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A little bit of a tailwind can go a long way in investing, and these five stocks are riding a big one; the declining Australian dollar. With the RBA now firmly in a rate cutting cycle, and the Aussie well below 70 US cents, stocks with offshore earnings are set to reap the benefits. But has the good news already been priced in? Find out in this week’s episode, featuring Henry Jennings from Marcus Today and Michael Wayne from Medallion Financial, hosted by Matthew Kidman from Centennial Funds. Stocks discussed include Macquarie Group, CSL, Brambles, James Hardie, and Bluescope Steel.


Transcript:

Matthew Kidman: Hi my name's Matthew Kidman and welcome to Buy, Hold, Sell. I'm joined today by Henry Jennings from Marcus Today and Michael Wayne from Medallion Financial. We're talking about earnings tailwinds. Hard to find in a pretty slow economy.

Start with you Michael. Macquarie Group, it always just seems to go up. They always seem to beat their numbers. Buy, hold or sell?

Michael Wayne: Look I'm going to say a hold on this one, given US market's pretty much at all-time highs. Our market's now pushing all-time highs. It's difficult to be putting new money to work into something like Macquarie at this point in the cycle. Despite the good earnings growth in recent years, great dividend per share growth, I'm going to say hold.

Matthew Kidman: Okay. Surely you can't sell Macquarie Group.

Henry Jennings: Can't sell it. It's against my DNA. I used to work for them.

It's a buy from me. I guess the main reason's infrastructure. We just saw a New South Wales budget which came down with, what was it, $93 billion spent on infrastructure over four years. The US hasn't even geared up its infrastructure spend yet. They're still struggling to even get that off the ground. Macquarie are the experts in this space. We've got rising markets, we've got good exposure to US markets from Macquarie as well. Quality management, a new era under Shemara, who's just extraordinary from what I understand. I think this is the quality company I'd like to own for five years.

Matthew Kidman: Okay. Another one that's done even better than Macquarie over the years, CSL. Buy, hold or sell?

Henry Jennings: I'm a hold on that one I have to say. I think there's some issues, depending on how the trade tariffs go but they've got some serious income out of China with Merck, in terms of some of their products there, their JVs there, which I think could come under a little pressure if we see anti-Americanism continue in China. It’s had a pretty good run, it's obviously the big one that everyone goes for in healthcare but for me it's a hold.

Matthew Kidman: Okay. We can't live without blood.

Michael Wayne: That's right.

Matthew Kidman: Great commodity. Buy, hold or sell?

Michael Wayne: I'm going to say buy on CSL. The Australian dollar's been under a lot of pressure, it generates a lot of its earnings overseas. There's still ongoing issues with some of their competitors and their ability to supply the market. CSL's history, its size, its scale is enabling them to really capture the market at a time when others are struggling so I've got them as a buy despite the high PE.

Matthew Kidman: Okay. Let’s put the blood aside and go to pallets. Brambles, buy, hold or sell?

Michael Wayne: On Brambles I'm going to do a sell. There's a lot of competition starting to emerge in the US, putting a little bit of pressure on them. They obviously deal with a lot of very large businesses, such as your Walmarts, such as your Proctor & Gambles, Tescos, etc. There's potential for a bit of a price squeeze there. They can't increase prices like they once could. That's a bit of a concern for me at these lofty levels for Brambles.

Matthew Kidman: Henry, they seem to have got their act together. The share price has been on a pretty good run.

Henry Jennings: Finally. Finally.

Matthew Kidman: Buy, hold or sell Brambles?

Henry Jennings: Buy for me. Certainly they've got good exposure to the US economy. The proceeds from IFCO, that they've just sold, they will come through in the capital return. Also the share buyback later in the year as well, which will support the price. I think the fact that the US economy is growing so strongly. These guys basically move stuff around the planet. Same in western Europe as well. That should come out of some sort of recessionary blip, if we get some stimulus so for me it's a buy.

Matthew Kidman: Now steel margins being crunched lately. They're down. BlueScope, our proxy on steel around the world, buy, hold or sell?

Henry Jennings: I'm kind of a sell on Blue Scope I’ve got to say. They came out with a profit warning yesterday. A slight downgrade to what we were going for. They were looking for a 10% increase down to about 6%. I think there's more of that to come, to be honest. We are seeing those margins squeezed, iron ore prices going up, doesn't really help them. I think there's still a little bit of a problem with demand in Australia.

Matthew Kidman: You're kind of a buy, kind of a sell or kind of a hold?

Michael Wayne: No, I'm a sell on BlueScope. They've faced some stiff competitions from China and the US, some of the large steel mills there. Very low margin business. I thought they rode the wave of the synchronised global growth story that we saw. That's very much come to an end now. I don't think the weakening in construction domestically helps them either so I'm going to continue to sell BlueScope.

Matthew Kidman: Okay. Nothing ever goes wrong in Trump land. James Hardie, housing in the US. Buy, hold or sell?

Michael Wayne: I'm going to do a buy on James Hardie. I think at the moment that we've seen their price dominance really come through. They've been able to fix their little conundrum, that they were in, quite well. At the moment, with rates potentially going down further in the US again and that potentially kicking on the housing market in the US a bit more, I think James Hardie's a buy at these levels.

Matthew Kidman: James Hardie?

Henry Jennings: I'm going with a hold I’ve got to say. I think there is some downside risk. Clearly cost out is an issue for them and they're doing well on that, but demand is still a little bit slow in Australia. I'm just in the hold camp on that one.

Matthew Kidman: They're not all tailwinds. There's some mighty headwinds out there as well. 



Comments

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John Smith

Thanks for the expert recommendations here. I was actually in a dilemma about whether to sell or to hold BSL shares. Now it is quite clear. Also it would be great to hear something about penny stocks and lithium stocks. I am holding some penny stocks like (ASX: HSC), (ASX: SIV).