Watchlist: Stocks on the edge of an upgrade
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- Indepth analysis of ASX listed shares
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Well, that was quite some day wasn't it? After a horror night on Wall Street the ASX was down 1.6% at midday, with the banks dropping over 1%, BHP 2% and Rio almost as much, to say nothing of the smaller iron ore plays which, as predicated in Macro: Time to buy iron ore?, are beginning to fall over.
Then the rebound came and the ASX 200 closed up 0.2%, led by the big banks and energy stocks. Remember, too, that less than a week ago the ASX 200 fell over 2% in a day, the worst performance this year, at least so far. As we wrote last week, Mr Market looks alarmed.
Time, then, to batten down the hatches? Not at all. In fact, we welcome this kind of volatility with open, loving arms. To quote last week's article, 'If you've been waiting for the opportunity to buy some great businesses on our buy list, now's your chance.'
Key Points
- Market falls have already produced five new Buy recommendations
- We expect to add to that number on further weakness
- Here's your list of stocks to watch
Yesterday we got another bite, if only a small one. After recently upgrading Carsales.com (Buy - $9.63), Santos (Get your claws into Santos (Buy - $13.48)) and DWS on 25 Sep 14 (Buy - $1.10), James Carlisle did manage to raise a Buy recommendation on Computershare and Nathan Bell rang the, err, bell, on Austbrokers. These two stocks are now officially (back) on the Buy List, and we expect to add more over coming days if this volatility continues.
On the basis that forearmed is forewarned, Table 1 lists the stocks already close to being upgraded, along with our trigger price.
|
Company (ASX code) |
Latest recommendation |
Yesterday's closing price |
Buy Trigger Price |
|---|---|---|---|
| Platinum Asset Management (PTM) | 27 Aug 14 (Hold - $6.29) | $5.80 | $5.50 |
| Sydney Airport (SYD) | 26 Aug 14 (Hold - $4.41) | $4.12 | $4.09 |
| Origin Energy (ORG) | 22 Aug 14 (Hold - $14.83) | $14.41 | $14.00 |
| BHP Billiton (BHP) | 21 Aug 14 (Hold - $38.51) | $33.33 | $30.00 |
| AWE (AWE) | 5 Jun 14 (Hold - $1.82) | $1.67 | $1.60 |
| Northern Star Resources (NST) | 28 Sep 14 (Hold - $1.32) | $1.205 | $1.20 |
| FSA Group (FSA) | 15 Sep 14 (Hold - $1.14) | $1.04 | $0.90 |
In addition, Orica, New Hope Corporation and Rio Tinto aren't far from being upgraded and Gaurav Sodhi, your analyst on these stocks, is working through them at the moment. Expect more details to follow should the prices on any of these stocks fall a little more.
More upgrades coming
At 60 cents Vision Eye Institute (currently trading at 64 cents) is also a good candidate but we're waiting on news of a capital raising to be announced today. That may change things somewhat, although at an unconfirmed price of 60 cents a share we'd suggest you buy and participate up to our portfolio limit of 3%. Again, expect more details soon.
Flight Centre is another stock we're running the ruler over right now. It's currently trading slightly below our Buy price of $40 but given our last recommendation on it was a while back (see results review of 27 Aug 14 (Hold - $46.34)) and there's been quite a few changes at the company, we're reworking our valuation to make sure.
All up, these are interesting times, and we hope they'll become more so. We've been waiting a while for a period of volatility like this and it's pleasing to have it finally arrive. We're looking forward to a very interesting few weeks, loaded with Buy recommendations. We trust this list of stocks on the verge of an upgrade whets your appetite and points you in the right direction.
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