This year among the brokers Fisher & Paykel seems to be the winner. Where were they in the early part of this decade when they were trading @ 1.80? Just wondering. The rest can be put in the same category. And keep this in mind:
Pick these stocks on dips in their share prices - they ALL have dips. AND - do your own research - lots of it. It makes things interesting as well. Next year could be another one like we have already had - some dips but mostly up - or it could - drop but be mostly down. Whatever it is it will provide opportunities for all of us to make money. Share Investor's 2017 Stock Picks
Blue chip and small cap stocks lead the list of expected market performers for the coming year
F&P Healthcare is expecting 17pc increase in growth in the coming year. Photo / Greg Bowker
Some undervalued "blue chip" companies and a selection of small cap stocks dominate our broker picks for the year ahead.
Fisher & Paykel Healthcare gets the tick from four firms -- Forsyth Barr; Hamilton Hindin Greene; First NZ Capital; JBWere -- making it the most popular choice in an unusually diverse field.
Despite being perennial favourite the stock underperformed in 2015, but there appears to be a strong view that it now represents good value.
"[F&P] has come back significantly from all time share price highs, having reached a mid-year high of $10.90," says Hamilton Hindin Greene's James Smalley.
"We believe this has been on the back of concerns regarding litigation with competitors and a potential negative impact on their sales into the US. We see some headwinds due to production facilities being based in Mexico, and the incoming Trump administration signalling an increase in protectionist policies."
But, he says, the sell-off is an opportunity, given the short-term nature of the issues, to buy in to a quality business.
Rickey Ward, of JBwere agrees.
"F&P Healthcare is a genuine growth company with a track of record delivering strong earnings improvement from offshore avenues.
"We do not see this changing, with earnings growth approaching 17 per cent this coming calendar year," he says.
"Potential taxation concerns around Mexican manufacturing following President-elect Trump's success have been exaggerated."
Another mature company, seen as undervalued given it retains strong growth potential, is transport and logistics group Mainfreight.
It is picked by three brokers: Craigs Investment Partners; Hobson Wealth Management and JBWere.
"It's is a well-managed business with global growth options. Leveraged to robust economic growth," says Craigs Investment Partners head of research Mark Lister.
"Mainfreight should be well-insulated from increasing interest rates and has a very strong market position in New Zealand, which should continue to benefit from strong local growth, but it also offers some international exposure given is growing operation in Europe, the US and Asia."
JBWere's Ward notes: "Trading on 20 times earnings means they might appear expensive, but good companies tend to, and MFT is a good company."
From there several stocks feature twice in the 2017 picks.
Contact Energy also merits three picks, from JBWere, Craigs and First NZ.
"Contact has lagged its peers in recent years, so it looks like the value play in the sector," says Lister. "It has the potential to increase its dividend payout, and the retail strategy could bear fruit in 2017.
We also like the idea of hedging our bets a little, by including one yield stock.
Mark Lister, Craigs Investment Partners
"While rising interest rates could be a headwind for companies in the utilities sector generally, we see a number of company-specific reasons why Contact could still deliver reasonable returns.
"We also like the idea of hedging our bets a little, by including one yield stock."
Craigs and Hobson both pick Restaurant Brands, very much with an eye on its growth potential following a major investment in Hawaii.
Restaurant Brands has offered US$105 million ($151m) to buy Pacific Island Restaurants, the largest fast-food operator in Hawaii and the sole Taco Bell and Pizza Hut franchisee in Hawaii, Guam, and Saipan.
"Restaurant Brands has a solid track record, capable management and offers stable earnings," says Lister. "The core New Zealand KFC franchise will see free cash flow steadily increase in the coming years, enabling the company to invest in growth areas like KFC Australia and Carl's Jr."
Another other stock picked by two brokers was dairy company Synlait; picked by MSL very much in growth mode and more indicative of the smaller cap stocks in the game this year.
The company has a market cap of $100m and won best growth strategy at the Deloitte Top 200 awards. It has invested heavily in the past and is well positioned to cash in on China's demand for infant formula.
The Fonterra Shareholders fund is a favourite of Craigs and JBWere.
"We continue to see underlying operational improvement in FSF. A change in compositional mix, with a management team committed to addressing inefficiency, has seen tighter controls on costs and capital expenditure, leading to margin expansion," says Ward.
Lister notes that rising dairy prices represent a headwind in some respects "however, the business transformation is well underway and recent operating results have been impressive, the company is reducing its cost base and improving efficiency, while the period of heavy investment has come to an end.
"We believe these factors are yet to be reflected in the share price, which offers attractive value," he says.
Beyond these four the brokers have cast the net wide.
Other stocks that fit the mould of "blue chips on sale" might include Auckland International Airport , picked by MSL Capital Management; Tourism Holdings and Infratil picked by Forsyth Barr; Contact Energy picked by Craigs and JBWere.
Hamilton Hindin Green has a number of similarly high quality NZ companies that look like good value at the moment, says Smalley.
