>Compareshares ran a recent piece which covered some stocks I have previously reviewed. Here are their comments and my current viewpoint.
- Rio Tinto (RIO) - [Hold Recommendation] Investors should stick with Rio as it offers quality operating assets and the outlook for commodities is bright. RIO has flatly rejected BHP Billiton’s takeover offer on the basis it significantly under values its assets and prospects. This begs the question: What price is acceptable to RIO? Based on our analysis, we believe RIO may consider a scrip offer in the range of 3.6 to 3.9 BHP shares for each RIO share.
[Editor - I still prefer BHP in the longer term due to its greater oil and coal exposure] - Woolworths (WOW) [Hold Recommendation] – Expect WOW to continue using its strong cash flow to put pressure on Coles and Foodstuffs in New Zealand. The company remains a beneficiary of a relatively weak Coles supermarket division, and, until this is rebuilt by Wesfarmers, WOW will continue to invest in increasing the gap while it has the chance.
[Editor - I am still holding my WOW stock and it will be a good stock to own if Australia enters a recession. For now I agree with the hold recommendation] - AMP (AMP) [Sell Recommendation] For the first quarter of the year, AMP’s net fund flows were down 83 per cent to $129 million. This is disappointing, but the first quarter is seasonally AMP’s weakest and we expect AMP’s corporate superannuation to report stronger inflows in the next six months. With volatile equity markets continuing, we see better risk/ return in other stocks.
[Editor - I disagree and will continue to hold AMP. It is a 5 to 10 year holding for me and as the population ages the company should benefit which will be reflected in the stock price] - Macquarie Group (MQG) [Hold Recommendation]- Macquarie Bank is a leveraged play on credit and equity markets. The 2008/09 year is shaping up as a mixed bag. With 15,000 staff, it is no longer a small operation and higher growth rates are getting harder to obtain. While it never pays to underestimate the company’s capability, it’s hard to see where out-performance will come from. The stock was trading below $60 a share on May 23 and our target price is $65.
[Editor - I agree and prefer Babcock and Brown (BNB) for the longer term upside potential. For now though I would stay away from investment banks until the global credit market turmoil is resolved] - Incitec Pivot (IPL) [Hold Recommendation] – The very strong run for IPL has continued on the back of stronger global ammonia and fertiliser prices, the Dyno Nobel (DXL) corporate activity and the China story. We recommend taking part profits at this level as the market is pricing the company for perfection. Our valuation for IPL is closer to $100 a share, but acknowledge that sentiment may take the stock higher in the short term.
[Editor - I think the stock is a hold for now as well. If you already own IPL or DXL, hold on for the longer term ride] - Oxiana (OXR) [Buy recommendation] – The likely marriage of Zinifex’s strong cash position and OXR’s project pipeline has the potential to deliver significant long term value. With both boards supporting the transaction, the merger looks a formality. The resources boom has a long way to go and this merger will boost earnings in times of strong demand. The gold price is marching higher and a strong zinc price is likely to rise.
[Editor - I think gold and commodity prices are due for a fall soon. So I would rate the stock a hold for now. If the merger with Zinifex does go ahead, I would look at buying Zinifex] - QBE Insurance Group (QBE) [Buy recommendation] -This global insurer has a strong balance sheet that enables it to continue its acquisition strategy despite shelving the IAG takeover bid. That doesn’t mean it won’t be back to take another crack at IAG and it could even land it at a cheaper price. QBE does not over pay for acquisitions – management is astute.
[Editor - I have discussed this stock recently and think it is a great stock to own. Look to buy on any weakness]
So there you have it. What are your thoughts on the above stocks? Click on the stock names above to see my past reviews.
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