Buy, hold, sell: Five stocks the pros bought

Buy, hold, sell: Five stocks the pros bought

But to me it looks like this rating is pricing in M&A. You have a long and successful track record of execution, but you don’t really want too much of that to be priced into the stock, and I don’t think you can necessarily look at everything on an absolute basis. Because if you look at the relative possibilities out there, I know the question is on IPH, but there is another company that is being called Hansen Technologies (ASX:HSN) out there who have really similar organic growth, really similar returns on investments and a great track record from M&A – same as IPH. Offshore earnings are also very analogous, although a very different business, and it trades at a 40 percent lower multiple. So I think the IPH is almost on hold in and of itself.

Ally Selby: In order. The share price has risen by around 9 percent since the beginning of the year and has thus developed significantly better than the market. David, is it a buy, hold or sell?

David Moberley (SELL): It’s a sale from us. I agree with everything Josh highlighted. They did a great job integrating this recent acquisition in Canada. There’s definitely some upside potential in converting the foreign currency they’re exposed to, but the valuation and medium-term growth prospects don’t really justify the share price. So it’s a sale from us.

John’s Lyng group (ASX: JLG)

Ally Selby: Okay, next we have building services company Johns Lyng Group. It’s down 27 percent since the beginning of the year. David, is it a buy, hold or sell?

David Moberley (SELL): This is a tougher one. To stay off the fence, I say sell. And again the reason for that is because we really like the management and it offers a great medium term growth perspective for the company. There has been some insider selling in the short term, which usually dampens the market somewhat, and there are a lot of people crowding under that name. And the rating just isn’t good enough for us.

Ally Selby: Josh, I know you’ve liked this in the past. Do you still own it? do you buy it Is it a buy, hold or sell?

Josh Clark (BUY): I think it’s a purchase. And I’m honestly deeply offended that David said that.

David Moeberly: I had to choose that because it was either a hold or a sell.

Josh Clark: Well, there’s a lot I agree with. Yes, the management sold. It’s not particularly cheap. It’s well kept. But if you look back at what they’ve done since going public, they’ve increased earnings per share by 20 percent. So if you find more of these please give me a call. love business like this.

And I think what they’ve done over the past four years is they’ve positioned themselves really well to not have too different growth rates over the next four years. And I think that’s where your return comes from. I think the opportunities these guys have for growth are as long as your arm. That’s core growth within the existing building repair business, organic growth with cross-selling layers, acquisitions within layers, and the disaster protection vertical that they just started and are seeing some success there. And probably the most exciting thing would be the platform for growth that they just bought and are building in the US. And I think there are some early signs of success as the weather event they had in Florida accelerated that.

And these aren’t just things management talks about. They execute her. Motivation just oozes from the top down in this business. They have ownership right up to the front line of the company and I think that will help execution and earnings growth in the future. So a purchase.

PSC Insurance Group (ASX: PSI)

Ally Selby: Okay, next we have PSC Insurance Group. The share price has risen by around 4 percent since the beginning of the year. Is this a buy, hold or sell?

Josh Clark (BUY): This is a purchase. If you had a category of bottom-drawer stocks, I would pick this one. At PSC Insurance you can sleep well at night knowing that there is a significant amount of insider ownership within the company which has a truly prudent track record of allocating capital. If you wanted to try and generate the yield profile for this stock, you could add a few percentage points of insurance policies sold, a few percentage points of price increases on those insurance policies, and another 2.5 percent dividend yield to get you to a market yield.

But they’ve delivered a compound annual growth rate of 18 percent per EPS over the past five years, which is way above that. And then M&A is the big one. That’s how they really managed to maximize that earnings growth by acquiring and integrating judiciously, paying the right price for similar companies and bringing them in. So I think that’s a buy.

Ally Selby: Yes, earnings per share are actually up 28 percent over the past year. To you, David. Is it a buy, hold or sell?