It also included Chorus, Genesis Energy and Ryman Healthcare with Opus international as its wild card.
"It's about buying quality businesses when they are on sale," Smalley says.
Education group Evolve rounds out the stocks to receive multiple picks.
Ward says his team see Evolve as well placed to benefit from further government moves to support mothers in the workforce and notes the trend has similarities to the retirement sector several years ago.
"Acquisitions, developments and cost-out initiatives will see strong near-term earnings growth from a roll up growth opportunity," he says.
Beyond these companies there are plenty of small cap stocks and less familiar names in the mix this year.
MSL picks Green Cross Health, a small player it has chosen for a second year in a row, in what managing director Andrew McDouall describes as "a hot sector benefiting from an aging population, regulation and industry structure changes."
Vulcan Capital is picking natural healthcare products company Promisia Integrative as well as cancer diagnostics company Pacific Edge and NZ Salmon.
UPDATE 2: THL shares finished today's trading up 10c to 70c or nearly 17%. This is 2c more than the offer from Ballylinch LP. Ballylinch LP this morning announced that it intends to make a partial takeover offer to acquire 40.85% of the ordinary shares and redeemable shares in Tourism Holdings Ltd [THL.NZX]that it does not already own. The company currently owns 19.14% of the ordinary shares in THL. The offer is for 67.5c per ordinary share and this is a 12.5% premium to the closing price on the NZX yesterday. While the offer is higher than the market price (see one year chart below) and the company has been trading at these low levels because of its poor management and dire results over a number of years, it is opportunistic (and canny of course) of Ballylinch to make an offer for this company when its fortunes are at its lowest ebb in many a year and they are likely after the lions share of THL so they can realise assets that are worth more than the THL share price. Tourism has been a fickle beast over the last few years and in combo with poor management the share price has obviously suffered. The thing is regardless of its management ills the company is going to see better times in terms of tourist numbers to their businesses and this will eventually reflect in a higher share price as the overall macro situation will get better for them. The 2011 Rugby World Cup should be a boon for THL. On this basis alone shareholders should soundly reject Ballylinch's offer and hold tight for either a better offer or better times for the company. Tourism Holdings @ Share Investor Share Price Alert: Tourism Holdings Ltd Tourism Holdings worth more broken up Long Term View: Tourism Holdings Ltd 2011 World Cup Fever Discuss THL @ Share Investor Forum Download THL Company Reports
The profit warning for Tourism Holdings Ltd [THL.NZX] out yesterday is par for the course for this company. It has a long history of overpromising and under-delivering then making excuses for doing so. They are blaming natural disasters in this part of the world for a slow-down in bookings and also snow in Britain preventing people from booking holidays - I think they have the internet there don't they? If you have invested in THL at higher prices I am sorry to hear that but don't expect results to consistently improve while current management are heading the operation. Basically they suck! This is why. As I pointed out in July last year this company is so badly managed it is worth much more broken up than as a functioning company. Back then its net tangible asset backing was $1.37 per share and it was trading at about 75c per share. It now has an asset backing of $1.31 at 59c per share after dropping 20% yesterday on the bad news. These are company valuations of their assets so you could probably remove a good 30c per share just to be safe in this climate of low prices for assets. The kicker with the profit warning is that the company will be in breach of its banking covenants at the early part of this year, something that Bruce Sheppard pointed out was being risked mid 2009. It is anyone's guess what might happen next but if the bank doesn't see the company improving in 2011 they could well be tempted to pull the plug. In that case of course shareholders are well down the line of creditors. If this doesn't happen the company could well be attractive to a buyer of all or part of the company's assets. At 59c per share it maybe well worth a punt. Having said that there will provably be more share price weakness as the company moves into the slower part of its business year during the Winter months. Look to buy on a lower share price for an outside punt that could pay off well. Not for the long term.
While writing the Long Term View for Tourism Holdings [THL.NZ] I discovered that this company is hiding quite a delicious little secret. While closing at 75c last Friday, after being at a low of 45c over the last 52 weeks (see price chart above) the Net Tangible Asset (NTA) backing is booked in at $1.37 by the company. To be sure it is hard to quantify as to what any asset is worth at the current climate of knockdown prices but at roughly half its balance sheet value the company's shares can be purchased. THL own a vast array of assets from camper vans to tourist attractions and land and buildings. Granted THL have had a particularly bad last few years and a patchy profit history but their half year to December 31 2009 did improve vastly on the previous comparative year. Clearly then the company isn't being run to a high degree of efficiency or with much skill otherwise the share price would at least be equal to the disposable value of its assets. The value of the management and goodwill is discounted by more than half and probably should be given the inept way it has been run over the last 10 years. Seems a relative bargain at these prices. Tourism Holdings @ Share Investor Share Price Alert: Tourism Holdings Ltd Tourism Holdings worth more broken up Long Term View: Tourism Holdings Ltd 2011 World Cup Fever Discuss THL @ Share Investor Forum Download THL Company Reports
