On this week’s Switzer Show, Peter Switzer put a run of quality names that have come off the boil to Paul Rickard of the Switzer Report and Rudi Filapek-Vandyck of FNArena. Here is what the two of them are buying, what they are steering clear of, and where they disagree.
The Switzer Show was recorded on Monday, so the prices and levels discussed below reflect Monday’s market.
The question Peter set them was the one a lot of investors are asking: with several good businesses well down from their highs, is this a buying opportunity, or are you already too late? The answers split cleanly into buys, passes, and a couple they see very differently.
NextDC (buy zone, on both views)
Both back the data-centre operator, and both say patience is the price of entry. Rudi’s case is that the market misreads it. “I still think this is a share price that will ultimately get close to $20,” he said, arguing NextDC is an infrastructure business, not a technology one.
Paul put the buy zone at around $13.30, but said the reward needs patience. “You’re just going to have to put it away and be patient,” he said.
Pro Medicus (not too late, on both views)
The medical imaging software company has run hard off its lows, and neither thinks the run is over. “The way forward is from here onwards, not from where it was,” Rudi said.
Paul named his level and a warning. “I think $180 ish would probably be my buy level at the moment,” he said. “But don’t be too greedy.”
BHP (a core portfolio holding)
Both treat the big miner as a stock you own for the long run, on the strength of copper. “BHP is the largest copper producer in the world,” Rudi said. “More than half of its profits will be from copper, and that will only increase.” His framing was blunt: “bottom drawer in the portfolio, and don’t look at it.” He added that he would “prefer BHP above Rio.”
Paul’s point was about weighting. “It’s probably your core portfolio stock,” he said. “If you’re below weight, I think you need to get up to weight. I may be looking for a little bit more of a pullback, but I wouldn’t be mucking around too much.”
Where they split: the semiconductor ETF
The Global X Semiconductor ETF is the one they see most differently. Paul is cautious about buying it after a huge run, saying he probably would not at this level, though he noted “the trend is still up” and it had not broken.
Rudi would own it and ride the swings. “I think semiconductors are probably worth at least 5 per cent in your portfolio, because they are really the future,” he said, while warning the sector is “extremely cyclical.”
Where they split: infrastructure
Both like infrastructure as an asset class, and Rudi credits Magellan with getting Australian investors interested in it. But Paul would take the exposure a cheaper way. “Probably the one I’d go for is GLIN, the iShares global infrastructure fund,” he said. “It uses a similar index to benchmark against, and it’s done even better than Magellan.”
Steering clear: lithium
Neither wants PLS Group at these prices. Paul was flat about it. “At $4.50 ish, it’s sort of, for me, nowhere,” he said. “I don’t really want to touch it at these levels. I’m not saying it’s going down, but I don’t feel I have to own lithium at this price.”
Rudi’s caution was about the nature of the commodity. “The problem with commodities is that you can still have a long-term fantastic future, but in the short term you can go bankrupt,” he said. Both agreed that if you must own lithium, PLS Group is the quality name to hold.
Steering clear: Bravura Solutions
The financial-software small cap is a pass for both. “For me it’s a pass,” Paul said. “I don’t see why I need to own it.” He noted its Friday guidance upgrade came from cost cutting rather than revenue growth.
Rudi would rather own a larger, safer name in the space. “I would prefer TechnologyOne any day of the week before it,” he said.
Rudi’s closing note was a caution on the market itself. “You have to be careful of what you own, and better have some cash,” he said, “because if any of your holdings dares to disappoint, don’t be surprised if it’s 15 to 20 per cent off.”
This article does not take into account the investment objectives, financial situation or particular needs of any individual. It does not constitute formal advice. The stock views expressed are those of the guests, shared on the Switzer Show, and are general in nature only. Consider the appropriateness of the information in regards to your circumstances. Before acting on anything we discuss, we strongly recommend you seek the appropriate professional advice. Past performance is not a reliable indicator of future performance.
