A combination of lacklustre earnings announcements combined with coronavirus jitters has knocked almost 7% from the S&P/ASX 200 Index in a week. But amid the darkness, there are some stocks exhibiting resilience or re-rating after surpassing expectations. Watch, read or listen in to find out which stocks we discuss, and what the experts think.
In this episode of Buy Hold Sell, we've invited two fund managers; undervalued growth company specialist Matt Haupt of Wilson Asset Management and TMS Capital's Ben Clark, the most consistent stock picker on the Buy Hold Sell series.
They opine on five stocks outperforming in February: 1) A consumer tech darling; 2) A financial stock that's stunned investors; 3) A global healthcare leader; 4) A food business back in the market's good books, and 5) A top-performing A-REIT.
Notes: You can access the video, podcast or edited transcript for this Buy Hold Sell episode below. This episode was filmed on 26 February 2020.
Vishal Teckchandani: Welcome to Buy, Hold, Sell, brought to you by Livewire Markets. My name is Vishal Teckchandani and today, we're going to talk about five stocks on a tear. Joining me is Ben Clark from TMS capital and Matt Haupt from Wilson Asset Management. Matt, I'll start with you. Aristocrat Leisure, buy, hold, sell?
Aristocrat Leisure (ASX:ALL)
Matt Haupt (Buy): Buy. The reason why I like it, the land-based business is going fantastic, but the digital business, which everyone was a sceptic of, is flying, so for me, this is a buy.
Vishal Teckchandani: Ben, what do you reckon? 400% share price increase over the last five years, the chairman did reiterate guidance for growth in fiscal 2020, buy, hold, sell?
Ben Clark (Buy): Yeah, I've got a buy as well. It's our largest holding, I think that the management's done a superb job not only continuing to really run their existing asset base hard but to pivot into a much bigger growth and much bigger market potential and they've executed beautifully. Stock doesn't look overly expensive.
Challenger Financial Group (ASX:CGF)
Vishal Teckchandani: Okay. Staying with you, Ben. Challenger Financial Group, share price jumped after its results, is it a re-rate or a sugar hit? Buy, hold, sell?
Ben Clark (Hold): I think it's a hold, but it's a buy on any more weakness. I think the CEO has done a really impressive job repositioning this business in quite a short period of time after a pretty chaotic year last year, mainly driven by the Royal Commission. Much better than expected numbers; it's seeing growth again and it provided a growth outlook. If you can get it a bit cheaper it'd be a buy, but it's a hold for now.
Vishal Teckchandani: Matt, are you can challenge that view?
Matt Haupt (Hold): I'm going to pretty much agree with that view. I'm going to say, buy in the $8 range, it's currently over $9, but once the advisor channel gets fixed and they start getting flows through the retail network again, this looks like incredibly good value, so even with the low-interest rates at the moment, people are wanting some certainty around income and for me, this is a buy in the $8 range.
Vishal Teckchandani: Okay, let's move on to healthcare darling Resmed, maker of sleep apnea products, buy, hold, sell?
Matt Haupt (Sell): For us, it's a sell. Great thematic, everything's very good about the company, management, where they are at. Valuation for us really makes this incredibly tough to buy and that's why I'll be putting on a sell.
Ben Clark (Hold): I'll be a hold. I think this company is slowly morphing into almost a technology business through some really good acquisitions that it's made in the sleep apnea market. It's still got a very long runway of growth for them. It does look fairly expensive, but this is a stock, for many years now, that has held that PE multiple and in the earnings and going to keep pushing higher, so I see the share price moving higher.
Domino's Pizza Enterprises (ASX:DMP)
Vishal Teckchandani: Next on the list, Domino's Pizza back to three-year highs after serving up 10% growth in EBITDA, buy, hold, sell?
Ben Clark (Sell): I'm a sell. I'm still a sceptic. I just think the competition that is coming into this space and the technology competition that's coming in, it's going to be extremely hard for them. They've done a great job, you've got to say. I'm a sceptic on the franchise model as well, and the share price is pricing quite a bit of growth ahead, which I find challenging to see.
Vishal Teckchandani: Lots of scepticism from Ben. Is there optimism from you, Matt?
Matt Haupt (Sell): No, I'm going to say sell too. Again, valuation, this business year, they've done fantastically, but I'll say there's some cost of goods flowing through now, some inflation domestically. I've been wrong on this stock for a long time, so I'm probably not the best person to listen to on this one, but for me, it's too expensive and there are too many headwinds coming with competition and cost of goods as well so for me, it's a sell.
Goodman Group (ASX:GMG)
Vishal Teckchandani: Okay. Last on the list, Goodman Group, interestingly, the thing about Goodman is that it doesn't yield much more than a term deposit, but investors are in love with it. Are you in love with it, Matt? Buy, hold, sell?
Matt Haupt (Hold): I'm going to hold. It's a big position in our portfolio so for us, the thematic around Goodman and the opportunity to deploy capital into good returning vehicles still exists and they've pretty well underwritten their results for the next couple of years of around that 10% growth. So for us, if you're looking in the REIT space and if you want to classify it as a REIT, it's the only one with decent growth apart from the other ones which have done acquisitions like Charter Hall, but for us, Goodman is a standout.
Ben Clark (Hold): I'll be a hold as well. I think they own the right assets, they've got the expertise in the area of property that everyone's looking to get into and partner up with, but it is expensive and on a sell-off, I reckon this would be a good buy and management have done a superb job as well, so it's got a lot of the stuff that we really look for, but maybe just at the moment it's just too a bit too expensive so I'll hold.
Vishal Teckchandani: That's it for this episode - while some of these stocks are delivering some pretty sweet returns, the experts reckon the risk of a sugar crash is just a bit too high.
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Love receiving this email. I am familiar with a number of your experts and I respect value their contributions.. further I have been in the share market since the late 1960s, keep up the good work.