sector selections 15 Dec

1. 15 Dec 2009 The Screen Watcher (d) +613 9640 3804 (m) 0406 425 550
(f) +613 9640 3800
“Time is a great teacher, but unfortunately it kills all of its pupils" - Louis Hector Berlioz
ASX 200 - Current Top Picks
Sector Call 1 2 Comment
Transport TOL is not cheap but buy on biggish dips. AIO may outperform it in the short term and
M/W TOL AIO
BXB has some rebound value (but experience warns not to fall in love with the stock)
Media See little value in WAN, FXJ is marginally better. NWS is not my thing. CMJ at best
U/W SEK REA
fair value. Prefer new age media such as Seek and Realestate.com.
Banks ANZ L/T the MTB’s are fine. Short term they are marginally out of favour. AGMs in the next
M/W WBC
NAB day or 2 will drive. Buy for a 3 year view or wait for 10% cheaper for a 12 month one.
Insurers SUN QBE still the standout here but strong $A and rising yields are capping. SUN a
U/W QBE
IAG possibility if they sell their banking arm for a reasonable price. IAG targeted by QBE?
LPTs DXS Two years on and the value destruction should almost be at end. Investors are tired and
U/W LLC
CFX there should be deep pockets of value. But I am extremely wary.
Materials RIO I vacillate between market/overweight here. BHP or RIO are fine, the latter is cheaper
M/W BHP
FMG (some would argue for very good reasons) buy on dips. FMG the dark horse.
Energy market remains range bound. The sheer cost of LNG plants has put the market
ORG AOE
Energy M/W into a defensive mode. LT term bullish, short term neutral. Get AOE at $3.75. WPL will
OSH PDN
be raising regularly. STO & PDN belted and may offer better value. I like OSH.
Metals & PNA AWC Volatility will burn traders but pick best of breed on big dips. Iron Ore I like AGO and
O/W
Mining OZL OZL MGX. AQP for the aggressive. Believe in China? – then PNA and OZL via Copper.
Utilities No fireworks here. AGL is the safest call. Will get left behind in pursuit of growth.
U/W AGK
Telcos Telstra gradually manoeuvring themselves into a reasonable position on NBN. Nothing
M/W TLS
else.
Beverages Coca Cola is the preferred defensive play for those that want to be there. Fosters is for
U/W FGL CCA
& Food those that see Corporate activity eventuating. (Brokers dream on??)
Coal WHC Centennial, Whitehaven then MCC are the order of my picks here. CEY is better value
O/W CEY
MCC on valuation but WHC are sharp operators so don’t sell quickly.
Chemicals I like this sector for the longer term though the headwinds in the short term have been
O/W ORI IPL
strong. IPL rebounding and we await Sinochem on NUF (if you have them, then hold)
Television Should do better with stronger advertising $’s in 2010. Not a transparent sector for the
U/W AUN
end investor.
Gaming I confess to little real feel here, but Crown seems to be the standout for those that want a
U/W CWN
“punt”. TAH preferable over TTS (but no need to be here).
Infrastructure Recapitalisations have been the theme here as de-gearing takes place. Little to get
U/W SKI DUE
excited about. Yield chasers only.
Steel SGM Brokers seem to be more bullish on this sector than the investors. Time will tell who
M/W BSL
OST wins.
Contractors UGL Again, stay with the bigger names but buy Leightons on (Dubaiesque) big dips. L/T
U/W WOR
DOW Worley then look to United then Downer.
Building Rebounded hard but it may be a case of “premature reinflation”. Easy value has been
M/W CSR
Mats. picked up. Real GDP has to now drive future earnings. Almost an U/W call.
Retailing Woolworths is a stalwart buy but not cheap enough, Wesfarmers too much a
M/W WOW PMV
conglomerate for a clean call. JBF, DJS expensive. MYE too early to call. MTS???
Other The start of corporate action here (AXA & possibly AMP) shows that strategic buyers
O/W AMP AXA
Financials will want to leverage whilst the cycle is cheap. ASX expensive.
Gold Short term this is a traders market – Buyers will select tier 1. NCM & LGL Tier 2.
M/W NCM LGL
OGC, DOM, SBM, KCN Tier 3. PRU, RSG, TRY and then the “rock kickers”.
Healthcare CSL SHL CSL struggles against the high $A (as does RMD, COH). Overall a defensive sector,
U/W
RMD PRY prefer growth
O/W Overweight M/W Marketweight U/W Underweight
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