Monday 30 November 2020 Good alpha returns

Yes there can be some bad years for stocks but in a week’s time we’ll be able to test the stock market ‘rule of thumb’ that shares will return around 10% a year over a 10-year period. In my article today I prove this fact: smart stock-picking or reliance on great fund managers will give you good alpha returns.

Like me, Paul (Rickard) invests for the long term, but from time to time he’ll toss out the odd mistake, take a bit of profit and trim exposures. In his article today, he tells you about two stocks he’s selling and two he’s looking to buy.

Sincerely,

Peter Switzer

Inside this Issue 02 FACT: Smart stock-picking or reliance on great fund managers gives good alpha returns Good alpha returns by Peter Switzer 04 2 buys + 2 sells 2 buys + 2 sells by Paul Rickard 08 A2 Milk & 4 other infant formula stocks 2 Milk and 4 other infant formula stocks FACT: Smart by James Dunn 11 Buy, Hold, Sell, What the Brokers Say stock-picking or 9 upgrades, 12 downgrades reliance on great fund by Rudi Filapek-Vandyck managers gives good 13 My “HOT” stocks My “HOT” stocks alpha returns by Maureen Jordan by Peter Switzer 02

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before Switzer Super Report is published by Switzer Financial Group Pty Ltd AFSL No. 286 531 acting, consider the appropriateness of the information, having regard to the Level 4, 10 Spring Street, Sydney, NSW, 2000 individual's objectives, financial situation and needs and, if necessary, seek T: 1300 794 893 F: (02) 9222 1456 appropriate professional advice. FACT: Smart stock-picking or reliance on great fund managers gives good alpha returns by Peter Switzer

In a week’s time we’ll be able to test the stock 1. Chinese growth slowed and the SSE market ‘rule of thumb’ that shares will return around Compositefell 43% in just over two months 10% a year over a 10-year period. The IOZ exchange between June 2015 and August 2015. This traded fund from iShares, which tracks the ASX/S&P worried Wall Street. 200, has been operating since 10 December 2010 so 2. The yuan was devalued. This also spooked I thought I’d test this out because I often make Wall Street. reference to the expected return for having faith in 3. Commodity prices slumped as the world’s stocks. most important economy for global growth slowed. IOZ 4. The threat of a ‘Grexit’ was still a possibility. 5. The Brexit referendum! 6. In September 2015, the Coalition swapped Tony Abbott as PM for Malcolm Turnbull. 7. The double dissolution 2016 election wasn’t a plus, with the Government reduced to a one-seat majority.

Did I say it was a ‘crap’, year? (Excusez-moi, It wasn’t a great year to kick off, as the chart shows. encore!) The kick-off price was around $20. By 30 September 2011, it was down to $16.90. You can probably blame This changed and it was helped by Donald Trump the end of the mining boom as one reason but winning the December 2016 election. political instability with Labor was no help, nor was our dollar, which hit $US1.08 in May! By August 2018, IOZ was back to $26. Then Donald met Xi Jinping and trade and tariffs trumped the stock Also not helping was the fact that the US lost its market party. However, by late 2018, trade talks had AAA-credit rating. And over this time, the S&P 500 raised positivity and Trump had hogtied the Fed dropped close to 16%. As we can’t resist playing Chair, Jerome Powell, to cut interest rates. And the ‘follow the leader’, this was bad news for IOZ stock market took off. investors as well. There was a 25% gain from 28 December 2018 to 21 Then it was a nice climb to around $26 by March February 2020, with the unit price at $29.18. But the 2015.However, the optimism didn’t last. Between Coronavirus brought us back to earth and IOZ fell to March 2015 and February 2016, IOZ fell to $20. That $20.14 — a 30% fall! was a 30% fall! Since then it has rebounded to $27.09, which is a Excuse my French but this was a crap year or so, 34% comeback. But remember this: when you fall partly created by dumb politicians. Here were the 30%, you need a 44% comeback to get you back to negatives that took money off stock market players: where you started before the crash.

