Friday, January 15, 2010

Share Investor's 2010 Stock Picks

It is that time of the year, to pick stocks for 2010 and time for my stock picking monkey to come out of a self imposed 12 months hiatus for another stab at the stockmarket pages.

It is a bumper edition this year and I started it 1 week ago in between feeds for my time consuming wee girl - she had no say in what the stock picking monkey chose this year but could be encouraged to throw a dart or two at the end of 2010.

In the face of a global recession, an uncertain economic future that had a big impact at the end of 2008 and continues today, with dwindling share values, even for good assets, it is going to be hard to pick winners for next year.

2009 was a tough year for stocks, perhaps one of the worst in a generation

Please keep in mind dear readers that the picks are my own and they reflect my investment philosophy and not necessarily anyone else's.

My picks are based on a long-term view, regardless of the current short to medium term market turmoil and economic uncertainty.

NB: Since I think most of my portfolio consist of the best stocks on the New Zealand market, I found it difficult to pick stocks outside my realm of self interest.

Picks from the NZX

Fisher & Paykel Healthcare

I will kick off my picks with a company that I consider will be one of the big successes of the next 5-10 years and one I included in the 2008 and 2009 Share Investor stock picks, Fisher and Paykel Healthcare, the health care products provider.

I had it as a pick for 2009 and it has been one of the better performers this year, as it was in 2008, even though it is still well off its highs share price wise.

Company profit forecasts to March 31 2010 have been estimated at NZ$65-70 million - which is down from 2009 - and revenue is also set to grow as it has done for the past decade.

Any significant movement in the value of the NZ dollar means a substantial rise or fall of profit, as the bulk of company revenue are in the US dollar.

Fisher's profits are largely immune from the current market turmoil as buyers simply have to have the products that the health care company makes regardless of a global recession.

A future global player in the sector they operate in.

Fisher & Paykel Healthcare @ Share Investor

Stock of the Week: Fisher & Paykel Healthcare
Analysis - Fisher & Paykel Healthcare: FY Profit to 31/03/09
Schroder Investment Management takes big Fisher & Paykel Healthcare stake
Long VS Short: Fisher & Paykel Healthcare
Big Fisher & Paykel Healthcare trades a curious tale
Why did you buy that stock? [Fisher & Paykel Healthcare]

Drinking and Trading
Share Investor's 2008 stock picks
Share Investor's 2009 stock picks
Fisher & Paykel: A tale of two companies
FPH downgrade masks good performance

Discuss Fisher & Paykel Healthcare @ Share Investor Forum - Register free

Fletcher Building Ltd

Fletcher Building has had a tough 2009 and 2010 looks to be a similar year but there is promise in the winds through a shortage of new housing stock in New Zealand and Australia and a large number of infrastructure projects on the go in New Zealand and across the Tasman and a similar list on the books ready to start.

The commercial sector will be a problem for the company but that will be an opportunity for prospective investors in Fletcher to get cheaper stock based on bad news for this sector.

Management haven't given much indication of profit for 2010 except to say that they are happy with analysts indications to the market of NZ$261-340 million. At their Nov 2009 AGM Directors indicated uncertainty in their business for the coming year.

Accumulate on share price weakness of which there will be for this stock in 2010.

Fletcher Building @ Share Investor

Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Building raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free

The Warehouse Group

Retail has been tough in New Zealand and globally over the last 16 months but there are signs that retail in NZ is on the improve.

The Warehouse has had a year of stagnant growth but has seen a slight improvement over the last half year when it even advanced a special dividend to its shareholders.

This confidence by management will only be underpinned by tangible results over the all important 2009 Christmas shopping period and any increase on last year will be a sign that improvement could be on the cards for 2010.

This stock is a good long term play and any increase in sales and cashflow will benefit shareholders with increased dividends.

An added bonus is that the company is still in play to some extent pending a decision by either Foodstuffs or Woolworths Australia making an official bid for the company.

Accumulate on weakness.

The Warehouse Group @ Share Investor

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The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court

Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

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Sky City Entertainment Group


Sky City Entertainment has had a great 2009, with increased FY 2009 profit at the hands of an inspirational leader and a number of strategies planned and executed to produce pleasing results for shareholders. The share price of the company has not however tracked its increased fortunes, plumbing the depths of below NZ$2.50 and settling of late in the low 3 dollar range.

There is promise however for 2010. The loss making cinema division is set to be sold in February with almost $60 million to be returned to the balance sheet in some form - either a special dividend or a paydown of debt.

