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Fund managers reveal some shares to watch in reporting season

Fund managers and analysts often have a much better grip on how individual shares are expected to do in reporting season because of the amount of research they have done on those shares. Managers will likely also have had some communication with business’ management.

Here are two managers thoughts on Livewire on shares to watch this reporting season:

John Ayoub – Wilson Asset Management

Newly-promoted portfolio manager John Ayoub from WAM Capital Limited (ASX: WAM) believes that energy and resource companies could create a few earnings surprises with Origin Energy Ltd (ASX: ORG) being one that could return to dividends sooner than expected.

He also said that US dollar earners could be an opportunity, he named QBE Insurance Group Ltd (ASX: QBE), News Corp (ASX: NWS), Sims Metal Management Ltd (ASX: SGM), James Hardie Industries plc (ASX: JHX) and Boral Limited (ASX: BLD) as potential opportunities.

Alex Shevelev – Forager Funds

Furniture retailer Nick Scali Limited (ASX: NCK) may have too much optimism baked into the price according to Alex Shevelev from Forager Australian Shares Fund (ASX: FOR).

He said that revenue growth of around 10% is expected by the market in FY19 and FY20. The rising housing market encouraged people to fill their renovated homes with quality furniture, but falling prices could see homeowners shut their wallets.

Lower sales could lead to lower profit margins, which could then lead to the market trading at lower earnings multiples.

Ominously, he said that the next five years are unlikely to be anywhere near as good as the last five for Nick Scali.

Foolish takeaway

I’d agree with most of the comments made above. If companies give negative outlooks then those businesses could be particularly damaged by the end of this month.

A lot of house-related businesses like Nick Scali are likely to face some trouble in the next couple of years as consumers may decide to focus on paying their mortgage rather than buying new goods.

That’s why I’ve got my eyes on this top share which has a strong chance of increasing its profit growth if a recession occurs.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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