When it's all a little iffy. Via Getty
Experts
MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Anthony Golowenko, Portfolio Manager at MLC Asset Management
With seemingly little respite in mortgage rates, cost-of-living and other pressures, Anthony Golowenko says MLC Asset Management is starting to see the cracks emerge in household balance sheets.
“Coupled with elevated starting valuations on earnings seemingly yet to be delivered (in the same way that a roller-coaster, particularly the dips, twists and turns is exciting) we expect there’s going to be some twists n’ turns and likely big dips should these underlying earnings fail to materialise.
“Notwithstanding the recent tax cuts on July 1, we see a range of companies starting to press up against what they can reasonably put through as price rises to consumers.”
For the first time in seemingly a long time, we’re alert to private sector organisational restructuring, realignment and ultimately staff cuts this coming reporting season. We see this as having both a direct (impacted employee) and indirect (impacted friend, family or colleague) effect and this places a little more weight on domestic weakness, and economic slowdown scenarios.”
”The energy transition, in our view, is starting to ‘drop off the pace’ in terms of generation capacity, and network/transmission infrastructure. With this in mind, we’ll be looking for signs of potential deferral in legacy generation asset retirement dates and along with refining, see scope for meaningful near-term cash flow generation.
“In balancing out some more positive economic scenarios, expanding return-to-the-office work practices and narrowing of bid-ask spread for commercial property transactions could see some more support across still out-of-favour A-REITs.
“We also see both general and health insurers continuing to execute with some favourable industry tailwinds.
“In a nutshell, a key attribute we’re looking and positioning for is resilience. Quality businesses, focused management teams, delivering solid earnings, and maintaining, ideally expanding margins.
Three sectors Golowenko says are showing appeal:
Insurers – We see both general and health insurers continuing to deliver resilient earnings. Premium increases, improved investment earnings from still elevated yields, and within the health insurance space cost-of-living pressures favourably impacting the rate of extras claims.
Industrial & Specialty Real Estate – Efficient movement of goods, including last-mile urban infill locations, expanding into modern logistics and data centres, and with increasing housing affordability challenges self-storage and (well located, high amenity) land lease are all bright spots we see within the domestic REIT universe.
Specialty Retail – Broadly speaking those businesses catering to over-50s and/or low- or no-mortgage households. Treasury Wine Estates (ASX:TWE) via their luxury wine portfolio being a good example of demonstrating resilience to increased mortgage and cost-of-living pressures, where Penfolds continues to be the global jewel in the crown for TWE.
Golowenko says the inflation squeeze hasn’t killed off quality retail.
“As a result of the recent RBA ‘rapid fire’ rate rises, there are considerable cost-of-living pressures being felt by many everyday Australians.
“This impact across households and businesses is uneven. While we believe the economic strain is causing some cracks to appear, those established homeowners, along with potential downsizers with no- or low- mortgage, are generally speaking, far less impacted.”
“We see Nick Scali as an incredibly well-run business, with recent ‘runs on the board’ in successfully integrating the Plush business and demonstrably lifting margins.
“We’re on the lookout for early signs of back-end efficiency gains and ‘Scali-isation’ coming through in Fabb Furniture UK acquired business.”
The Kerry Stokes aligned SVW has a trio of reliable business pillars, says Golowenko.
“Having recently moved to full ownership of Boral, the ‘big three’ business units – WesTrac, Coates, and Boral – place SVW in an enviable position.”
This is a bit like a modern-day equivalent of the ‘picks n’ shovels’ enabling Australia’s Mining, Infrastructure and Building operations.
“We see a backdrop of multi-year, multi-billion-dollar mining and infrastructure projects as conductive to SVW continuing to execute is strategic (and increasingly profitable) growth strategy.”
Brambles is a familiar Aussie name, but its business is less so.
BXB specialises in the pooling of unit-load equipment, pallets, crates and containers. Brambles’ platforms form the “invisible backbone of global supply chains, primarily serving the fast-moving consumer goods, fresh produce, beverage, retail and general manufacturing industries,” as per the blurb.
“The efficient movement of goods around an integrated global economy is essential to our everyday lives,” says Golowenko.
“We see easing pallet intensity and lumber prices, coupled with improved efficiency and optimisation processes, placing Brambles in a solid position to do ‘more with less’. This will continue to drive margins in the absence of outright volume growth.
”Across global supply chains, the incremental cost of pallet pooling, in the price the end-customer ultimately pays is inherently small. We see this being supportive of margin resilience in BXB’s core business.”
Goodman Group is an Australian integrated commercial and industrial property group that owns, develops and manages real estate. This includes warehouses, large-scale logistics facilities, business and office parks globally.
Basically, a specialist global industrial property and digital infrastructure group.
What could reasonably be described as ‘AI mania’ or ‘the next (digital) revolution’ has seen GMG’s share price demonstrably power higher over calendar 2024, according to Golowenko.
“Consistent execution on the development program, steady property income growth, typically conservative earnings outlook, and more recently the step-up in ‘highest and best use’ development potential to encompass data centres have underpinned the now hulking A-REIT representation.
“To support what by historical standards is a full valuation, we’re looking for further evidence of strategic execution and profitable growth, and for data centre sites – perhaps most importantly – access to secured power.”
News
News
Health & Biotech
