Collected Wisdom

When the stockmarket is going gangbusters tipping stocks couldn’t be simpler. You could throw a dart at the ASX and pick a winner. But as soon as a period of volatility is ushered in, the going gets tough. And when the going gets tough, smart stock tippers go back to the fundamentals. Price/earnings (P/E) multiples, industrials providing basic everyday products and even gold stocks get special attention from the tip sheets this week.
Looking for value in a volatile market, the Rivkin Report team has put together a list of stocks that they think represent compelling bargains. Of the big four banks, the report says ANZ Bank (ANZ) is an extremely good buy to about $27.70. Another stock that is trading below its target price is Pacific Brands (PBG). The low P/E and the fully franked yield of around 7% make it relatively cheap at current prices. Acknowledging the series of problems that face Wesfarmers (WES), the report can’t help but think in a couple of years that it will seem positively undervalued at current prices. They recommend that you buy Wesfarmers to about $35. Small-cap oil explorer and producer Incremental Petroleum (IPM) is a high-risk investment but the report (which is bullish on oil) suggests acquiring the stock below $1.50.

In The Australian’s Criterion column, Tim Boreham paws through the rubble of this week’s correction looking for some value and thinks he has found it in the form of latex manufacturer Ansell (ANN). Discounted by as much as 18% since mid May, its P/E is now as low 12 '” Boreham rates Ansell a buy. On the strength of the NSW housing market regrouping, he upgrades his rating of CSR Limited (CSR) from a long-term buy to a buy. Taking a second look at Qantas (QAN), he views the recent discount combined with a yield of about 6.5% makes it not a bad income maker and therefore a buy.

The team at Fat Prophets disagree. Quoting Gordon Gekko from the classic film Wall Street, their view is that airlines make lousy investments, “because of high fixed costs, volatile fuel prices and problematic unions”. The team recommends that you strongly avoid airlines as an investment. They do, however, see opportunities in gold, specifically in Lihir Gold (LHG). The gold miner has experienced strong support at $2.50 on a number of occasions and can be expected to firm up significantly. Bullish about the prospects of the Japanese economy following a seven-year bout of deflation, the team recommends that you acquire units in the Platinum Japan Fund. Offering investors good exposure to undervalued companies in Japan and South Korea, the fund seeks a minimum investment of $25,000.

Over at The Bulletin, David Haselhurst’s Speculator has been singing the praises of gold by drawing your attention to the huge fluctuations in the gold price, which have been as much as $US100 an ounce in recent weeks. Two companies that he has been spruiking include Reed Resources (RDR) and Adamus Resources (ADU). Haselhurst says recent falls in the spot price of gold mark the perfect opportunity to get back into junior explorers.

It goes without saying that even in tough times people still need to eat. With this in mind, Huntley’s Your Money Weekly tips both Goodman Fielder (GFF) and Metcash (MTS). Goodman Fielder is a distributor and manufacturer of staple food products such as bread and with a weakening NZ dollar, the newsletter recommends that you snap it up before this tip goes as stale as yesterday’s bread '” good buying to about $2.60. At the same time grocery marketing and distribution outfit Metcash (MTS) represents good value to about $5. Further to these, anyone who isn’t afraid to get back on to the commodity horse should look no further than Hardman Resources (HDR). It has languished around $1.50 for the past week, but Huntley’s expects it to break out of this trading range and to begin heading back towards the $2 mark very soon.