Wealth Within, Chief analyst
AQUICK profit or a slow build? Income or capital gain? Take a risk or play it safe? Business Daily asked the experts what’s hot and what’s not on the sharemarket, whatever your game plan for 2019.
But one thing in common for investors is that everyone should get set for another bumpy ride during the next 12 months.
Markets are tipped to remain volatile as state, national and international economies continue to be pushed around by global politics.
Trade wars, territorial disputes and unpredictable governments will again ramp up the risk factor for companies and shareholders.
On the domestic front, stagnant wages, falling house prices and rising inflation indicate reduced consumer demand.
This is expected to flow through to lower revenue of consumer goods companies, retailers and discretionary services, as families cut back on spending.
Investors, too, may be torn between trying to make up losses from the past year by taking a higher risk or further battening down the hatches until the volatility settles.
ADAM FLECK
Morningstar, Equity research director
HOT
James Hardie Industries
THE building products manufacturer is trading well below value and should benefit from the forecast upswing in the US housing market.
a2 Milk Company
DISCOUNTED because of concern about Chinese demand, however, sales have strengthened.
NEGATIVE reports over legacy resident contracts have hit the share price but aged care is a long-term growth sector.
G8 Education
AN oversupply of child care has discounted the share price, however, population growth underpins future demand.
HAVING invested in the business, the funeral homes operator should be able to increase its market share.
NOT
THE logistics software provider has high revenue but little or no profits. ANOTHER overpriced tech darling given it is generating little or no profits.
DALE GILHAM HOT
GOOD time to buy. The miner has fallen about 50 per cent in past 19 months. History demonstrates it will rise again. Demand for lower grade iron ore has increased.
EXPERIENCED large price falls following the demerger of Coles. But it retains plenty of cash and is expected to consider acquisitions and new opportunities.
THE software firm can have a volatile share. Not for everyone’s portfolio but if you’re interested wait for a dip in price to buy in.
A SOLID company that pays great dividends and makes billions of dollars in profit. Share price has fallen by 30 per cent in past three years.
THE pallet supplier is a proven defensive stock to have in a portfolio. Cost-cutting and automation to bring greater efficiencies.
NOT
MAY suffer from reduced retail spending and competition from online giant Amazon.
FALLING commodity prices have impacted the miner’s share price. There is a real risk of further declines this year.
NOT for untrained investors. That said, the circuit board software firm should provide some short-term upside but there is a real risk of further falls.
LONG-term price growth has been broken and it may take months or years for the construction giant to recover.
HIGH level of share price volatility — it’s a risky proposition.
NATHAN BELL HOT Unibail Rodamco Westfield
SHARES in the French-based shopping centre owner have fallen since it acquired Westfield last year. Despite slow growth in Europe, its current yield of 7.5 per cent should increase further as its European property development pipeline takes shape.
Reliance Worldwide Corporation
THE dominant international player in the plumbing industry. Has carried out a large UK acquisition which provides a gateway to Europe and strong revenue from repairs and maintenance. Earnings are expected to grow by about 10 per cent a year.
IF Brexit gets solved in 2019, the bank should respond favourably.
NOT
US share markets
DESPITE falls the US market is still extremely expensive. If price-to-earnings ratios continue to narrow, as interest rates increase, share prices may continue to drop.
US construction sector
Home building stocks with US exposure may struggle in particular, including CSR and Boral if US home building activity slows. Higher quality stocks in this sector, including James Hardie and Reece, should prosper.
TOM RICHARDSON HOT Xero
AN online accounting business which has had strong international growth. Has some compelling economics and should hit cashflow break even within 24 months.
CSL
THE blood products and vaccine maker has forecast 10 to 14 per cent growth this financial year, while also investing in products for tomorrow to drive long-term growth. Majority of revenue is from overseas, offering investors exposure to a weaker Australian dollar.
Afterpay Touch Group
THE payments provider is disrupting the traditional credit card industry and is now intent on attempting to replicate its Australian success in the US.
Sydney Airport Holdings
OFFERS a dividend yield of 5.4 per cent. It may also provide some decent capital growth as it benefits from increase in Chinese and wider Asian travellers.
Apple
OFFERS investors exposure away from what could be a soft Australian economy in 2019. Apple shares have fallen heavily on the back of the US-China trade war, which presents an opportunity for long-term investors.
NOT Telstra
THE telco giant has cut its divined from 31c to 22c. Investors face the possibility of further cuts as it needs funds to invest in next generational infrastructure. It is also facing headwinds from the transition to the National Broadband Network and revenue pressure as mobile phone plans become cheaper.
Big four banks
THE big banks face a tough year as Melbourne and Sydney property prices fall. In particular, Commonwealth Bank must work through problems from the banking royal commission, money laundering proceedings, shareholder class actions, an ASIC investigation and rising wholesale funding costs. Rising costs and revenue pressure could send dividends lower.
Household goods
FALLING house prices could also impact retailers Harvey Norman, Nick Scali and kitchen appliance company Breville as consumers and households tighten their belts.
JAMIE NICOL HOT
Link Administration Holdings
TRADES as Link Market Services. The share registry operator and funds administrator had a difficult year in 2018 which included the loss of administration of low-balance superannuation funds. But there is now of range of longterm growth factors behind the company. It is in a strong market position and its share price remains at its cheapest valuation since listing.
ARB Corporation
SHARES in the 4WD accessories manufacturer have fallen over concerns that falling house prices will impact consumer spending. Ignore the short-term noise — the current price offers a rare opportunity to buy a high quality growth business at an attractive rate.
James Hardie Industries
RECENT price falls because of concern about a slowdown in US housing market mean this high-quality company, with strong margins and returns, offers attractive growth going forward. An opportunity to buy at historic price levels.
NOT Property sector
THE fall in housing and a likely change of federal government, which increases the potential for changes to negative gearing and capital gains tax rules, suggests housing construction will be soft in 2019.
Banks
BANKS face a difficult environment because of the banking royal commission, a fall in property prices and a potential Labor Party federal government, which may bring in a higher bank levy.
Real Trusts Estate Investment
REITs have been over priced during this recent period of low risk. Better value can be found elsewhere.