Momentum from paring back running costs has been built up over 2009 and in addition to that a capital raising and paydown of substantial debt has left the balance sheet open to more flexible capital management during 2010.

Look for improvements in profit during 2010 based on the above and once again buy on weakness if this company has already been in your sights.

Sky City Entertainment Group @ Share Investor

Share Investor Interview: Sky City CEO, Nigel Morrison
Sky City Entertainment 2009 FY Profit Preamble
Sky City debts levels now more manageable
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Sky City share offer confusing and unfair for smaller shareholders
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Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster
Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
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Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)Sky City Casino 2007 HY Profit

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Xero Ltd


Xero Ltd is a company in a state of transition. At present this online accounting software company is a niche player in an industry dominated by global players like Quicken and MYOB and appears to be gradually increasing its customer base among a very loyal following of clients.

Those in the tech industry who know intimately what the company does and how it does it say it is a company to look out for and that it could be well a big player in time to come. I have no idea whether that is true or not but the buzz created by this company within the industry is something that should be taken notice of.

It has yet to make any money but those in the know say it is close to breaking even and should start to see some profit in the next few years.

It is presently building its customer base to get "critical mass".

If those insiders are right 2010 could be a good year for this company and early buyers might be in for a windfall should the company succeed.

Buy on weakness and if you are ready for a bit of risk with a 50/50 shot.

Discuss this stock @ Share Investor Forum - Register free

Xero @ Share Investor

Stock of the Week: Xero Ltd
Love Xero?

Contact Energy Ltd

Contact Energy Ltd has had the year to end all years in 2009, with their FY profit in 2009 down by 50% to NZ$117 million. It has been a stinker but there is sunshine on the cloudy horizon.

A CEO gaffe at the end of 2008 led to the loss of over 40000 customers and weather was also against the company, affecting bulk power prices and increasing running costs because of the use of more expensive generation.

These things are unlikely to occur again in 2010, more customers have come back to Contact and management appear to be focused on cutting business costs. Management will give no indication of 2010 profit but it is likely to be higher than 2009 unless something unexpected should visit them.

With the share price at the time of writing well below NZ$6 the company is a relative bargain considering its long term prospects for growth and the possibility that the company is still a target of Origin Energy Ltd [ORG.NZ], its Australian majority owner.

Buy on weakness should you be interested in any listed NZX utility.

Contact @ Share Investor

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Mainfreight Ltd


Mainfreight is a dominant player in the logistics sector in Australasia and has businesses in North America and Asia. It has designs on becoming a global logistics player and has surpassed 1 billion in revenue this year. It has a stated aim of doubling in size over the next 3-5 years.

It is one of the best managed companies listed on the NZX.

Mainfreight has had a bad 2009 by its own admission, with profit significantly down and its share price has suffered as a result. There were signs in the last quarter of 2009 though that things were picking up and Mainfreight is likely to a benefactor of any improvement in global trade, especially in their United States operations.

2010 is by no means going to be one of the best years for Mainfreight but it is more than likely that they will come back stronger than any other business sector if global trade improves as they were one of the first and hardest hit when the downturn came.

Mainfreight is a good barometer as to the health of the rest of the economy and if you are looking for one of the best long term investments on the NZX this is it.

Buy on any weakness with a view to hold a minimum of 5 years for superior returns.

Mainfreight @ Share Investor

Share Investor Interview: Mainfreight's MD Don Braid
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Questions to Mainfreight's MD Don Braid
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A rare breed
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Discuss Mainfreight @ Share Investor Forum - Register free

Picks from the ASX

Caltex Australia Ltd

Caltex Australia Ltd is Australia's largest refiner of oil and oil based products and has one of Australia's largest networks of filling stations.

Its share price has suffered over 2009 but the company still remains a dominant player in its sector with good long term potential for recovery.

The retail sector for petrol in Australia is undergoing consolidation at the moment and Caltex could be set to benefit if its bid for Mobil retail sites in that country can overcome competition watchdogs.

Buy on weakness for good long term gains.

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Coca Cola Amatil

Coca Cola Amatil is the dominant player in the carbonated drinks market in Australasia. It sells its iconic Coca Cola brand as well as a large number of other well known brands in New Zealand, Australia, Indonesia, Fiji and a number of other markets in this part of the world. Their 5 year financials to 2007 show a steady increase in revenue and profit and their 2008 Annual Report shows a record profit of just over AU$ 400 million on strong revenue growth.

A strong history of profits can be a good sign that there is more to come in the future and the fact that its customers are largely addicted to its products makes this company a great long term bet.

Buy on any weakness for superior long-term returns.

