Buy Hold Sell: 5 big movers and 2 under-the-radar results

Buy Hold Sell

Livewire Markets

When it comes to movers and shakers, the Aussie reporting season has delivered on all fronts. 

A surprise 141% dividend increase and an impressive jump in earnings from WiseTech (ASX: WTC) saw its share price skyrocket 28.5% on the day it reported, while the announcement of a long-awaited new product saw Nanosonics (ASX: NAN) share price soar around 21.9% in just one day. Meantime, RedBubble (ASX: RBL) shareholders were likely popping bottles after its share price lifted 19% on reporting day, and another 16% the day after.

But August's reporting season wasn't just champagne and caviar. In fact, there were some equally disappointing results for shareholders. Online retailer Kogan (ASX: KGN) saw its share price fall 15.8% on the day it reported, while Monadelphous Group (ASX: MND) suffered a 14.4% beating. Yikes! 

In this episode of Buy Hold Sell, Centennial Asset Management's Matthew Kidman is joined by two of the industry's best; Chris Stott from 1851 Capital and James Gerrish from Market Matters, to take a look at the movers and shakers from this reporting season. 

Plus, they each share one company with a stellar result that flew under the market's radar. 

Note: This episode was filmed on Wednesday 1st September 2021. You can watch, listen or read an edited transcript below. 

Edited Transcript

Matthew Kidman: Welcome to Buy Hold Sell. My name's Matthew Kidman. And we're going to review the reporting season; the 12 months to June 30. It's all over. We know all the numbers now. There was some terrific results, big responses and some terrible ones, terrible responses. And to discuss some of the stocks, I've got Chris Stott from 1851 Capital and James Gerrish from Market Matters. 

Nanosonics (ASX:NAN) 

I'll start with you, James. Nanosonics. It struggled through last year. This year, bang, everyone didn't expect it. It was up more than 15% on day one. Buy, hold or sell?

James Gerrish (HOLD): It's a hold for me, Matt. I think that was the key to the result; the expectations were low. So obviously FY21 was a difficult year. It's hard to get into hospitals to sell things and instal things. But I think the revenue is delayed rather than lost. So it's a hold for me, but a buy at lower levels.

Matthew Kidman: Chris, it shot out of the gates, had that big surprise. It's come back a little bit. It's a great growth story in the long term. Buy, hold or sell on Nanosonics?

Chris Stott (HOLD): Hold. The stock has run too hard on short covering on the back of the result and a new product announcement, which people have been waiting a couple of years for. So again, with James, I'd look to buy it at lower levels.

WiseTech Global (ASX:WTC)

Matthew Kidman: Okay. Whoo-hoo. The best report of the whole season, up 55% before it fell back a bit. WiseTech, software and logistics around the globe. Chris, buy, hold or sell?

Chris Stott (SELL): Sell. The stock's run too hard. It's expensive on all metrics, Matthew. Again, you say it was one of the standout results for reporting season but I think there will be a heavy component of short covering in this name in the shorter term. So again, I'd look to buy it at lower prices.

Matthew Kidman: James, the margins went bang. Can you push back on Chris and give it a buy, hold or sell?

James Gerrish (HOLD): I'll keep it as a hold, Matt. FY21 was great and the guidance for FY22 is really strong. Organic growth rates are really ramping up, but that's all captured in the price at around $48. So it's a hold for me.

Redbubble (ASX:RBL)

Matthew Kidman: Is it a bubble? Or is it for real? Redbubble, it has designs for everything you want - cups, T-shirts, school cases. James, we'll go with you. Buy, hold or sell?

James Gerrish (BUY): I think it's a buy here, Matthew. The marketplace seems to be working. So it's working because it's getting more customers on it and that's attracting more merchants, which gives more variety and that's leading to more multiple purchases. So after a tough '21, I think '22 looks better. So it's a buy.

Matthew Kidman: Chris, it's been a volatile relationship between Redbubble and the market. They're in love. Then they're out of love. They're in love, out of love. Guess what? They've fallen back in love. Buy, hold or sell?

Chris Stott (SELL): Sell. 79 times PE is too expensive for us. We think there's better value elsewhere. They missed their earnings more recently and the guidance underwhelmed to an extent being a re-investment year on the cost side of things. So it's a sell for us.

