Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Retail in favour at value-oriented Montgomery
With reporting season over, the market shifts its focus back to Covid-19, the percentage vaccinated, and the likely impact lockdowns will have caused on company earnings. In some cases the impact will have been a positive one, but in many cases it will have been a negative. Roger Montgomery, founder and chief investment officer of Montgomery Investment Management, looks at six companies that have caught his eye during the latest reporting season.
Here are his 6 stock picks following reporting season:
Accent Group (ASX:AX1) – The footwear chain (that operates Vans and The Athlete’s Foot, among others), posted a stock-standard result that was, overall, in line with expectations. However Montgomery says “lockdowns on the east coast are seeing like-for-like (LFL) sales turn negative in the early months of FY22.” Overall lockdowns have seen LFL sales drop by 16 per cent over the year. Stores are holding excess inventory ahead of Christmas, and people have done ample online shopping throughout lockdown. That said, Montgomery says “activity can rebound quickly when lockdown ends”.
Redbubble Limited (ASX:RBL) – The global online print-on-demand product provider reported a slightly lower-than-expected result despite an increase in customer acquisitions. Repeat purchases outpaced first-time purchase growth, which Montgomery suggests, “is the platform becoming established.” He goes on to say RBL can become a high-quality company.
Beacon Lighting (ASX:BLX) – Montgomery says BLX’s result was better than previously upgraded guidance, however, outlook guidance was down to mid-teens. The company is also targeting B2B with a goal of matching retail revenue in 3-5 years. Upgrades are likely.
Treasury Wine Estates (ASX:TWE) – The wine maker and distributor posted improving trading in all markets bar China, which imposed tariffs and smashed sales. Its profit result was overall ahead of expectations, but revenue and EBITDA were a miss. So, a mixed result overall.
Cochlear (ASX:COH) – Overall a slightly lower-than-expected result driven by the Americas and Asia-Pacific regions. It was, however, one of the few to offer guidance with FY22 net profit projected at $265 million-285 million, compared to consensus estimates of $302 million. Montgomery says, “With the stock up 35% year-to-date against the market’s gain of 13%, and with a one-year forward P/E of 60 times, it is unsurprising the stock is down 7% at the time of writing.”
Bapcor (ASX:BAP) – The vehicle parts provider posted an OK result. Montgomery says “Lockdowns will continue to impact the business detrimentally.” To explain this in more detail, Bapcor’s NSW Trade business suffered a 20% hit and NSW retail is off 20 to 30% because of lockdowns. However, opening up pre-Christmas could produce a mini-boom. Montgomery says, “Our small-caps team really likes Bapcor and believe it is a high-quality business with defensive business characteristics offering growth.”
