2020 whacked Australia’s economy harder than 2001 hit American airport security. But as Australia’s hospitality and travel industries begin a slovenly limp back to normal, the ASX, buoyed by a miraculous NASDAQ rally, has rallied harder than McRae.
While experts agree it will take years for the ~real~ economy to grow back to 2019 levels, the stock market is currently living in a world of its own. Whether this can be maintained or whether it’s an over-ripe peach about to go putrid, we’ll leave for the experts.
What’s not up for question is that you don’t want to be throwing money away right now. So rather than trust your mate’s brother’s cousin (or your Uber driver who assures you ‘there’s still momentum’), DMARGE, each month, will be bringing you the top three ASX picks of Luke Laretive, CEO of Seneca Financial Solutions – and his down to earth analysis on each one.
July 2020 Picks
All figures in Australian dollars (1 AUD = 0.71 USD at time of publishing).
Amazon (NASDAQ: AMZN) US$2,961.97
E-commerce remains the #1 pass-time of the locked-down and socially distanced. We can’t spend money on travel, restaurants or experiences (which has been a key investment theme of the past few years, experiences over ‘stuff’) – we are now back on the consumerism bandwagon!
Amazon is primed to capture the vast majority of this shift. It’s growing dramatically outside the US, at very high margins (AWS, media, ad business) and is a now a multi-sector monopoly. If it gets hit with an anti-trust driven breakup, it will only unlock additional value for shareholders in my opinion.
In short: Probably going to get bigger, better and more dominant.
Super Retail Group (ASX: SUL) $8.19
All figures in Australian dollars (1 AUD = 0.75 USD at time of publishing).
SUL owns Super Cheap Auto, BCF, Rebel & Macpac. See above RE: the new consumerism bandwagon. We also can’t travel overseas, so once borders open you’re going to see people doing up their cars, buying caravans and campers and going hiking and camping and 4WD’ing all over Australia.
In the US, LCI Industries recently reported earnings 40% ahead of analyst estimates citing:
“Increased demand for RVs drove accelerated outdoor recreational products sales, which was well ahead of increasingly bullish expectations as we moved through the early part of Q2. In this post-COVID environment, RVs continue to be one of the safest ways for American families to take a vacation. Underscoring this strength, a recent RVIA survey reported that 46M people intend on taking a trip in an RV in the next 12 months.”
SUL is not too expensive 5.6x EV/EBITDA on consensus estimates (vs 5 year average of 7.7x) either.
In short: A rare business in retail with structural tailwinds at a reasonable valuation.
TNT Mines (ASX: TIN) $0.14
I always like to throw in something saucy for the punters. TNT recently acquired a strategically located land package in Utah that is highly prospective for uranium and vanadium (used to batteries). I like management, I like the tight company structure (not too many shares on issue, low market cap, cash in the bank and management alignment) and I like how under the radar this company is… for now. With less-attractive peers valued at multiples of the current value of TIN, results pending and not many shares around, it won’t take much for this to pop in my opinion.
In short: Very high risk, very speculative, very naughty.
June 2020 Picks
All figures in Australian dollars (1 AUD = 0.69 USD at time of publishing).
Credit Corp (CCP) $16.78, market cap $1.13bn
“You’d think collecting debts in a recession would be a tough business, but this exceptionally led, industry-leader is well capitalised (recent cap raising at $12.50) and primed to buy debt ledgers at the best rates in many years. The debt ledger game is a bit like the property market, you make your money in the buying, and with competitors in decline, CCP is poised to benefit from higher margins and subsequently, above-average growth for the next few years in my opinion.”
In short: “It looks too cheap, I think it’s misunderstood by the market.”
Nearmap (NEA) $2.11, market cap $951m
“Despite much skepticism in the market place after a recent downgrade, Nearmap narrowed their guidance in late May. The company also reiterated stable customer churn, reduced cash burn and the release of a new product (AI) – all of which point to the company getting back on track after losing a significant customer and being impacted short term by Coronavirus. Nearmap is the clear leader in aerial imagery here in Australia and has a real and material opportunity in the US, an under-penetrated market. Nearmap’s scalable business model, proven management team and very reasonable valuation make it an attractive investment opportunity in my view.”
In short: “Market has doubts, I’m confident in the management.”
Golden State Mining (GSM) $0.48, market cap $19m
“A speculative pick but with a significant gold discovery (2.2m oz) only 13km down the road (De Grey Mining, DEG.ASX, market cap $737m), and identical sulphide anomalies already identified by the geologists, it could be worth a punt. The company recently raised money at 12.5c and the 10,000m+ drill program begins later this month.”
In short: “Speculative, but some encouraging signs.”
This article is of a general nature only and does not consider your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your objectives, financial situation and needs before acting on it and obtain copies of any relevant disclosure documents. Seneca Financial Solutions does not warrant the accuracy or reliability of the information in this report. Luke Laretive, Seneca Financial Solutions, it’s Directors and it’s associated entities may have or had interests in companies mentioned. They may have or have had a relationship with or may provide or has provided investment banking, capital markets and/or other financial services to those companies mentioned.
Luke provides clients with a daily note, which you can access here.
Australian Share Trading FAQ
Which stock trading site is best for beginners?
CommSec by Commonwealth Bank or E*Trade are the most popular trading platforms for beginners. Their trading fees are roughly $20 per trade to buy and sell shares online.
How to invest in shares?
Investing in shares can be done via a stock broker or by yourself using an online trading platform.
How to buy shares in australia?
Trading shares in Australia is relatively easy. You simply need to set up a trading account with your bank or an online trader like ETrade or CommSec. Once you have deposited funds into your trading account you will be able to buy and sell Australian shares.