WAM Analyst Forum: buy, hold, sell

James Marlay: Hello and welcome to the latest instalment of WAM Vault. Today we have something new, a new feature section where we are going to be going through some buy, hold and sell ideas with the analysts that power the Wilson Asset Management portfolios. Everything from micros to small, large and global stocks. Joining me, I have Sam Koch, Shaun Weick, Anna Milne and Will Liu. Good afternoon everyone. Shaun, you are first cab off the rank today and why don’t you start with a hot sector, Buy Now Pay Later, Zip (ASX: Z1P). Buy, hold or a sell?

Shaun Weick: Zip is a sell for us, James. The key issue there is around competition rising globally, and we have real question marks around the sustainability of long-term margins.

James Marlay: Anna, QBE Insurance (ASX: QBE), is it a buy, hold or a sell?

Anna Milne: That is a buy from us. We are very big on the financials overall. We think banks are in the first leg of the trade and the insurers are next. It is our top pick in the sector due to its exposure to bond yields and a rising rate environment.

James Marlay: And we have a bull. Will, let’s go travelling again, it has been a while. Booking Holdings (NASDAQ: BKNG), buy, hold or sell?

William Liu: Booking is a buy from us. We believe it is a great way to play the pent up demand in global leisure travel. The company is the right size for its cost base. It has a huge opportunity in terms of market share and we think it is well-positioned to play the travel recovery, so it is a buy from us.

James Marlay: Sam, it is your turn in the hot seat. The death of the office was all the talk in 2020. Servcorp (ASX: SRV), is it a buy, hold or a sell?

Sam Koch: Servcorp for us is a hold. We really appreciate the fact that management did not waste the crisis. They took the opportunity to cut costs and actually reduced their floor space really well. And at the moment although valuation is super compelling, we see that we are expecting a trough in conditions before we want to label them as a buy. It is a hold.

James Marlay: We will stay with you. Synlait Milk (ASX: SM1), these agricultural stocks have been all the rage, is it a buy, hold or a sell?

Sam Koch: Synlait is a sell for us. We are really worried about the balance sheet at the moment. It has $500 million of net debt. It is forecasting a loss of $20 to $30 million after-tax this year. And we really see a risk with the company looking to expand its capacity at a time where volumes are coming down for one of its key customers.

James Marlay: Okay. Anna, stock that must be in just about everyone’s portfolio, CSL (ASX: CSL), buy, hold or a sell?

Anna Milne: CSL is a hold for us. It has underperformed the market significantly in the last year. However, collections are turning. People are getting back out there. US vaccinations are full steam ahead. So short-term it is probably more of a buy. Over a medium-term, we do think it is a sell. We think there is risk going into the August results.

James Marlay: Shaun, domestic travel, we are all doing it. SeaLink (ASX: SLK), trip on the harbour, buy, hold or a sell?

Shaun Weick: We are bullish SeaLink. It is a buy. We think the pent up demand in the tourism industry is significant. Obviously, the transit systems, bus business, has proved to be a great acquisition. And we think the catalyst from here is really concentrated around additional contract wins. So that one is a buy for us.

James Marlay: A buy there. Well let’s go global again. CVS Group (LON: CVSG), give people a bit of an insight into what it does, and is it a buy, hold or a sell?

William Liu: Sure. CVS Group is a sell from us. We have talked about it in the past. It is a UK pet veterinary services provider. We think it is a sell because some of the key catalysts have played out. There has been a margin upside due to cost pressures abating and furthermore, they have done some acquisitions and deleted some really good earnings growth. Valuation is limited now so we see it as a sell.

James Marlay: Okay. Sam, I am going to go with you. Local operator, Moelis (ASX: MAF), buy, hold or sell?

Sam Koch: The next Macquarie Bank. Moelis is a strong buy from us. We see that they can grow earnings three ways, funds management, their corporate advisory business and also the new lending business. That is key and the market is not really appreciating the earnings growth in that new lending side of things. They have upgraded guidance already this year and we see further tailwinds for that business. Strong buy.

James Marlay: Okay. Anna, we are back on you. JB Hi-Fi (ASX: JBH), it is actually had a really great 12 months or so. Have we got enough TVs in our houses? Buy, hold or sell?

Anna Milne: In our perspective, it is a sell at the moment. Fantastic business. Sales per square metre unparalleled, however cycling just monster comps. Offshore comps have not been very forgiving in terms of cycling these prime period sales so we think at the moment it is a sell.

James Marlay: Okay the other thing that has been booming has been mortgages. Genworth (ASX: GMA), buy, hold or a sell?

Shaun Weick: Yes so Genworth is the largest provider of lenders mortgage insurance in the Australian market. We think it is a buy. It is experiencing very strong tailwinds as a result of the growth in the housing market, provides strong leverage to a rebound in interest rates for earnings. Similar to the domestic banks, we think you are going to see significant capital reserve releases post the wall or the flood of capital they have built up last year.

James Marlay: That is a buy. All right, last one. Will, for you. PPG Industries (NYSE: PPG), again give people an insight into what it does, and is it a buy, hold or a sell?

William Liu: PPG is a hold. They are the largest coatings producer in the world listed in the US. So we think it is a hold. We think the business is in a really sweet spot right now. They have pricing increases. They have volumes rebounding as global industrial production picks up. However, we think valuation is fairly priced right now. They have beat and raised up their latest quarterly results. So we are a hold for PPG Industries.

