and internal flying, happens this year and international flying is up and going by mid-year.
- A potential Joe Biden Presidency won’t over-spook Wall Street.
With each stock, I will offer my views on their potential to live up to analysts’ expectations. By the way, I’m not saying I like these, but they are worth a look if you want to add to your portfolio.
1. Sigma Healthcare ((SIG))
Sigma Healthcare (SIG) is a perennial disappointment, but the analysts think the company has 17.2% upside.
The chart isn’t screaming “buy now”, but by the time it does, it might be too late.
2. Pact Group ((PGH))
Another regular disappointer is Pact Group, but the analysts think it has 15.5% upside. The chart shows the company was on the improve until the virus came to town. It’s up for the year and that’s why there is green on the screen.
This company is overdue for a bounce back. In the age of online purchasing, a company that’s in the manufacture and supply of rigid plastic and metal packaging, materials handling solutions, co-manufacturing services and recycling etc. should be well placed to benefit.
3. James Hardie ((JHX))
This is a more promising investment idea — James Hardie (JHX).
This company is bound to benefit from a boom in 2021, which has to help building and construction activity and, as a consequence, analysts see a 14.5% upside. Government assistance to this vital industry is certain because it’s a big employer, and because there will be a large number of Aussies who won’t want to trust Europe, the USA and Asia when it comes to the Coronavirus, money will be spent at home on new properties and upgrades. JHX looks well placed to benefit from the eventual rebound in the construction cycle.
4. Aurizon ((AZJ))
Generally, here at the Switzer Report, we think our miners are in for another good year in 2021. And this report from CNBC reinforces that view. Here’s the heading: “The next wave of the global recovery could send commodity prices soaring” and here’s the link: https://www.cnbc.com/2020/09/18/world-economy-infrastructure-led-recovery-could-send-commodity-prices-soaring.html
And if miners are going to do well, so should the train business that freights a hell of a lot of stuff from the ground. That’s why Paul Rickard and myself like Aurizon. So do the analysts, who see a 24.7% gain ahead.
5. Bingo Industries ((BIN))
Another from the building sector is Bingo Industries, which has never been a company I could get enthusiastic about because it tends to find a reason to undo previous good work. But it is a big waste remover and infrastructure expansion should be good for a company like this. The analysts see an 8.9% gain ahead, and that’s before next week’s Budget, which could be very good for construction, infrastructure and the businesses that take away the mess that these sectors create in assisting the building of very important structures. I also like the chart that shows the company’s share price is up for the year. Normalcy and a big-spending Budget should help this company.
6. Bluescope ((BSL))
While in the building and infrastructure space, I’d like to throw in Bluescope (BSL), which my colleague Julia Lee of Burman Invest likes as well. The analysts tip a 7.1% share price gain. But if the world goes mad on construction and infrastructure spending, this company will do well. Its year chart shows the company’s share price is up. I think this company is set for better times and so do the insiders who study this stuff nearly 24/7.
7. Steadfast Group ((SDF))
Steadfast Group (SDF) has historically been a good performer. The analysts see a 19% gain ahead. Recessions see a lot of people avoid their insurance payments but if we see the boom of 2021, then it could be a better business environment for insurance brokers who are a part of Steadfast.
8. oOh!Media ((OML))
From the risky file, oOh!Media is thought to be 20.1% underpriced. This is a company that has its ups and downs but seems to rebound from lows. If my 2021 boom replaces the current recession, we’re bound to see outdoor advertising and all those electronic signboards of this company get a lot more business. This is my most speculative stock in this collection, but it does have a habit of going for a decent run when it has been through a beaten-up phase.
9. Bubs Australia ((BUB))
My final company is Bubs Australia (BUB). Here, the analysts expect a 15% gain going forward. I reckon nine months of people spending more time at home has to be good for a baby boom in 2021 and this should help a company in the right space.
It has rebounded nicely out of the February/March crash, where it hit a low of 44 cents but now trades at 79 cents. It might need some months (maybe 9!) to show that the lockdown has been good for business, but I expect this company could end up being a nice surprise package.
That’s it! All we need now is a vaccine, a nice big Budget spend next week and the boom we have to have!
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.
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