Rudi’s View: Telix, Telstra, Treasury Wine & More

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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 | Jan 19 2023

By Rudi Filapek-Vandyck

Less than two weeks out from February, when most companies listed on the local exchange will release financial results, analysts and market strategists have updated their conviction ideas for the year ahead. Below are some of the recent updates.

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UBS's recent strategy update carries the title From Stagflation to Disinflation. UBS strategists believe successful investing in 2023 will centre around identifying which companies can still grow when economies are decelerating or temporarily suffer from negative growth.

UBS has lifted its year-end price target for the ASX200 to 7500. While this is up from a prior 7250, as the index is trading close to 7400 already the upgraded target still suggests not much is on offer in terms of sustainable net gains, at least not at the index level.

UBS strategists' focus has therefore shifted to companies that can lift their dividends through the cycle. Three characteristics to look out for are: consistent revenue growth, lack of cyclicality, and a competitive advantage. Not surprising, also, UBS has reduced exposure to cyclical companies on the ASX.

On the broker's analysis, Infrastructure, Utility and Financial stocks have been most consistent in lifting annual dividend payments over the last 20 years. UBS has upgraded Infrastructure and utilities sectors to Overweight, joined by insurance, while mining companies have been downgraded to Neutral. Property-linked sectors remain key underweights. Energy remains an Overweight, as is Technology.

UBS is of the view that rising bond yields have had their impact throughout 2022. This impact is now running thin in 2023. Hence why so-called long duration companies are back on the menu. This also explains the Overweight for Tech stocks. UBS is still not a fan of healthcare or building materials.

When it comes to dividend growth reliability in Australia, the banks only come third on the broker's analysis, beaten by infrastructure and utilities, with packaging (thanks to Amcor ((AMC)), no doubt) the most reliable sector. Staples retailers and insurers are sectors four and five, respectively, on the dividend-growing reliability ladder.

At the other end, there is one sector that historically has proven even worse than chemicals, energy and mining companies; old media.


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