James Marlay: That is a hold. All right folks this is the segment where we put your ideas from the Wilson Asset Management survey to the analysts. So I am going to run through the stocks, again small caps, large caps and globals. And I’ll get each of the analysts just to introduce the stock and give you their view whether it is a buy, hold or a sell? Let’s test your ideas. Let’s go with you Shaun. Beston Global Foods (ASX: BFG), a buy, hold or a sell?

Shaun Weick: Beston Foods is a buy. A bit of a controversial one but this is a multi-year turnaround strategy which is coming to fruition now. We think the business is really well-positioned to benefit from the Lacto brand strategy which we think medium-term can drive significant earnings upside so it is a buy.

James Marlay: Wisr (ASX: WZR), Sam, buy, hold or a sell?

Sam Koch: Wisr (ASX: WZR) is a hold for us. There is significant momentum in the personal lending space at the moment but we believe that the space is quite competitive and also the valuation is getting up there. It is a hold for us.

James Marlay: Will, we are going to go global. Apple (NASDAQ: AAPL), we all have one in our pocket, buy, hold or a sell?

William Liu: Apple is a fantastic business but it is a hold for us. We just do not think the valuation justifies the growth potential over the next couple of years and we think there are better ideas elsewhere globally. So Apple is a hold.

James Marlay: All right. Let’s stay on global tech titans. Alibaba (NYSE: BABA), buy, hold or a sell?

William Liu: We are bullish on Alibaba. So Alibaba is a buy. We think that this year the share price has been a little bit weak because there is a bit of uncertainty around the investment cycle. We think longer term that they are going to reap the benefits of the investment they are making this year. We think they have huge, under monetised assets and that it is an attractive long-term opportunity, so buy on Alibaba.

James Marlay: Great. Anna, I am looking forward to your answer to this one because it has been a pain point in my personal super, and it is obviously tip of the tongue for a lot of your investors. A2 Milk (ASX: A2M), buy, hold or a sell?

Anna Milne: A2 Milk has been through a bit of pain recently to say the least. Everything has a price and so for us now it has become a hold.

James Marlay: Oh a hold! Can’t even give me a buy.

Shaun Weick: Controversial hold.

James Marlay: Building and construction have been going gangbusters in Australia. Boral (ASX: BLD), buy, hold or a sell?

Anna Milne: Boral is a buy. We think management is highly incentivised to pull off the transformation program that is ongoing. There is a buy back in place and a lot of catalysts on the horizon in terms of divestments.

James Marlay: Shaun let’s go to Tyro (ASX: TYR). It had a bit of a bumpy start to the year. Is it a buy, hold or a sell?

Shaun Weick: Tyro is a hold for us. We just have some question marks still remaining around the issues that they have had with their terminals previously. So at the moment, we have that one as a hold.

James Marlay: All right. Sam, a stock I have not heard of so I want an intro, and your view on buy, hold or sell on Dusk (ASX: DSK)?

Sam Koch: Dusk is a strong buy for us. Dusk sells candles and diffusers and if you go down to your local shopping centre, you will be able to pick one up for your grandmother or for your mother. We really like it because we see multi-years of earnings growth ahead of it.

Shaun Weick: They are a hit too with grandmas. Massive hit.

James Marlay: Note to all of you people out there. Will, let’s talk about gaming because it is a booming industry and I think a lot of people have got a lot of interest in where that is headed. EA Games (NASDAQ: EA), buy, hold or sell?

William Liu: EA Games is a buy. We are extremely bullish particularly on the longer-term structural opportunity as gaming becomes increasingly penetrated in the population. They have the best intellectual property and have the most creative content, the best studios to produce the highest calibre games. So we are bullish on EA Games. It is a buy from us.

James Marlay: Okay. Anna, it is still gaming, it is gambling. Aristocrat (ASX: ALL), buy, hold or sell?

Anna Milne: Aristocrat is a buy for us. It has recently printed some great numbers. We think there are more to come. It is highly leveraged to the US re-opening trade and there is upside from the iGaming opportunity.

James Marlay: Shaun, one of the absolute poster children of 2020 was Temple & Webster (ASX: TPW) as we stuffed couches into every crevice of our houses. Buy, hold or sell on Temple & Webster?

Shaun Weick: We are a hold there James. I think you have highlighted the key reason. We just think it is getting more and more challenging to cycle the comps given the tailwinds they have had. Management have highlighted that they are willing to reinvest significantly in the business which is delaying the operating leverage. So medium-term we like it. But in the short-term we think it is a hold.

James Marlay: Sam, Mach7 (ASX: M7T), I am assuming this is not a fancy new razor blade, buy, hold or sell, and tell us what it does?

Sam Koch: Mach7 is a hold for us. It is trading at a significant discount to some of its listed peers. But what they do is they sell enterprise software technology into the hospital space and into the medical space. And for us, they have been through a booming period of sales but at the same time, that should come to an end soon. It is a hold for us.

James Marlay: Final stock for today Shaun. Kogan (ASX: KGN), it has been that retailer that keeps innovating itself and diversifying. A buy, hold or a sell?

Shaun Weick: Kogan is a sell for us, James. The key issue we have is inventory in the short-term which was highlighted in their recent update. There is a lack of visibility around when those issues will be resolved and I think coming out of coronavirus we have question marks around lifts in competitive intensity across the industry and what that will mean for margins. So that one is a sell.

James Marlay: Well to the four of you, I think you have done a great job. To all the viewers out there, the shareholders at Wilson Asset Management, I hope you enjoyed this new instalment of WAM Vault.

More from WAM Vault