Monday 30 November 2020 02 OK, that’s the story. As you can see, it was and lower exposure to a manager that has a bad trot complicated with everything from Brexit to Donald after being crash hot. Trump to question marks over China’s ability to keep growing and then the damn virus! Important: This content has been prepared without taking account of the objectives, financial situation or Anyone who slammed a million into IOZ over that needs of any particular individual. It does not time has seen their capital go up and down, but it has constitute formal advice. Consider the grown by 34% or 3.4% on average over the decade. appropriateness of the information in regard to your circumstances. Let’s be conservative with the income paid by IOZ, but it has generally (until this year) paid over 4.2%. So the count is now 7.6% (3.4% + 4.2%). If we allow 1.4% for franking credits, we end up with a payoff per year of 9.0% (grossed up).

This isn’t a bad result for an investment product that’s had to deal with so many curve balls and undoubtedly makes a decent case for all ETFs out there that give you the entire S&P/ASX 200 Index.

While this is OK for a core return, remember there can be some bad years for stocks generally, as the IOZ chart above shows. That’s why smart stock-picking or reliance on great fund managers can give you some good alpha returns.

I know I’m conflicted pointing to the performance of WCM because a company I have a share in brought this US fund manager to the ASX. However its return over the past 11 years shows what an above average fund manager can do.

This was data from October 30 but you can see what a very good fund manager can do. Looking for best of breed (especially when wanting to invest overseas) is a pretty good strategy.

If you want to go down the fund manager path, you should think about creating a fund of funds (maybe two or three or even more) so you have diversification

Monday 30 November 2020 03 2 buys + 2 sells by Paul Rickard

I am not a huge believer in overly active portfolio management. For my core portfolio, I invest for the long term, so I don’t carry expectations that I can “buy at the bottom” or “sell at the top”. Time in the market, rather than timing, is the key driver. But re-balancing and re-weighting, throwing out the dogs (or mistakes) and occasionally, taking a bit of profit and trimming exposures, are strategies I do employ.

It is with regard to the latter strategy that I am suggesting a couple of portfolio trimmings. While I still like the companies, I think they have run too hard and Source: nabtrade it is time to lock in a profit and moderately reduce the exposure. Down the track and at a better price, I will Short seller Blue Orca Capital accused Seek’s 61% look to re-invest. owned Chinese employment jobsite, Zhaopin, of creating fake job advertisements and fake CVs to I have also nominated two that have “cheapened” boost traffic. It also said that there were accounting (mainly due to the “rotation trade”) and are irregularities. Seek issued a statement strongly candidates to develop or increase exposure to. refuting the allegations. It agreed that Zhaopin was an industry leader (not necessarily the leader), saying Here are two to sell and two possible replacements. that “Zhaopin led on many key metrics, but not all”.

1. Seek (SEK) – reduce Friday’s ASIC data showed that there was still a meaningful short position in Seek, with 4.85% of its Seek closed on Friday at $26.06, just shy of its 52 ordinary shares sold short. week high of $26.50. It is 10% higher than its pre Covid-19 high set on 17 February, and 230% higher Seek says it is continuing to invest in Zhaopin and than its market meltdown low of $11.23 on 23 March. three structural themes – online education, Human Importantly, it has more than fully recovered the loss Resources as SaaS, and contingent labour . it suffered when it came under attack from a foreign short seller in late October – it has risen by 31% from CEO Andrew Bassat delivered an upbeat assessment the low on November 2. of the Group’s prospects at the recent AGM on 19 November, saying that “revenue is well above the Seek (SEK) – last 12 months assumptions underlying the illustrative assumptions provided in August”. They have now guided for FY21 for revenue to be in the order of $1,600m, EBITDA of $400m and NPAT of $50m.

