Buy Hold Sell: 5 of your most searched stocks
The stocks you actually care about on Buy Hold Sell? Who said you can't have your cake and eat it too...
In this episode, we crunched the numbers on your most searched stocks for the month of August and put them to Chris Stott from 1851 Capital and James Gerrish from Market Matters for their thoughts on these reader favourites.
These include machine learning product provider Appen, a darling-turned-dud of the ASX; Afterpay, the Australian success story about to take the global stage; A2 Milk, which has struggled during the COVID-19 crisis; Dusk Group - perhaps you all really love candles? And Pilbara Minerals, the lithium producer with an electric 578% share price rise over the past 12 months.
And while Chris and James tended to agree on the majority of these stocks. There are two, in particular, that have them divided.
Note: This episode was filmed on Wednesday 1st September 2021. You can watch, listen or read an edited transcript below.
Matthew Kidman: Welcome to Buy Hold Sell. My name's Matthew Kidman. And today, we're going to look at the viewer's choice - the most searched stocks on the Livewire website. And to join me to talk about it, we've got Chris Stott from 1851 Capital and James Gerrish from Market Matters. Welcome gentlemen.
Here's one that has been absolutely torched, and no wonder everyone's looking at it because it used to be a market darling. Chris, we'll start with you. Appen, buy, hold or sell?
Chris Stott (SELL): Sell, Matthew. Its earnings were disappointing in the recent release. We think the guidance they provided for the full year is a bit of a stretch. It needs a huge second half to get there. The last few earnings results have been disappointing from this company, so we'll sit on the sidelines and sell.
Matthew Kidman: James, it was only a year and a half ago this was one of the market darlings. It was teaching computers how to understand voices around the world, it was selling to the big tech companies. Been a disaster since. Buy, hold or sell?
James Gerrish (SELL): I'm going to say sell on it as well - I agree with Chris. What the last 12-18 months have shown is the lack of visibility in earnings for this sort of business. Some technology businesses have really strong abilities to forecast. These guys don't, and that's come home to roost. So for me, Appen's a sell. Even though it's around the $10 dollar level. It's been whacked, but it's a sell.
Matthew Kidman: The next one is not a surprise, because it's been a remarkable story. In fact, I'm reading a book about it at the moment called Buy Now Pay Later - that's how special the company's been. Afterpay - it's unusual because it's got a takeover bid from Square and it's going to disappear from the Australian landscape. Do we hold onto it, or do we sell? Chris, let's go with you, Afterpay.
Chris Stott (HOLD): Hold, Matthew. Nick and Anthony have done a terrific job since the IPO, and it's a tremendous achievement to secure the deal with Square. We would say people should hold, and then roll into the Square offer. Hold the Square shares if you can. We think certainly with them as a partner now that they've got significant capital fire-power behind them to really drive their next level of growth over the medium to longer-term, so hold.
Matthew Kidman: It's a big jump, James, to go with Square. Obviously, they've got a good payment system, they're very big in the US. But they like to trade around in Bitcoin as well, so it's an exotic company to join. Buy, hold or sell?
James Gerrish (HOLD): I'd be holding it if I held Afterpay at this point in time. Obviously, the next 12 months are going to be all about integration, so putting the Afterpay business into the Square ecosystem and trying to get a really strong level of growth coming out the other side. For my money at the moment, I'd be a buyer of Zip Co (ASX:Z1P), in the buy now pay later space. I think that's got more upside in the short term. But I think the other key thing in BNPL at the moment is the validation that we've seen from Square coming in, as well as Amazon doing a deal with Affirm. So those two things have really validated the sector. So for me, it's here to stay, and I'd be a holder of Afterpay, but a buyer of Zip.
A2 Milk Company (ASX:A2M)
Matthew Kidman: One stock that doesn't seem to be able to get out of the psyche of our readers and our followers but has done really poorly recently is A2 Milk. Struggling, bad result, down again. It's finding it hard in China. James, A2 Milk, buy, hold or sell?
James Gerrish (BUY): I've got a buy on it, and it's a cautious buy. I think the market has now gotten too negative on it. They've moved from being overly optimistic on A2's growth prospects to now being too pessimistic. So from a risk/reward perspective, I think it's a buy now at these levels. I think you'll either get a bid or a bounce in A2 Milk at the very least, so it's a buy.
Matthew Kidman: Chris, no one likes the milkshake anymore. It's used to be the celebratory drink of the Australian share market, but for the last couple of years, it's been terrible, struggling in China. Buy, hold or sell?
Chris Stott (BUY): Buy. So it's fallen from market darling to market dud, hasn't it? So that's normally when you want to buy. We think that at the moment, they've got through the worst in terms of their fall-away in earnings, particularly to China and the Daigou channel, in particular, so we think they're getting through the worst of that. And as James said, the stock's got corporate appeal. We've seen transactions in that sector around the world over the last 12 months. Certainly at much higher multiples than it trades on at the moment, so buy.
Dusk Group (ASX:DSK)
Matthew Kidman: I'm not sure with this next one whether the readers are actually looking for expensive candles or the stock. Dusk Group, buy, hold or sell?
Chris Stott (SELL): Sell. The company is over-earning in terms of their margins. They've been a huge COVID beneficiary over the last 12 months. The CEO's just sold 5% of his holding more recently on market, so that's normally a signal - we typically like to follow what the insiders are doing, and in this case, they're selling, so we'd put a sell on it too.
Matthew Kidman: James, does Dusk light you up? Buy, hold or sell?
James Gerrish (BUY): I'm going to go slightly on the other side of that, so I've got a buy here, Matthew. While I'm cautious retail and I completely get Chris' view around management selling down of stock, I think Dusk is now too cheap to ignore. If we look at the growth available in the outer years in a fragmented part of the market, I think Dusk does pretty well in the longer term, so I think the price decline is a buying opportunity.
Pilbara Minerals (ASX:PLS)
Matthew Kidman: We might've gone a bit sour on the milk, but we definitely like our lithium in Australia. Pilbara Minerals, unbelievably it has a market cap of $6.5 billion. Buy, hold or sell?
James Gerrish (HOLD): It is unbelievable Matthew - the rise of the lithium stocks here in Australia. I've got a hold on the stock. Pilbara would be a buy if it dropped down below $2. We are in other names in the lithium space. We have Independence Group (ASX: IGO) in the portfolio, and also I like Orocobre (ASX:ORE). But PLS is a buy into weakness, and a hold for now.
Matthew Kidman: Chris, it's an interesting one. It's a thematic we can't avoid. Australia's right in the middle of it with lithium and batteries. But Pilbara is expensive. Buy, hold or sell?
Chris Stott (SELL): Sell, Matthew. It's been one of the best-performing stocks on the ASX over the last 12 months, it's had a significant run, and rightfully so. Lithium's going to be a big part of the world for many decades to come, in particular in the car space. But we think that shorter term, the stock has run way too hard here, so it's a sell.
Matthew Kidman: Readers, all interesting stocks, but it seems like the battery's gone flat on a few of them. I really enjoyed that show. If you did as well, why don't you subscribe to the Livewire YouTube channel so you can watch it all the time?
What stocks would you like to see on Buy Hold Sell?
In this episode, we crunched the numbers on the most searched stocks on Livewire's platform. Did we miss one of your favourite stocks? Let us know what companies you would like our fundies to analyse in future episodes of Buy Hold Sell in the comments section below.
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5 stocks mentioned
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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.