At this time of year a lot analysts, investors, and media commentators like to offer up predictions as to what stocks might perform well or poorly over the important August full year financials reporting season.
Over the short term company valuations tend to go up or down compared to how their financial results stack up against analysts’ forecasts. If they beat the consensus forecasts they’ll go higher, and lower if they miss.
This is only a general rule of thumb though as particular drivers of price movements include trading updates for the current financial year and any specific guidance a company may give as to results in the year ahead.
Sometimes forecasts can also be dated or a company will have other unexpected additional news, to mean which way a stock price goes on results has many inputs.
Still for what its worth I’ll name five businesses I expect could enjoy a strong August and some that could sink lower. Of course this is just my opinion over the short term and shouldn’t be relied upon as the basis for an investment decision.
5 that could go higher
Accent Group Ltd (ASX: AX1) is the footwear retailer behind stores such as HypeDc, Platypus and Athlete’s Foot. It’s also moving into new stores with the acquisition of the trendy Subtype sneaker stores and a kiddies offering in The Trybe. At a $1.50 it offers a 5.5% fully franked trailing yield and I expect it could go higher in August and 2019.
a2 Milk Co Ltd (ASX: A2M) is up around 23% over the last month to $16.90 today, but I reckon this a2-only-protein infant formula and supermarket milk business could deliver a strong result and move even higher this year.
Catapult Group Ltd (ASX: CAT) looks reasonable value, but has a mixed track record of late including management’s habit of raising capital at increasingly lower prices. The underlying business seems to be doing ok though and it could move higher. Shares could be cheap at $1.22.
Computershare Limited (ASX: CPU) has given up some ground recently but the underlying share registry business is performing well and has some macro support. Shares are $15.72.
Webjet Limited (ASX: WEB) I think is being marked down by investors due to concerns over the deal it struck with Thomas Cook in the UK and after there was a squabble with its previous auditor over signing off its accounts. As such it’s higher up the risk curve, but the business has some strong growth with shares at $13.50 today.
5 that could disappoint
Perpetual Limited (ASX: PPT) has been struggling of late as large super funds yank big mandates and its value investing style underperforms the market. The rise of passive investing or ETFs that are popular with retail investors is another issue. The stock is at $38.38.
Challenger Ltd (ASX: CGF) I’ve sold out of this business as the ultra-low rate environment sees margins, return on equity, profits, and product sales tumble. It looks risky to me and shares are at $7.10 today.
Telstra Corporation Ltd (ASX: TLS) is another business I expect may have to cut its dividend again as margin falls hurt profits and it struggles to plug the NBN earnings hole. Shares are $3.93 today.
BWX Limited (ASX: BWX) is the Sukin skincare retailer that undertook a couple of large acquisitions of other beauty product businesses in the US that produced $56.7 million of debt as at December 31, 2019. The AFR has also reported some worrying details over accusations being made in U.S. courtrooms as to what the real thinking behind the acquisitions may have been. Shares are $2.17 today.
Auscann Group Holdings Ltd (ASX: AC8) provided a “trading” update yesterday that I must say confirmed my long-standing impression that this is not a spec stock to own. The stock has gone from $1 to 44 cents over the past year and I expect has further to fall.
5 stocks under $5
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*Extreme Opportunities returns as of June 5th 2020
You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of and has recommended BWX Limited, Catapult Group International Ltd, Challenger Limited, and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Accent Group, Computershare, and Webjet Ltd. 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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