But to put these numbers in context, the results pre-Covid (for FY19) were revenue of $1,530m,

Monday 30 November 2020 04 EBITDA of $456m and NPAT of $177m. Australasia, is developing an eco-system around the accounting software for its small business customers Seek is back to trading at stratospheric PE multiples that allows it to grow ARPU (average revenue per as the company invests for growth. About 137 times user). forecast FY21 earnings and 62 times forecast FY22 earnings. The major brokers, according to FN Arena, But on a key metric, growth in customers, grew have a consensus target price of $23.67, about 9.2% international subscribers in the last 12 months by lower than Friday’s close. Individual targets range 20.5% to 1.03m, just marginally faster than the from a low of $19.90 from Macquarie to a high of increase in Australasia of 18.3% to 1.43m $28.50 from Credit Suisse. subscribers. In the USA, where Xero is battling Intuit and others, Xero added a disappointing net 10,000 Although target prices have been rising (on the back customers in the half year to 30 September. of upgraded guidance at the AGM and an improved outlook for the Australasian business), Seek looks Xero cited Covid-19 and the prolonged filing of tax fully priced. returns as being causes to the underwhelming performance of its US business, where it is still a Reduce. relative minnow with 251,000 customers. It will need to better in this key market. 2. Xero (XRO) – reduce The company is particularly liquid following a I am a huge fan of accounting software provider Xero US$700m convertible note issue, which will (XRO). I nominated it as recently as 28 September in potentially be used to drive business abroad and 4 top tech stocks to buy in a dip (see further acquisitions/investments. But it is expensive. https://switzersuperreport.com.au/4-top-tech-stocks-t According to FN Arena, the consensus target price of o-buy-in-a-dip/). At the time, it was trading at $97.63. the major brokers is $104.16, 22.1% below Friday’s On Friday, it closed at $133.76, up 67% in 2020. close of $133.76. UBS is the most bearish of the brokers with a “sell” recommendation and a target of Xero (XRO) – last 12 months $77.00, Citi the most bullish with a “neutral” and a target of $125.00.

Reduce.

3. NEXTDC (NXT) – add

I also nominated data centre provider NEXTDC (NXT) in 4 top tech stocks to buy in a dip.

NXTDC is involved in the development and operation of independent tier III and tier IV data centres in . It focuses on providing scalable, Source: nabtrade on-demand services to support outsourced data centre infrastructure and cloud connectivity for The thing I like most about Xero is that its core enterprises of all sizes. product, accounting software, is incredibly sticky – typically accountants (and their clients) do not like It grew data centre services revenue by 18% in FY20 change and churn is relatively low. It is cloud based, to $200.8m, and over the last 6 years, revenue has which makes the business very scalable. grown at a CAGR (compound annual growth rate) of Remarkably, there are still huge opportunities for 28%. Underlying EBITDA grew by 23% in FY20 to cloud-based accounting software outside Australasia. $104.6m. The company is also very innovative, and in

Monday 30 November 2020 05 the current consensus target price is $14.00, approximately 24.1% above Friday’s close. UBS is the high with a target of $15.25, while Credit Suisse brings up the rear with a target price of $11.70.

Add.

4. .Com – add

Last Thursday, Tony Featherstone outlined a positive scenario for car sales (new and second hand) in https://switzersuperreport.com.au/gearing-up-with-2-a NEXTDC has been improving operating metrics uto-related-small-caps/ ”Record low interest rates (revenue per square metre and revenue per unit of driving a house price recovery and with that, higher power consumed). It is well capitalised for growth, spending on home related goods and cars “. with additional data centres in Sydney, Melbourne and Perth under development. For FY21, it has New car sales are still falling, but the rate of fall has guided to revenue of $242m to 250m (growth of 21% slowed and last month, sales were only down 1.5% to 25% on FY20), and underlying EBITDA of $125m on the same month in 2019. While tax incentives on to $130m (up 20% to 24% on FY20). instant asset write-off have helped, momentum is building as consumers feel flush with cash and When I nominated NEXTDC on 28 September, It was confidence is high. $12.46. It traded upwards reaching a high of $14.10 on 9 November, but by Friday, had fallen 20% to One company that is set to benefit from the tailwind of $11.28. higher spending by consumers is carsales.com (CAR). Carsales is one of the largest digital NEXTDC (NXT) – last 12 months automotive advertising businesses in the world. It has consolidated its leading position in Australia (its audience is more than double its nearest competitor), and international businesses (South Korea and Brazil) are growing. In FY 20, the latter contributed 24% of look through revenue and 19% of EBITDA. Data services is also an important contributor to revenue.

