Buy Hold Sell: Australia’s most shorted stocks

Matthew:   Welcome to Buy, Hold, Sell. My name's Matthew Kidman and today we have Jeremy Bendeich from Avoca and Shane Fitzgerald from Monash Investors. Welcome gentlemen. We're talking about the stocks that are hated, nothing better. Start with you, Shane. Myer. Retailer. Old world business. Buy, hold, or sell? 

Shane:   It's a sell. If you look over the last twenty years, Myer hasn't grown its revenue line at all in that period. It hasn't benefited from population growth, hasn't benefited from GDP growth, hasn't benefited from inflation. It's in a tough market. Competition coming from everywhere. It's a sell. 

Matthew:   Jeremy, you dare to be different? 

Jeremy:   No, it's a sell. No roll out. Amazon's coming, and the property market's peaking. These type of retailers are in a dangerous part of the cycle. 

Matthew:   Okay. Let's go to engineering, oil and gas, Worley Parsons. Buy, hold, or sell? 

Jeremy:   It's a hold, but it's completely correlated to the oil price. You want a  leveraged oil  play? Buy an option over the oil price. 

Matthew:   Do you like the leverage oil play, Worley Parsons? 

Shane:  Not really ... I'll put it at hold though. I think there's been CapEx hold on oil and gas for some time after the mining boom and the oil price dropping. I think we're through the worst of that now, but Worley's a very opaque company. You want to see some tangible evidence of things improving before you want to get into it.  

Matthew:   Okay. From oil and gas to infant formula, Bellamy's. Boom stock. Buy, hold, or sell? 

Shane:   We're a  buy on that one. We think Bellamy's has built quite a good brand in China for its product. We can see quite strong earnings growth coming forward and the valuation multiples given that growth profile has, looks pretty reasonable. So, a buy for us. 

Matthew:   They're growing big kids in China, and they're doing it with infant formula. Buy, hold, or sell? 

Jeremy:   Sell because I'm not sure of the business model of importing milk from Switzerland or Austria, shipping it all the way to Australia, processing it, saying it's made in Tasmania and then selling it to China. Why doesn't someone in Austria cut out the middle man? Sell. 

Matthew:   Okay. Software global business, Aconex. Buy, hold, or sell? 

Jeremy:    Going to struggle potentially in the short term because sales estimates are a little high by the market, and they've been softening. Long term, it's a big buy. It's got a very large addressable market, but it's got some short term headwinds. Can't afford that on the really high PE that it trades on. 

Matthew:   Yep. Seems like a quality business. Expensive. Buy, hold, or sell? 

Shane:   It's a hold for us. We want to see how the European acquisition beds down and how the cash flow from that business actually transpires as they change the revenue model. Great business. Saas model. Love that type of business model, but for now, with the valuation, it's a hold. 

Matthew:   Let's get to the really heated end of the market, Metcash. Buy, hold, or sell?

Shane:   That's a sell for us as well. You're looking for retail exposure; there's better retail exposure than this. It's probably benefited for the last little while from the problems Woolworths has had. Woolies seems to have righted the ship now. We expect market share losses to continue, to reassert themselves in the grocery market business, which is a mixed business. 

Matthew:   Can you make any money out of Metcash being long Jeremy? 

Jeremy:   I'm with Shane on this one. You've not only got Aldi increasing its store footprint, but you've got Amazon announcing that it is coming ... not only in normal goods but in groceries. They're setting up a special type of business here. You don't want to go against Amazon. 

Matthew:   You might hate them, but there might be some money there to be made.