Kogan.com (ASX:KGN)

Matthew Kidman: Chris, staying with you. We're all at home, we're all buying electronics, fridges, lounges, whatever you want and you can definitely get all that stuff at Kogan. But it's been out of favour, too much inventory recently. Buy, hold or sell?

Chris Stott (SELL): Sell again. We think they've still got inventory issues that will remain for a little while longer, perhaps longer than what people are expecting. They're cycling higher comps, benefiting at the moment from being locked down, but as soon as the economy reopens, their comps should normalise back down. So sell.

Matthew Kidman: James, this stock has virtually halved. It was a market darling and it's halved and it's still falling, even after the result. Buy, hold or sell?

James Gerrish (BUY): I think it's a buy, Matt, at around $11. Obviously, they stuffed up in FY21. There's no doubt about it. They got too bullish on the demand for their products. And when you have a heap of inventory, it's hard to store it, it costs money and they've obviously had to try and move it through sales. So I think that's a lesson for them. And I think going out into '22, that aggressive stance towards growth will eventually pay dividends. So it's a buy at these levels, at around $11.

Monadelphous Group (ASX:MND)

Matthew Kidman: One of the big stories of the reporting season was cost inflation, especially for the mining sector and mining services. Monadelphous got whacked right between the eyes. Buy, hold or sell, James?

James Gerrish (HOLD): It's a hold here. And we do hold this stock. I was disappointed with the result. Strong top line but weak profit. And that wasn't the case throughout mining services. There were some that had that influence and some that didn't. So I'm a hold here on those cost pressures. We need to see some more evidence that they've started to dissipate.

Matthew Kidman: Chris, it was surprising in the sense that commodity prices are strong everywhere. So you would have thought mining services companies do well. But the border lockdowns and people movement restrictions really hit Monadelphous. Buy, hold or sell?

Chris Stott (HOLD): Hold, Matthew. Cost pressures aren't going away any time soon. They delivered a below-par result versus expectations in the last few weeks. But I am reluctant to put a sell on it given the management team are probably one of the best management teams in the business in that mining services space. So hold for now.

Two cracking results that were missed by the market 

Matthew Kidman: Let's get positive again. Let's get away from these falling stocks. Chris, we'll start with you. What was one absolute cracker that caught your eye and we can comfortably buy because we know it's doing very well at the moment?

Nick Scali (ASX:NCK)

Chris Stott (BUY): Nick Scali, the furniture retailer. So we think this one has certainly delivered a record result and record profit, record dividend. And it flew well under the radar from a share price perspective; it's fairly flat. The outlook we think is as good as we've ever seen it for Nick Scali. It's one of the best retailers in the country. Anthony Scali is running the business and has done this for well over 20 or 30 years. They have flagged to the market that they are interested in the Plush asset, which they may or may not purchase. If they do, it would be earnings accretive going forward. So we think there's certainly scope for M&A activity, as well as earnings to surprise on the upside in our opinion. So we think that's a buy.

Matthew Kidman: James, is there something else that has excited you during reporting season that we all should be looking at?

Whitehaven Coal (ASX: WHC)

James Gerrish (BUY): I'm probably going to get shot by viewers here, but Whitehaven Coal. Obviously, it's been on the nose for the last couple of years. But their result, while operationally and financially '21 wasn't great, it's looking good for '22. And I think the thing that caught my eye in this result was around debt and their de-gearing of their balance sheet. They say if coal prices stay where they are, they'll be debt-free by the second half of '22, which I think is a really strong outcome. It reminds me of Fortescue Metals when they had debt problems and then they got a really strong commodity price tailwind. So Whitehaven Coal is a stock to buy from me.

Matthew Kidman: Well, it sounds like a pretty good environment to be picking stocks. If you enjoyed that show as much as I did, why don't you subscribe to the Livewire YouTube channel?

What stellar result has the market missed? 

Chris chose Nick Scali and James picked Whitehaven Coal, but we would love to know what you think. Let us know what stellar result you believe flew under the market's radar in the comments section below.

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Buy Hold Sell

Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.

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