The company has a strong record of with revenue, EBITDA and NPAT growing consistently.

Source: Nabtrade

I can’t see any reason for the fall apart from the “rotation trade” and profit taking after a very strong share price performance in 2020. The CEO said that the company had “experienced a strong start towards meeting FY21 guidance” at its AGM on 13 November.

The major brokers are positive on the stock with 6 “buy” recommendations and 1 “neutral” recommendation (no “sells”). According to FN Arena,

Monday 30 November 2020 06 For shareholders, carsales has also been a strong The major brokers are positive on carsales but see it outperformer. as appropriately priced. There is 1 “buy” recommendation and 6 “neutral” recommendations (no “sell” recommendations). The consensus target price is $19.34, 4.8% lower than Friday’s close of $20.31. In a tight range, Credit Suisse is the low at $18.80, Ord Minnett is the high at $20.26.

On broker forecast, carsales is trading on a multiple of 34.7 times FY21 earnings and 30.2 times forecast FY22 earnings with an expected dividend yield of around 2.4%.

These numbers are not out of line for a company that has demonstrated consistent earnings growth rate of 10% pa and should be a beneficiary of favourable tailwinds.

After hitting a Covid-19 market meltdown low of Add. $9.64, carsales more than doubled to $22.99 on 23 October. It has since pulled back closing on Friday at Important: This content has been prepared without $20.31. taking account of the objectives, financial situation or needs of any particular individual. It does not Carsales.Com (CAR) – last 12 months constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

Source: nabtrade

Carsales has not provided specific guidance for FY21. However, CEO Cameron McIntyre said at the AGM that the company expected to benefit from the resilience of the used car market and that excluding metropolitan Melbourne, “overall lead volumes grew strongly on the corresponding quarter in FY20”. South Korea was also experiencing “good growth in revenue and EBITDA”. The company was ‘well-funded with low gearing, strong liquidity and cashflow that will continue to fund growth and dividends”.

Monday 30 November 2020 07 A2 Milk & 4 other infant formula stocks by James Dunn

Australia’s exporters are enduring a tough period, as nervous. the country receives the kind of trade/political retaliation threats from China that would not be out of Not only are the big Anzac companies major players place in a Sopranos episode. in this industry, they know that they are in China’s sights, because dairy giant China Mengniu has been The ugly news from the wine sector last week forced to abandon plans to buy the Japanese-owned showed how devastatingly capricious Beijing can be. Lion Dairy milk processing businesses in Victoria, The Australian wine industry gave China exactly what because Treasurer Josh Frydenberg won’t approve China wanted in terms of the pricing of wine, and now the deal (although Mengniu was allowed to take-over it is accused of “dumping.” sector luminary Bellamy’s Australia last December.)