Coca Cola @ Share Investor

Coke is it!

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Domino's Pizza Enterprizes Ltd

Domino's Australia has had a great 2009. It increased store numbers by 35 to 776 and also increased profit in 2009 by 29% to AU$15.4 million.

DMP is the dominant pizza chain in Australia and New Zealand and has grown considerably since its May 2005 listing on the ASX. The company also has 250 odd stores in 3 European markets.

While the company has been growing well in Australasia during the global recession their stores in France, Belgium and the Netherlands have been powering ahead.

Same store sales have increased across their various markets and costs have been carefully managed.

Management have an aggressive approach to expansion and have manged to achieve this growth without incurring any significant debt or diluting the all important same store sales.

Dominos @ Share Investor

Dominos poised for another slice of Pizza Hut
Domino's Australia Dominant in Australasia
The dots get the hots

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Other notable quotables


Auckland International Airport [AIA.NZ] A good monopoly at historically cheap prices.

Kathmandu Holdings Ltd [KMD.NZ] A new listing from end of 2009. Value below NZ$1.50.

Port of Tauranga [POT.NZ] New Zealand's leading port company with good upside on increased exports.

Michael Hill International [MHI.NZ] A very well managed jewelry chain poised for global expansion.

New Zealand Refining [NZR.NZ] The country's only refiner of oil products, it is currently having a bad second half year. The share price should recover on a lower Kiwi dollar and therefore better margins, an increased global demand for oil and refurbished, expanded plant closed in September 2009.

Telecom NZ [TEL.NZ] Value in the company as a hedge against investment inflation. Dividends are over 10% net PA at current share prices (low NZ$2.30 - 2.50 range) and stock worth buying at these low levels for the return and a possible recovery in share price.


Yum ! Brands Inc [YUM.NASDAQ] A target of 10% sales growth for 2010 after a 15% profit growth in 2009 and more good growth to come from China make this company a tasty treat.


2010 should be a better year for stocks than the anus horribilusness of 2009 although it is by no means any guarantee that a good year should follow a bad one except to say some confidence seems to have entered the stockmarket, albeit with a tinge of nervousness over the uncertainty of what is exactly happening to the global economy - is it getting better, or is it going to get worse, who the hell is right?

I think there is more bad news in relation to the global economy to come, but that is only my opinion.

That aside if you can, some listed companies have done well in 2009 and will continue to do so in 2010 but others will find the going tough as credit lines are exhausted and interest rates rise.

There are a number of companies that have had a poor or hum drum 2009 and any real upturn in the global economy will see a better 2010.

If there is no upturn in the economy, stockmarket share price weakness will have me poised to buy further shares in some of the companies I own in the Share Investor Portfolio with any surplus cash rather than with borrowed funds. I am also looking at buying Coca Cola Amatil [CCL.AX] and Yum! Brands [YUM.NASDAQ] shares on weakness, which would be my first foray into international shares - 1000 Coke and 250 Yum!

Remember, the stocks I have picked above are based on my investment criteria and may not fit yours or of course you could have a different opinion. I would love to hear your opinion and any picks you may have.

Have a look at what I have to say, take it on board or not and then do your own research to see if you might agree with me.

Lastly, I wish you all good luck and a prosperous 2010, we could all use it!

**Just an added footnote. Please feel free to post your own stock picks for 2010. The only requirement is that you say why and declare any financial interest. Post them below at the bottom of this piece or click here.

: I own FPH, FBU, WHS, SKC, MFT, AIA shares in the
Share Investor Portfolio.

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  1. Feel free to post your own picks for 2010 below.

  2. GPG floating around 80 cents dividends 14% company grown on average 20% per year owns coats largest thread manufacturer in the world people always need clothes good long term pick if dividends reinvested capital doubles in 5.3 years

  3. If you were going to invest in Xero, today is the day. Xero are going to announce their customer numbers soon and it is going to be quite a shock to the market.

  4. Anon, haven't seen any announcement today. You sure it isn't tomorrow?

  5. Darren, re-read the comment. The suggestion to invest today is because the "shock announcement" will relate to massive growth in user numbers.

    My personal prediction? 2000 either side of 20,000 subscribers. The only negative in this is for those who ignored the suggestion to get in early. It's still not to late though - this is a long term growth story.

  6. It could be interpreted either way Paul.

    You have news?

  7. I'm not privy to any information not already in the public arena. Check the NZX announcements anytime from 9am tomorrow - these guys report fast as is expected from an accounting software company.

    And don't say you weren't given a heads up over a year ago :)


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