The results are in: few do the heavy lifting, others struggle
At the beginning of February I tipped 10 stocks for 2013. Since then the benchmark All Ordinaries Index, which measures price movement only, had stalled after a powerful rally but is now 3 per cent higher.
The 10 stocks I chose have risen 8 per cent on average, but the heavy lifting has been done by a few while the rest have found the going tough in choppier conditions.
At the end of each quarter I will review my tips. This week we will look at the first five and the rest next week.
Platinum Asset (flat)
After a strong surge into March, the funds management group's share price hit a wall and is flat. The recent fade stems mainly from a discouraging March result.
Platinum has a good record in Japan and, as a result, it has a powerful exposure to rising international sharemarkets.
The company was on a roll from November to February, increasing funds under management by more than 20 per cent, but in March the growth stagnated, causing some investors to jump ship.
I remain bullish on Platinum and I believe Japan and other international sharemarkets will rise further into 2013.
Bell Financial (up)
Bell has a tremendous exposure to a rising Australian market and is up 8.6 per cent. The stockbroking company generates revenue from increased action in equities.
Bell's share price rocketed into March, but then turned and headed lower. The company announced its first-quarter result, posting a net profit of $2.9 million. But with a market capitalisation of $182 million, earnings will have to increase by about 50 per cent on the March result to justify a higher price.
I believe Bell still offers an astute way to play this move. The stock has the ability to touch $1 a share.
Capral Ltd (down)
Picking the aluminium fabrication company has proven to be a poor decision to date, with shares down 6.9 per cent.
At the time I said the catalyst for the stock was an improvement in housing starts and the sale of GPG's 47 per cent holding. Since then GPG has sold its holding to a range of institutions.
Capral fabricates aluminium products for buildings but is most leveraged to the residential market. Unfortunately the positive of GPG selling its stake has been overshadowed by continuing softness in the housing market.
In February, Capral lowered its earnings forecasts, saying the encouraging demand it saw for new housing experienced at the end of 2012 had tapered off.
I am still bullish about the stock. If housing starts pick up from current lows just to the long-term average, Capral could have $15 million to $20 million in earnings before interest, tax, depreciation and amortisation.
With an enterprise value of $60 million and a cash-rich balance sheet, the stock price could double from this point.
Devine Ltd (up)
The Queensland-based property developer and land bank group has risen since February, up 9.4 per cent. While the share price has been disappointing, there is potentially a lot of value to unlock.
Devine's net tangible asset (NTA) backing sits just shy of $2 a share, while the stock price is languishing at 91¢.
The catalyst for Devine's share price to close the gap with its NTA will be a sustained recovery in house prices or the divestment of development assets at book value. The stock has the potential to climb back to $1.40 a share.
RXP Services (up) Ross Fielding's IT services group has got off to a flying start as a listed company. In the past three months it has motored 31.4 per cent higher. The group is tiny, with a market capitalisation of just $60 million, meaning that if it wins any new business it is meaningful.
Management expects RXP will earn $4.5 million to $6 million EBITDA for the 2013 year.
This means the group is no longer attractively valued and will have to grow revenue and profit strongly during 2014 to justify the current price.
The Age takes no responsibility for stock recommendations.
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