Now , as the most prominent The infant formula exporters have all the approvals example, is facing a situation where its $4 billion from the General Administration of Customs of the business in China is rendered unprofitable at a People’s Republic of China (GACC) and the State stroke. TWE generates 45% of its $530 million-plus Administration for Market Regulation (SAMR). And earnings in the Asian region, with a big chunk of that they have established and lucrative markets, with (so coming from China. far) fiercely loyal customers. But given the way that China’s Commerce Ministry blindsided the wine The wine industry joins the farming, seafood and exporters – who can say their markets are safe? coalmining as being appalled at the trade spat with China – in which a Free Trade Agreement (FTA) and The industry has been challenged heavily in 2020 decades of rules-based access mean precisely with supply chain disruptions, in particular as COVID nothing within Zhongnanhai, the leafy leadership slashed the number of part-time-to-semi-corporate compound in Beijing. “daigou” operators mass-buying in Australia for export. Also, China is spending heavily to boost its If the Chinese leadership wants to send a message to domestic industry. Given the massive potential of the anyone, it does so quite nakedly. And it is telling us sector, it shouldn’t surprise anyone that the Chinese that it wants to hurt Australian exporters. government has set a target of achieving 60% of infant formula sales in China coming from domestic Australia now taking China to the World Trade manufacturers. Is it conceivable that trade actions Organisation (WTO) over grain and wine exports, and could be used in this aim? Of course it is. there will be other cases, but despite China being a full member of the WTO and “bound” by its rules, Here’s a look at the infant formula players. The does anyone think that Australia’s case will be caveat here is that analysts have not yet factored-in vindicated and our exporters will be compensated for to their forecasts and valuations any increased their losses? likelihood of trade action.

While TWE faces the wrath of investors, shareholders 1. A2 Milk Company (A2M, $13.73) in the big dairy exporters – particularly those in the Market capitalisation: $10.2 billion lucrative infant formula market – would also be feeling Three-year total return: +21.8% a year

Monday 30 November 2020 08 Analysts’ consensus valuation: $16.37 (Thomson 2. Bubs Australia (BUB, 69.7 cents) Reuters), $15.658 (FN Arena) Market capitalisation: $432 million Three-year total return: –2.3% a year A2 Milk relies heavily on doing business in China, Analysts’ consensus valuation: 65.1 cents with China-based retail sales channels accounting for (Thomson Reuters), 61 cents (FN Arena) 48% of its total infant nutrition sales, which reached $NZ1.42 billion ($1.3 billion), up nearly 34 per cent, in China is a healthy market for Australian infant formula FY20. The company has achieved in the milk world producer Bubs, which generates 27% — $2.6 million — almost the same kind of brand association that the of its revenue from China export sales. Bubs’ likes of Uber and have attained: a2 milk is a differentiation is that its products are based on goats’ variety of cows’ milk that mostly lacks a form of milk. Despite channel disruption arising from beta- proteins called a1, and instead has COVID-19, Bubs saw a 29% increase in Australian mostly the a2 form. A2 Milk Company has developed infant formula sales in the September quarter, and the genetic test that determines whether a cow also saw a 76 per cent increase in goat formula direct produces a2 or a1 type protein in its milk: other dairy export sales to China over the 12 months. companies can certainly produce a2 milk, but the onus is on them to differentiate their products from It has signed a deal with joint venture partner the trademarks of the A2 Milk Company Limited. Beingmate to start producing Bubs China label Goat Infant Formula in China. Through this joint venture, A2 Milk’s Chinese-language infant nutrition label Bubs also secured a distribution agreement with range is its super-premium product – in FY20, the Kidswant, China’s largest mother and baby store sales of this range more than doubled, to NZ$337.7 chain. million ($315.9 million) and distribution expanded to about 19,100 stores. English-label sales surged 40% However, Bubs’ quarterly revenue was down 34% (the English-label is premium priced within the from $14.2 million in Q1 FY20 to $9.4 million in Q1 reseller and online channels, but is positioned as a FY21. more accessible range.) Bubs isn’t a profit-maker at the moment, and A2M has been very successful in building a customer analysts see it as trading above fair value. base in China that firmly believes in the premium nature of the product – think “tiger mums,” who want 3. Clover Corporation (CLV, $1.85) what they feel is the absolute best for their children – Market capitalisation: $308 million and that has been a case study of successful Three-year total return: +41.4% a year brand-building in China. The company is very Analysts’ consensus valuation: $2.29 (Thomson confident that this supports its business in China. But Reuters), $2.285 (FN Arena) would this survive arbitrary tariffs and suddenly altered rules imposed all the way from a big desk in While Victoria-based food technology company Zhongnanhai? Clover Corporation does not make infant formula itself, demand for its omega-3 additives is being A2 Milk will say “we are a company: we driven by infant formula demand in China. The just happen to be dual-listed on the ASX.” A big company supplies micro-encapsulation technology chunk of its milk is Australian, although all of its infant enabling tuna, fish, fungal and algal oils to be added formula comes from Kiwi supplier Synlait. Would to infant formula, foods and beverages. Revenue rose China, in its anger, make the distinction? by 15.1% in FY20, to $88.3 million, and net profit climbed 23.8%, to $12.5 million, largely due to this Analysts still see good value in A2M – although it’s demand. not a dividend payer – but investors have to consider at least the possibility that China could lob a trade While improving the nutritional quality of infant grenade into the dairy industry. formula has acted as a tailwind for the stock, the company is exposed to any downturn that Chinese

