Buy Hold Sell: 3 stocks for offence (and 2 for defence)

In case you missed it, Perpetual's James Rutledge and WaveStone Capital's Raaz Bhuyan made their Buy Hold Sell debuts on Friday. They discuss three long-term growth stocks and two that could cushion portfolios in times of crisis. 
Buy Hold Sell

Livewire Markets

Like any great football team, an investor's portfolio should feature an astute line-up of players, those for both offence and defence. 

A portfolio's strikers boast growing, consistent earnings - market leaders with enviable management teams, investing in assets and services that play into long-term trends. Meanwhile, the defenders cushion your portfolio in volatile, uncertain, headwind-filled times - as we face now.

In this episode, Livewire's Ally Selby runs onto the ASX's pitch alongside WaveStone Capital's Raaz Bhuyan and Perpetual's James Rutledge for their Buy Hold Sell debuts. 

Together, they analyse three long-term performers, including a lithium leader, a financial services giant, and one of Australia's best long-term growth stories. Raaz and James each consider whether these can continue to outperform in the months and years ahead.

And perhaps more importantly, the pair are tasked with helping investors avoid portfolio "own goals," assessing the potential protection afforded by Australia's biggest supermarket chain and a gold producer. 

Whether you’re looking to top the league table or are happy just to avoid relegation, watch the video, listen to the podcast or read an edited transcript below. 

Note: This episode of Buy Hold Sell was shot on Wednesday 30 March 2022. 


Edited Transcript 

Ally Selby: Hey, how are you doing? Welcome to Livewire's Buy Hold Sell. I'm Ally Selby, and so investors can avoid kicking "own goals" in their portfolios, we're running onto the ASX's pitch and looking for a couple of strikers and defenders for the year ahead. To do that, we're joined by James Rutledge from Perpetual and Raaz Bhuyan from WaveStone Capital.

First up, we have Macquarie Group, a crowd favourite, and a long time grower. Its share price has lifted nearly 130% over the past five years. James, I might start on you. Is it a buy, hold, or sell?

Macquarie Group (ASX: MQG)

James Rutledge (HOLD): Macquarie's a hold for us. It should be benefiting a lot from the current volatility that we're seeing in the market. But for a business that is delivering mid to high teens returns, and is being priced at three and a half times price to NTA, that's quite a high level for us. And you need to see them deploying more capital to justify those high prices. So for us, it's a hold.

Ally Selby: Macquarie posted a record quarter of earnings in Feb. Raaz, over to you. Is it a buy, hold, or sell?

Raaz Bhuyan (BUY): It's definitely a buy for us. They're obviously going to have the volatility that James talked about in gas markets. We think they're going to have a cracking result in May when they announce their full-year results. Next year, of course, is another thing, but we like the exposure that they've got to infrastructure and the green transition. It's a buy.

Mineral Resources (ASX: MIN)

Ally Selby: Next up, we have Mineral Resources, which has been a major success story over the past two years. Raaz, is it a buy, hold, or sell?

Raaz Bhuyan (BUY): We think it's a buy, because basically what's going on in Perth with all the new energy metals is just amazing. They've also got a mining services business, which is doing incredibly well. They've got exposure to lithium, which we think will develop quite well. And they've obviously got a high-cost iron ore mine, which is what the market's a bit worried about, but we think that they've got options there to convert that to a lower cost mine. So, it's a buy.

Ally Selby: Its share price is down around 15% in 2022, should investors be taking advantage of this share price weakness and buying the dip? Is it a buy, hold, or sell?

James Rutledge (BUY): I agree with Raaz, we think it's a buy. The management team has done a great job of using their knowledge in the mining contractors to really grow the value of the assets historically. We are a bit concerned that there's a lot of CapEx coming down the pipe, but notwithstanding that, if iron ore prices hold up, then we should be able to see good value being driven out of those assets.

Seek (ASX: SEK)

Ally Selby: We have another long-term grower now, it's Seek. It was founded by the Bassat brothers in 1997. It's expanded around the globe since then. Is it a buy, hold, or sell?

James Rutledge (SELL): It's a sell for us. Cyclically, the business is doing very well at the moment, given the tight labour market across Australia and Asia. But again, the valuation is quite challenging, well above 40 times earnings, that's a sell.

Ally Selby: It's down around 15% as well since the beginning of the year. Raaz, is it a buy, hold, or sell?

Raaz Bhuyan (HOLD): As James pointed out, I think it's doing incredibly well right now. It's a hold for us though, because of valuation. They've got great assets around the world. The issue is how much of it is cyclical because obviously, unemployment's so low. However, some of the stuff that's going on with millennials is more structural in terms of job-hopping, which could change the way the Seek business looks in the long term.

Woolworths (ASX: WOW)

Ally Selby: Let's talk about some of the more defensive companies now. We've got Woolworths. Food, supplies, everyone's favourite item to stockpile; toilet paper. Raaz, is it a buy, hold, or sell?

Raaz Bhuyan (BUY): It's a buy for us. Obviously, food inflation's coming through, and Woolworths has got pricing power, so it's good for inflation. But the other big thing that we like is Brad Banducci, who's the CEO, has invested quite heavily on the online side. And now, their online business is twice the size of its nearest competitor. And our view is in five years' time, they'll be even bigger because that's part of the business is growing faster. So, it is a buy for us.

Ally Selby: Its share price is down around 3% year to date, just under the ASX 200. James over to you. Is WOW a buy, hold, or sell?

James Rutledge (HOLD): It's a hold for us. As Raaz says, the top line's grown very impressively over a number of years, and they've put a lot of CapEx into the business. But we're concerned that management doesn't have their hands around the costs, and costs continue to be an issue. Inflation, as Raaz says, should be a good tailwind for the business, but we think that's being reflected in the multiple that you have to pay today.

Newcrest Mining (ASX: NCM)

Ally Selby: Gold is considered a safe haven in times of crisis. Newcrest, is it a buy, hold, or sell?

James Rutledge (BUY): Newcrest is a buy for us. So, typically when you see real rates move from negative to positive, gold would be a pretty challenging space to invest. But given the freezing of FX reserves from Russia, we think that'll cause central banks to really revisit their gold holdings and that should support the gold price. Newcrest is also very cheap relative to gold majors. It benefits from a higher copper price with its byproduct. And the market's concerned about production issues, but we think that's more than reflected in the price.

Ally Selby: It's actually done quite well this year. It's up 10%, which is good compared to the rest of the market. Raaz, over to you. Is it a buy, hold, or sell?

Raaz Bhuyan (SELL): It's actually a sell for us. I agree with James - the geopolitics has really taken the gold price up, despite the fact that real rates are going up. We think the moment we get some clarity around the Ukraine conflict; given where real rates have moved, the gold price is probably going to be under the pump a little bit.

With Newcrest, I think they've got the issue - as James pointed out - that their best mine, Cadia, its grades are going down, so they need to put a ton of capital in front of it, and we are quite worried. We really like the CEO, Sandeep Biswas, who's done an exceptional job to take the business (to where it is today). But from here, we feel that they're quite challenged in a lot of their assets.

Ally Selby: Well, that's all we have time for today. We hope you enjoy that episode of Buy, Hold, Sell. If you did, why not give it a like? Remember to subscribe to our YouTube channel. We're adding new content every week.

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