Five stocks to buy in November

About the author:

Author name:

By Fiona Buchanan

Job title:

Co-Head of Research, Senior Analyst

Date posted:

08 November 2013, 1:40 PM

Sectors Covered:

Property, AREITS

BHP Billiton (BHP)

BHP Billiton is the world's largest mining company. Its major assets include iron ore, copper, petroleum and coal. Exploration and development is multi-commodity, with emphasis on potash.

Three reasons to buy BHP

1. As the owner of numerous Tier 1 assets, BHP enjoys the security of a low cost production position for its key products, ensuring profitable operations through the commodity cycle.
2. BHP offers solid valuation upside with a lower risk profile relative to peers.
3. As the sector leader, BHP is likely to be a major beneficiary of any improvement in the outlook for global growth, commodities demand (including China) and risk appetite.

We have an Outperform rating for BHP with a share price target of A$43.10ps.

Harvey Norman (HVN)

Harvey Norman is an integrated retailer, specialising in electrical goods, furniture, bedding, white goods and small appliances.

Three reasons to buy HVN

1. Leverage to an improving retail and housing market which is under way.
2. A more rational pricing environment (inflation is back = positive leverage).
3. HVN has A$2.3bn of net asset backing providing asset support. In tougher sales periods, HVN typically provides franchisee support. Last year they spent 2.7% of sales on tactical support to franchisees. This will fall in the better sales environment, providing extra leverage.

We have an Outperform rating for HVN with a share price target of A$3.60ps.

Santos (STO)

Santos LTD is one of Australia's largest producers of gas to the domestic market and has the largest exploration and production acreage position in Australia of any company.

Three reasons to buy STO

1. Partnered with major global players on LNG projects, with expansion potential in PNG.
2. Opportunities for cost savings on GLNG, as evidenced by the recent deal with Origin Energy to share upstream infrastructure and enter gas swap arrangements.
3. Earnings are expected to significantly increase following first LNG sales, which may lead to additional capital management.

We have an Outperform rating for STO with a share price target of A$15.86ps.

Sonic Healthcare (SHL)

Sonic Healthcare is Australia's largest pathology operator with significant operations in the US and Germany.

Three reasons to buy SHL

1. Operates radiology and GP centres which positions the business well to benefit from an ageing population and an increasing trend towards genetic testing and personalised medicine.
2. Recently posted an FY13 result which was up 4.7% on pcp and has provided guidance of EBITDA growth of 12% at the current exchange rate.
3. At current prices, SHL is our key pick in the large cap health care sector, trading on an FY14 PE ratio of 16.2x and offering a partly franked yield of 4.5%.

We have an Outperform rating for SHL with a share price target of A$16.91ps.

Sydney Airport (SYD)

Sydney Airport holds an 84.8% (soon to be 100%) economic interest in Sydney Airport.

Three reasons to buy SYD

1. Strong competitive position.
2. Passenger growth has shown a consistent upward trend over the long-term. SYD's strategy is to grow distributable cash faster than passenger growth, so as to produce solid dividend growth.
3. By end 2013 SYD will acquire the minority interests in Sydney Airport, settle with the ATO regarding its tax dispute, and simplify its corporate structure.

We have an Outperform rating for SYD with a share price target of A$4.24ps.

If you would like more information about any of our key picks, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.