Monday 30 November 2020 09 restrictions would represent – it already gave Three-year total return: –9% a year investors a nasty shock in October, when the shares Analysts’ consensus valuation: $6.56 (Thomson fell 20% on the back of a trading update that talked Reuters), $5.87 (FN Arena) about lower-than-forecast orders from infant formula manufacturers in the first quarter of FY21, on the New Zealand company Synlait is a major supplier of back of COVID-19. Because of this continuing infant formula to its part-owner A2 Milk Company, and uncertainty, Clover now expects revenue for the first also supplies infant formula to its largest shareholder, half of FY221 to be down 15%–25% on the first half China Bright Dairy. A2 Milk is Synlait’s biggest of FY20. customer, and Synlait is a2 Milk’s sole supplier of infant formula. The duo wants to become less reliant However, infant formula is not all of Clover’s on one another, with Synlait diversifying and a2 Milk business – it has been increasing its exposure to moving into making formula on its own account. But other food-and-beverage uses, in Europe and the US for the moment, any slump in demand for A2 infant as well as Asia. Any Chinese trade action on infant formula from China hurts Synlait. formula would hurt Clover – but in the absence of that hypothetical, analysts like the way that Clover’s The fact that Synlait is much more prominently a New business is trending. Zealand company than A2M could help it avoid any backlash. At present analysts make a strong “buy” 4. Nuchev (NUC, $1.25) case for Synlait – although it does not pay a dividend, Market capitalisation: $56 million preferring to reinvest in its diversification strategy. Three-year total return: n/a Analysts’ consensus valuation: $2.10 (Thomson Important: This content has been prepared without Reuters), taking account of the objectives, financial situation or needs of any particular individual. It does not Goats’ milk products company Nuchev listed on the constitute formal advice. Consider the ASX in December 2019 at $2.60, and quickly surged appropriateness of the information in regard to your as high as $3.77 – but the share price has retreated circumstances. to $1.25. The most recent issue has been weak revenue, which more than halved in the September quarter. While sales through the “daigou” channel were disrupted by COVID issues, the company also blamed a transition to a new distributor.

Nuchev sells its products, including infant formula, in Australia, China and Hong Kong, mainly through its Oli6 brand. Similarly to Bub’s, Nuchev is trying to capitalise on the fact that goat’s milk contains more vitamins than cows’ milk, including 46% more vitamin C: there are medical studies that claim that it is easier for babies to digest.

Nuchev has nominated Singapore, Vietnam, Taiwan and South Korea as markets into which it can expand in the near-term – but the company is currently a loss-maker, and it couldn’t be expected that it would react blithely to any market access restrictions suddenly applied by China.

