Collected Wisdom

Ian Huntley outlines his big picture strategy for the rest of the year in the latest edition of Your Money Weekly. His expectation is that base metals will hit year lows and the oil will continue to surge upwards as the US enters hurricane season. At the same time, he can see lots of value in industrial stocks and selects three for particular attention. ABC Learning (ABS) has been trading between $5.02 and $8.55 over the past 12 months. Recent criticism in the media has softened the share price quite considerably. Buy to $7.50.
The newsletter also suggests that Harvey Norman (HVN) is perfectly poised to take advantage of the consumer electronics boom. While flat-panel TV’s have certainly had their fair share of attention already, a new suite of integrated home entertainment products is purportedly set to take off. Well, just as soon as the retail market improves anyway. Accumulate to $4.10.

One company that has found itself played out of position in the new media environment has been John Fairfax Holdings (FXJ). Recent acquisitions have seen the company’s strategy come under intense scrutiny. Currently at a 12-month price low with a projected EPS of 14 times for 2007, the newsletter likes its opportunities for improvement and recommends you accumulate to $3.84.

Small capital specialists Wise Owl have a couple of tasty starters on the menu this week. Investors with an appetite for risk should certainly investigate them further. The first is Austin Engineering (ANG). Its trading range of 26–38¢ has recently been broken and the team at Wise Owl can see plenty of opportunity to test its all time high of 51¢ achieved in October 2004. ANG was trading for 41¢ on Friday, June 30, and a 12-month target of 75¢ has been set.

The second is Jackgreen Energy (JGL), a new player in the deregulated energy market. Formerly a property development business named Lion Equities, the outlook for the renewable energy outfit is good as it moves into cash positive territory. Trading at 41¢ on Friday, June 30, Wise Owl suggests a 12-month target of 70¢ and a stop-loss order at 20¢. For main course, the team are looking at IOOF (IFL). After listing in December 2003 for $4, the diversified financial services company has moved steadily north. It peaked at $8.90 in November 2004 and was trading for $8.50 at the close of trade on Friday, June 30. The peak is likely to be tested again in the very near future and a 12-month target of $11 has been set.

The Rivkin Report takes a good hard look at investment houses this week, starting with Babcock & Brown (BNB). Using the current management guidance of 35% growth, Babcock & Brown is at a multiple of about 16 times at its current price of $21.69. The report recommends that investors should sell, given the high expectations being built into the price. There is a bit more faith in the management team at Macquarie Bank (MBL), even though it is much more exposed to interest rates and equity markets. At $69 the stock is a hold, however you should make sure that you fully understand the risks that face the $16.5 billion company. Record Investments (RCD) is around half the size of Babcock & Brown, and around one eighth the size of Macquarie Bank. The stock has soared over the past three years: selling for $2.85 in July 2003, it was last trading for $12.85. It has overshot the target range established by the report by as much as 7% and in a much shorter time frame than anticipated. The Rivkin Report recommends that you lock in your profits and sell.

Always the contrarian, Tim Boreham of The Australian’s Criterion column, has stuck his neck out and backed Babcock & Brown (BNB). Making note of its strong institutional contacts and its plans to move into the increasingly competitive market of running European airports and ports he can see plenty of upside. Further, he believes PBL is much bigger than its TV network and sees plenty of life in the old stager yet. Though the worst may be over, it will offer plenty of opportunities to buy.

Engineering consultant GRD’s role as an ancillary to global mining giants such as BHP Billiton and CVRD puts the company in good stead with the Fat Prophets team. The team believes that its contracts and other fundamentals will see the price of GRD improve significantly in the short to medium term. Currently trading for $2.46, it is considered to be a higher risk investment. However, they expect that after having broken $3 twice in the past two years that it will do so again.

Unashamedly bullish on oil, the latest publication from Fat Prophets continues to fly the flag for Caltex (CTX). With Australian demand for petrol products exceeding refinery production by 6.7%, they speculate that the future for oil “will be exactly like the past, only more expensive”. For this reason, Caltex is a hold.

Over at The Bulletin, resources expert David Haselhurst has identified two opportunities that he considers good value. Greenvale Mining (GRV) made an announcement to the ASX that entered into a partnership to develop oil shale into a product that would halve pollutants from coal-fired powerhouses. The stock is extremely volatile and has traded in a range between 45¢ and $1.65 and may be worth a punt on the basis of the intellectual property involved and carbon credits that it may generate. Also on the speculative side of things is the WA based Quickstep Holdings (QHL), which is developing a patented method of producing composite materials faster and cheaper than presently available technologies. Haselhurst managed to snap up Quickstep at 21¢ a share; they were trading for 26¢ last Friday, June 30.