With the market rotating away from hyper-growth technology and medical companies, ‘old school’ sectors are back in favour.
Whether it’s building houses, facilitating e-commerce or selling shoes, business activities that are considered more essential to consumers’ lives are flying high in the face of higher interest rates.
Let’s take a look at 3 examples that experts have rated as “buy” this week:
Who needs shoes? EVERYONE
Bell Potter Securities advisor Christopher Watt sees Accent Group Ltd (ASX: AX1) as nice value at the moment.
The share price has plunged more than 41% for the year so far.
“The stock looks attractive given recent levels of price weakness,” Watt told The Bull.
“Accent owns an impressive portfolio of footwear businesses, including The Athlete’s Foot, Platypus and Timberland.”
He added that Accent is really building “a positive point of difference” in Australian retail.
“The company has more than 500 stores and more than 20 online platforms. It pays fully franked dividends.”
Indeed the stock is handing out almost a 4% yield.
Almost no empty space left
Medallion Financial Group analyst Jean Claude Perrottet currently likes the look of Goodman Group (ASX: GMG).
“This industrial property group is a quality business, with about $68.2 billion in assets under management.”
He cited Goodman’s 98.4% occupancy rate as a testament to the quality of the company.
“Goodman delivered a strong 2022 first half result, with growth in key metrics,” said Perrottet.
“Operating profit of $786.2 million was up 28% on the prior corresponding period. The company has increased earnings per share guidance in fiscal year 2022.”
Goodman is a major beneficiary of the consumer shift to online shopping, leasing out massive warehouse space to retailers.
Morgan Stanley is also a fan, rating Goodman shares as a buy this week with a price target of $27.88.
That’s an 18% premium on Wednesday’s closing price of $23.63.
‘Dominant share’ of US market
Building materials provider James Hardie Industries plc (ASX: JHX) is also a current buy for Bell Potter’s Watt.
“This building products company has a dominant share of the US fibre cement market amid immense exposure to the attractive US housing market.”
The stock price has cooled off significantly in 2022, dropping almost 30% so far.
But in the face of persistent inflation and rising interest rates, Watt likes James Hardie’s ability to set its own prices.
“Strong pricing power enables the company to pass on increasing manufacturing costs, which protects profitability.”
Analysts at Firetrail agree with Watt, saying the exposure to a growing US market could prove fruitful.
“We estimate current North America margins of 29% could increase to 46% by FY27, materially higher than consensus FY27 margins of 34%,” they stated in a memo to clients last week.
“We believe the market is missing a material market share and margin-accretion opportunity which lies ahead of James Hardie as it shifts its product mix towards higher-margin products.”