5. Synlait Milk (SM1, $5.24) Market capitalisation: $933 million

Monday 30 November 2020 10 Buy, Hold, Sell, What the Brokers Say by Rudi Filapek-Vandyck

In the good books which should have an impact on demand and supply. Galaxy Resources is upgraded to Hold from Sell and APA GROUP (APA) was upgraded to Add from the target raised to $1.80 from $0.90. Hold by Morgans OROCOBRE (ORE) was upgraded to Hold from APA Group has announced it will build a new 580km Sell by Ord Minnett gas pipeline, connecting the Perth Basin into the company’s existing pipeline network servicing the While some in the lithium sector have run up strongly Goldfields (WA). The group will spend up to $460m since the start of October, ahead of any move in the capex on the new pipeline, aiming for first operations underlying commodity, and value is elusive Ord around mid-2022. The group expects a “strong Minnett upgrades Orocobre to Hold from Sell. Target portfolio of long term contracts in place by the time is raised to $3.40 from $1.95. construction is complete”. This project is the first time Morgans is aware the company is proceeding with In the not-so-good books construction prior to revenue contracts being secured. The project contributes to a mild upgrade in VIRGIN MONEY UK (VUK) was downgraded to forecast earnings as the broker had already assumed Neutral from Outperform by Macquarie incremental earnings from an unidentified investment. The rating is increased to The appeal of investment in Virgin Money UK has Add from Hold, given the around 10% total diminished with recent re-rating, Macquarie suggests. shareholder returns over the next 12 months. The The broker believes that from here, performance will target price is increased to $11.07 from $10.88. likely be driven more by UK bank sector trends rather than Virgin-specific factors. While there is scope for a substantial longer term re-rating, the execution of portfolio optimisation and ability to deliver on synergies remain key, the broker warns, and visibility on execution is limited. Downgrade to Neutral from Outperform. Target rises to $2.70 from $2.10 due to improved capital and provision coverage. GALAXY RESOURCES (GXY) was upgraded to Hold from Sell by Ord Minnett

Ord Minnett observes lithium prices have bottomed and parts of the supply chain are tighter – such as high-quality battery grade lithium hydroxide versus low-grade spodumene – although significantly higher prices are required to incentivise new projects to meet even conservative scenarios for demand. Now The above was compiled from reports on FNArena. that the sector is attracting attention and capital, the The FNArena database tabulates the views of seven broker expects a constant evolution of the technology

Monday 30 November 2020 11 major Australian and international stockbrokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

Monday 30 November 2020 12 My “HOT” stocks by Maureen Jordan

“I just got off a call with Treasury Wines Estates take on James’ question. (TWE),” Jun Bei explained, when asked to comment on TWE, given China’s latest trade blow of a 212% “A2 is a different story,” she said. “It has been tariff on this Aussie wine company. “I thought this impacted by pantry destocking after reopening. way we are more informed,’ she added. “Earnings will be impacted for 6 to 8 months but the This cost imposition has smashed TWE’s expected long-term thesis won’t be affected. profit by 30% and its share price has fallen by a similar amount. But Jun Bei is still a believer. “In addition, A2 is considered a NZ label and therefore not directly impacted by the “Our investment case for TWE anchors around the Australian/China tension,” she said. tremendous value emerging in this name,” she said

“At its current price, investors are largely paying for the finished premium label sitting in TWE’s cellar and farm land, but this current political issue will ease eventually and a luxury brand like Penfolds won’t stay this cheap for long,” she maintained.

Source: Google

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your Source: Google circumstances.

In his article today, James Dunn focused on A2 Milk and other infant formula stocks.

“A2M has been very successful in building a customer base in China that firmly believes in the premium nature of the product and that has been a case study of successful brand-building in China. The company is very confident that this supports its business in China. But would this survive arbitrary tariffs and suddenly altered rules?” James asked.

Jun Bei, who is also a big supporter of A2M, gives her

Monday 30 November 2020 13

Powered by TCPDF (www.tcpdf.org)