TOL - 9th Jun, 2023
Buy Hold Sell: 5 stocks for your radar right now
In this episode, PM Capital's Paul Moore and Antipodes' Jacob Mitchell analyse five stocks making waves on the global stage this year.
With AI-related stocks soaring and central bank hikes continuing to take their toll on anything else in sight, it's easy to forget there are other companies making waves on the global stage.
Take Teck Resources (NYSE: TECK), for instance, a coal, copper and zinc miner out of Canada which recently received a takeover offer from Swiss multinational giant Glencore (LON: GLEN). Or Sands China (HKG: 1928), a casino operator expected to experience a major upswing as card players return to the table. Even Heineken (AMS: HEIO), which now counts Microsoft (NASDAQ: MSFT) co-founder Bill Gates as a shareholder after pouring $1.32 billion into the company, boasts a return on equity of 14%.
So in this episode, Livewire's Ally Selby was joined by Antipodes' Jacob Mitchell and PM Capital's Paul Moore for their analysis of these three stocks.
Plus, our guests also name a top holding they believe investors should have on their radars over the year ahead.
Note: This episode was recorded on Wednesday 31 May 2023. You can watch the video, listen to the podcast, or read an edited transcript below.
Edited Transcript
Ally Selby: Hey, how are you doing? And welcome to Livewire's Buy Hold Sell. I'm Ally Selby, and today we are going to be taking a look at five stocks that are making waves on the global stage in 2023. To do that, I'm joined by Paul Moore from PM Capital and Jacob Mitchell from Antipodes. Thank you so much for joining me today, gents.
First up today we have Teck Resources. This is a diversified natural resources company out of Vancouver, Canada. They have coal, copper, and zinc projects. I am going to start with you today, Paul. Is it a buy, hold or sell?
Teck Resources (NYSE: TECK)
Paul Moore (HOLD): It's a hold. It's done very well in the short term. It's under a takeover offer, so it's obviously reacted to that, but we're expecting a higher bid to come through very shortly. And it's got a great emerging copper business. And if you believe in renewables, that's one of the ways to play it. You've got a coal business that's depressing the valuation of this gem copper business, that's what's providing the opportunity - that's what Glencore (LON: GLEN) has reacted to in terms of making a takeover offer. The only issue we've got is we've got a throwback to the 80s where the management appeared to be looking after themselves, and is more worried about their careers than engaging with Glencore. And the board are doing a pretty good job of protecting them. So anything could happen over the next couple of weeks and months. But it's going to be in the news and we certainly would continue to hold it.
Ally Selby: Okay, its share price is up 4% year to date. Jacob, over to you. Is it a buy, hold or sell?
Jacob Mitchell (HOLD): I'd agree and say it's a hold. We hold it. It's an interesting collection of assets, but today, most of the cash flow comes out of metallurgical coal and the demand and price for that is very sensitive to Chinese activity. And China is slowing. It is similar to copper. 50% of copper demand is from China. The Chinese property market continues to slow, activity has to normalise. So we're a bit more cautious around base metal exposures generally, but we are holding here because of the valuation, as Paul pointed out. And there's a corporate angle here and Glencore, I think, are pretty desperate to get their hands on it and that drives synergies with their own coal assets.
Heineken (AMS: HEIO)
Ally Selby: Okay, next up today we have a name that I assume everyone knows, it's Heineken. I was today years old when I learnt Heineken has a market cap of €57 billion. For some reason, I thought it would be far, far bigger than that. Jacob, staying with you. Is it a buy, hold or sell?
Jacob Mitchell (BUY): It's a buy. We own it. It's great. It's one of those beer brands that are genuinely global and there are not many. So it makes it quite unique just in terms of how it's positioned around the world. It has a business in Europe and then some very interesting emerging market assets. It's consumer staples when you've had cost pressures. This company's starting to exercise pricing power at the same time that those cost pressures are coming out of the P&L. So we think earnings growth will accelerate and the multiple is pretty attractive for a classic recessionary-proof type business.
Ally Selby: I'm sure people will still be drinking their beer. Its share price is up 10% year to date. Over to you Paul. Is it a buy, hold or sell?
Paul Moore (BUY): It's a buy. Heineken has two classes of stock and the voting stock actually sells at a two or three multiple discount to the non-voting stock, which is quite interesting in itself. It's usually the other way around. It sells on about 14 to 15 times earnings, which we think is a very good valuation for probably a top 10 brand in the world, which still has a long pathway ahead of itself in terms of building out that main Heineken brand. So definitely a buy.
Sands China (HKG: 1928)
Ally Selby: Okay, next up today we have Sands China. It's a casino operator and developer out of Macau. Paul staying with you, is it a buy, hold or sell?
Paul Moore (BUY): Definite buy. In terms of upside potential, it's probably at the top of my list. Now obviously, that comes with certain issues. Those being, the Chinese recovery post-COVID, and China-US tensions. But my expectation is that the Chinese love to gamble. They've been prevented from doing that for quite some time. And just like we saw in Vegas when they're allowed back at the tables, it just went boom. So we're expecting the same in Macau. They're still selling on a reasonable valuation. So definite buy,
Ally Selby: Its share price has fallen 6% year to date. Jacob, over to you. Is it a buy, hold or sell?
Jacob Mitchell (BUY): I agree with Paul, it's a buy. It's a pretty simple story about the catch-up gambling that's going to take place. There are a couple of positive structural things that are taking place in Macau. There is this trend of the mass market becoming the dominant driver of these businesses, versus the high rollers. And that's much more of an annuity-style business and is more profitable to the casinos. And then secondly, you've just been able to roll the concessions. So we don't own Sands, but we own Galaxy (HKG: 0027). We think Galaxy has the better hotel proposition, but also the concessions have been rolled another 10 years. So you've got a lot of regulatory certainty. So definitely a buy.
Ally Selby: Okay, we asked our guests to bring along one stock they think should be on your radar for the year ahead. Jacob, what have you brought for us?
Siemens (ETR: SIE)
Jacob Mitchell (BUY): Siemens. Siemens is just an automation powerhouse, but it trades on about 15 times. And for a company of that quality, it's got a lot of software and hardware integration, and a lot of the investment that we see coming is about re-engineering supply chains and that really plays to what Siemens does. And so I think whilst it's historically been cyclical, I think it's becoming much more structural in the way it grows. And 15 times is a pretty attractive multiple.
Ally Selby: Okay. Over to you Paul, your time in the hot seat. What's your stock that you think should be on investors' radars over the year ahead?
Apollo Global Management (NYSE: APO)
Paul Moore (BUY): The one that I think most about and debate in my head about how good the risk award proposition is Apollo Global Management. Great management - really sharp management which started in private equity. We were a little bit nervous about the private equity business, but it's become a small part of their overall business. They made a great acquisition, we believe, 12 months ago, where they bought an annuity business in the US. And that's a beneficiary of higher short-term interest rates. Now the market has got fear in the stock because they're worried about a credit cycle emerging with a recession. And with these annuities, you get deposits from your clients, but you invest them in private investment grade credits. So I think if we could get the recession out of the way, people would really see what a great stock it is. But there's no doubt there are things to think about. But again, it's selling on around eight or nine times earnings and growing at 20%. And as I said, I think they are some of the sharpest management on Wall Street. So I would put that at the top of the agenda to have a view on.
Ally Selby: Well I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like. Remember to subscribe to our YouTube channel. We're adding so much great content every single week.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
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Livewire Markets
Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.
Expertise
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