David Moberley (BUY): Solid agreement here. For us it is a purchase. Founder-led, as we just highlighted. We love that. Second, as Josh pointed out, the business’s growth drivers are truly cycle-agnostic. As such, the broader macroeconomic softness is unlikely to impact these types, and we see fairly strong growth in premium rates across the insurance sector benefiting them. So you have some acquisitions, great growth. It’s not screaming cheap, but given these prospects, it probably never will be cheap. So buy from us.

Macquarie Telecom Group (ASX:QAM)

Ally Selby: Next we have Macquarie Telecom Group. They provide cybersecurity and telecom services to medium to large enterprise and government customers. That seems really timely considering what’s going on. David, is it a buy, hold or sell?

David Moberley (HOLD): It’s a hold from us. Agree with you Ally. The asset base is large and they are very exposed to the growth of cloud computing and data security. And I think that’s going to be a great place for the next few years. But the rating more than captures that. So a stop from us.

Ally Selby: The share price has fallen by around 22 percent since the beginning of the year. Josh, is it a buy, hold or sell?

Josh Clark (SELL): I think it’s actually a sale. It’s another great ASX success story that’s still led by the founders, but I think there are a few key things that have changed within the company over the past few years. So it has evolved from a telecom multiple to a data center multiple. So the valuation is now approaching double the multiple you paid if you look back far enough, so it’s a lot more expensive.

But on the other hand, it has gone from being a really capital-poor company to a really capital-intensive company as they put a lot of money into data centers. Returns on this investment appear to be lower than those of its core business, and returns within data centers may even appear to be declining somewhat given the mix is ​​shifting more toward wholesale, cloud, and hyperscale customers. So I think for those two reasons it’s a sale.

Whitehaven Coal (ASX: WHC)

Ally Selby: Last one for today, no surprise it’s Whitehaven Coal. Fundies absolutely loved this stock, and with good reason. The share price has risen by 220 percent in 2022. Josh, is it a buy, hold or sell?

Josh Clark (HOLD): It’s a stop. I think Whitehaven has some pretty extreme contrasting scenarios. First, you have to acknowledge the fact that the price of thermal coal has moved from a range of maybe $50 to $100 and is now many, many multiples of that. So when it comes to long-term forecasts or longer-term historical prices, it looks incredibly expensive. And then spot prices for thermal coal look ridiculously cheap.

We know that thermal coal prices will have to come down at some point. Last but not least, the energy crisis in Europe and the war in Europe have pushed up the price of steam coal. Stocks are starting to look a little better. These phenomena are not permanent. So the price will move down at some point.

So the game you’re trying to play is to get paid back a really cheap multiple before the commodity price starts falling. I’ve never seen a commodity stock hang there and not fall when the commodity price goes down, no matter what the numbers say. And while they’re pretty extreme scenarios, I think they’re pretty balanced. So Whitehaven is occupied.

Ally Selby: Okay, over to you, David. Is it a buy, hold or sell?

David Moberley (SELL): I’ll say sell for us, Ally. I agree with Josh, the commodity price has been incredibly strong. The company is throwing out really big cash, so it’s currently repurchasing up to 25 percent of its stock. But I think that’s more than reflected in the stock price at this point. And while commodity prices have been strong, there are some signs of a slowdown at the moment.

And I think, and agree with Josh, it’s pretty rare for a commodity company to outperform while its commodity price is falling. It’s very difficult to say when that will happen, but we like to be a bit contrarian when it comes to resource stocks. And when the commodity price is trading a multiple of the cost curve, it’s usually not the time to get too excited. So sell with us.

Ally Selby: Well, that’s all we have time for today. I hope you enjoyed this episode of Buy Hold Sell as much as I did. If yes, why not give a like? Remember to subscribe to our YouTube channel. We add so much great content every week.

Buy Hold Sell is a weekly video series produced by Livewire Markets. This article was first published on Livewire Markets.

Disclaimer: The information contained in this presentation is general in nature and should not be relied upon. Before making any investment or financial planning decision, you should consult a licensed professional who can advise you on whether the decision is appropriate for you. Contributors to this show may have commercial or financial interests in the companies mentioned.

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