With a growing army of investors hungry for knowledge and insights, we're getting more and more queries to cover specific stocks from fans of Livewire.
In this episode of Buy Hold Sell, Matt Williams of Airlie Funds Management and Sean Fenton of Sage Capital dedicate their time to our readers and have a red-hot crack at five stocks you want an opinion about.
They include 1) Wesfarmers - which Matt reckons operates the "best business in Australia"; 2) Beach Energy - whose revenues are holding up thanks to its solid contracts and net cash on the balance sheet; 3) CSL – a company that Sean believes will rebound and continue to grow strongly; 4) Coca-Cola Amatil – a consumer business that’s seen deteriorating profitability, and 5) A2 Milk - a market darling until just recently.
Notes: Watch, read or listen to the discussion below. This episode was filmed on 7 October 2020. Please reply in the comments section for stocks you want covered in future episodes - we appreciate your interest and will do our best to get them covered.
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Vishal Teckchandani: Welcome to Buy Hold Sell brought to you by Livewire markets. My name is Vishal Teckchandani, and this episode is all about you. We're going to talk about five stocks that Livewire readers have requested the fundies to cover. Joining me on the show today is Matt Williams from Airlie Funds Management and Sean Fenton from Sage Capital.
Vishal Teckchandani: Sean, let's kick off with you, Wesfarmers on a PE of 23; 3.5% fully franked dividend yield, buy hold or sell?
Sean Fenton (Hold): For us. It's a hold, pretty solid business. Bunnings is doing, doing really well as is Officeworks and catchoftheday.com.au. They've got some other businesses here - Kmart and Target that have probably struggled around a little bit more, probably pretty appropriately priced. So for us, it's a hold.
Vishal Teckchandani: Matt. I've never had to queue outside Officeworks before. A sign of the times? Buy, hold or sell Wesfarmers?
Matt Williams (Buy): Wesfarmers is a buy. Bunnings is the best business in Australia; 3.5% dividend yield with a balance sheet that Wesfarmers has, basically no net debt almost. And so they are well-placed to either give money back to shareholders or make a really good acquisition.
Beach Petroleum (ASX:BPT)
Vishal Teckchandani: Okay. Next stop is Beach Petroleum. What a cracking turnaround this company has had since 2016 and before the oil price collapse, this company actually set record highs. Buy, hold or sell on Beach?
Matt Williams (Buy): I think at the current levels, it's a buy, I think they're well-placed with the mix of business that they have, that some contracted business that it's going to keep them in good state, no matter what happens to the oil price, which is too hard to guess. So I think it's a buy.
Vishal Teckchandani: Okay. Sean, it pays out a 1.5% dividend yield. It's got $50 million of net cash. It's growing its 2P reserve. What's not to like? Buy, hold or sell on Beach?
Sean Fenton (Sell): I'd actually go sell on Beach. It's disappointed a little bit in terms of recent production guidance. They've been spending a lot of money in terms of development that hasn't really flown through to the same extent in terms of reserves. So for us, there is a bit of value in the energy sector elsewhere.
Vishal Teckchandani: Okay, next stop. CSL. No introduction needed buy, hold, sell?
Sean Fenton (Buy): CSL's a buy, just great quality business that does continue to deliver. They've got a broad product suite across blood fractionation that has been interrupted a little bit by COVID in terms of collection centres, but that's a temporary it'll rebound and continue to grow strongly.
Vishal Teckchandani: Okay. Do you agree with that Matt? Will it rebound?
Matt Williams (Hold): It will rebound. I'm a hold at the moment, but I'll be looking to buy on any significant sort of fall. That's right. COVID has provided a bit of a hiccup and I think it could last for a little bit longer as the plasma collections need to ramp up again. So it's a hold.
Coca-Cola Amatil (ASX:CSL)
Vishal Teckchandani: Okay. Next stop is Coca-Cola P of 21, 4% unfranked yield. Buy, hold or sell?
Matt Williams (Hold): Look, I'd say it's a hold. Coca-Cola has struggled to grow profits really meaningfully for years. And it's having a reasonable COVID bounce if that's a term. I'm not sure it's going to last, so I'll say hold.
Vishal Teckchandani: So it's had a decent COVID bounce, but is the rally going to fizzle buy, hold or sell Coca-Cola?
Sean Fenton (Buy): I'll stick with a buy on Coca-Cola. I think it's got a little bit more to go. They've done a good job diversifying away from traditional Coke, brought a product suite - no sugar, water, and the like, but ultimately it's the rebound from pubs and clubs as they reopen which provide much higher margin channels than supermarkets. It's that margin rebound that we'll see on reopening that'll keep driving Coke.
A2 Milk (ASX:A2M)
Vishal Teckchandani: And the last reader request, Sean is A2 Milk. Share price has been smashed 30% in the last three months because of what's happened in Victoria; impacted one of their sales channels. But is this an opportunity to buy a good quality business at a good price - buy, hold or sell?
Sean Fenton (Sell): A2 is a sell, the red flag for us there is that last year the Chinese government said they wanted more domestic involvement in infant milk formula in China, and that's been happening. So you've got local players starting to take share there. And A2 trying to continue to grow. And China's got a push down to mums and pubs stores into tier-four cities, lower margin, more cost-intensive. So it's seen it's best days.
Vishal Teckchandani: Right, has it seen its best days? Do you agree - buy, hold or sell on A2?
Matt Williams (Buy): I think it's a buy. So I'm not so sure about Sean's comments. I think that the growth potential is still pretty good. And the fact that it has fallen in such a big, big way. The red flag for me is the insider selling, the big insider selling. I think that's a bad look, but I'm going to stick my neck out and say $14 was 19 now 14, it's a buy.
Vishal Teckchandani: Okay, well, that's the last episode of Buy Hold Sell for me for this year. I hope you enjoyed my cheesy jokes. Cause I had a bloody pun time!
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Love this series and yes the puns are great keep them coming.
Love your "work" Vishal, enjoy your break!
Have pun Vishal, see you next year.
Thank you Vishal - one of my favourites on Live Wire, love your upbeat energy.
Love your cheezy jokes, Vishal. Enjoy, have pun!
Look forward to BHS each Friday, thanks Vishal.
Love your zesty presentaions. would like some thoughts on MP1, REA, PPH. cheers
Thanks everyone for the feedback, really appreciate it!