Five stocks to add to portfolios

About the author:

Tom Sartor
Author name:
By Tom Sartor
Job title:
Senior Analyst
Date posted:
15 October 2013, 2:13 PM
Sectors Covered:
Junior (Emerging) Resources, Bulk Materials

Morgans was pleased to host its 23rd Annual Queensland Conference this week, featuring 36 companies in the industrial services, consumer, financial, technology and property sectors.

As we did in 2012, we came away from the 2013 conference with five key stock picks. Note that our 2012 'key picks' averaged a capital return of 23% over 12 months (versus 17% for the ASX200 and -4% for the Small Ordinaries). With that in mind our stock picks for 2013 are well worth considering for portfolios:

Suncorp Group (SUN)

We believe SUN has capacity to deliver a further special dividend of ~20c in August 2014 which adds to its already solid 5.5% yield. Growth for the group can be driven by further cost benefits across the group, industry leading insurance processes, a turnaround in the life insurance sector, and returning a growth focus to the bank (after resolution of the non-core bank).

Watch our interview with Marcus Taylor, Personal Insurance Corporate Affairs Manager at Suncorp Group, where he discusses process improvements in the insurance arm of the company.

SUN is a key stock pick with an Outperform rating and a share price target of A$13.52ps.

Domino's Pizza (DMP)

The presentation by Andrew Rennie (CEO Aust/NZ) gave us further confidence in our positive view on the stock. The upside opportunity in Japan is meaningful, the recent European issues are fixable, and Australia/New Zealand continue to punch above their weight. We see the potential for FY14 guidance to be upgraded at the half year result given management's style of under-promising and over-delivering. 

We have an Outperform rating for DMP with a share price target of A$13.15ps.

Ardent Leisure (AAD)

AAD's presentation reminded us just how much leverage each business has to improving top-line sales. AAD offers a rare combination of solid earnings growth, an attractive yield (~7%), and leverage to an improving domestic tourism environment. 

We have an Outperform rating and a share price target of A$2.00ps.

GWA Group (GWA)

We believe GWA continues to offer an appealing investment case in current markets given cyclical leverage via exposure to an improving macro dynamic (housing) and additional medium-term EPS upside from further internal improvements.

Watch our interview with Peter Crowley, CEO of GWA Group, where he discusses the outlook for the company.

We have a Neutral rating with a share price target of A$3.03ps.

Freedom Foods (FNP)

We believe FNP is on a strong profit growth trajectory. Our positive view is underpinned by FNP's clear leadership in the high-growth, 'free-from' food industry, the significant growth opportunities at its UHT manufacturer (Pactum) and its shareholding in A2 Corporation (A2C). With many high returning growth projects being implemented or in the pipeline, we expect that FNP should remain an earnings upgrade story for many years to come. 

We retain our Outperform rating with a share price target of A$2.92ps.

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.

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