Hot stocks for 2014

If there were a company you couldn’t ignore this year it was Xero.

A share price gain of more than 300% made it one of the most valuable companies in the country.

But at a market capitalisation of more than $4 billion, none of our stock pickers have touched it in our 2014 competition.

Brook Asset Management, Forsyth Barr, Craigs Investment Partners and Hamilton Hindin Greene have graciously provided their three top tips for the year, including eyebrow-raising selections such as Chorus and Diligent Board Member Services.

Unfairly, NBR forces the players to choose only three companies – unlike a regular portfolio where a fund manager can spread their risk across different sectors and companies.

As usual, light-hearted stock tipping should not be misconstrued as financial advice.

BROOK ASSET MANAGEMENT

Mainfreight
Fisher & Paykel Healthcare
Diligent Board Member Services

Portfolio manager Andrew South says he likes Mainfreight’s management, it has a good vision and is gaining good share in Australia.

“We think Europe will recover; we think their purchase in Europe is long-term, strategic and will pay off for them eventually. There have obviously been a few teething problems but we can see Europe improving over the next year or so.”

F&P Healthcare is gaining market share with its new masks and its margins are expanding through increased emphasis on consumables and the product mix.

Diligent has had a slew of administrative issues this year and is restating its accounts. In a slight change of tune, Mr South says it’s more about timing and not necessarily cashflow and there have been changes at board and audit level.

“This company’s still a very sound cash generator.”

CRAIGS INVESTMENT PARTNERS

Fisher & Paykel Healthcare
Fletcher Building
A2 Corporation

Head of institutional equities Geoff Zame and head of private wealth research Mark Lister say F&P Healthcare is in excellent shape.

“Its business is growing strongly offshore and it is well-positioned to continue delivering over the medium-term. If we see any currency weakness emerge, this would serve to enhance the investment proposition even more.”

Fletcher Building, they say, will be a key beneficiary of the Christchurch rebuild, which is expected to pick up strongly next year.

Niche dairy operator A2 Corporation is positioned to attract premium prices, they say.

“A2 Corporation continues to perform well in both its core market of Australia and its new markets of China and the UK. Recent proposals to relax China's one-child policy (which has been in place since 1979) bode well for the company’s long-term prospects.”

FORSYTH BARR

Mainfreight
Contact
SkyTV

Head of private wealth research Rob Mercer says Contact’s regulatory risks are already priced in.

SkyTV, he says, will be enriched by having content over multiple platforms with minimal investment. “The free cashflow that that generates should be quite significant.”

On Mainfreight, he says it is a top operator in the New Zealand market, which is still its biggest earnings generator, and there should be improved earnings from Australia.

There should be no more negative surprises from Wim Bosman, he says.

HAMILTON HINDIN GREENE

Metlifecare
Steel and Tube
Chorus

Director Grant Williamson says Metlifecare is in a growth sector, has had a change in strategy and new supporting shareholders in Infratil and NZ Superannuation Fund.

Steel & Tube has exposure to the rural and construction sectors, which should see it in good stead, he says, while he believes the damage has been done with Chorus “and some common sense might prevail.”

2013 company tips, in review

BROOK ASSET MANAGEMENT
Fisher & Paykel Healthcare, Summerset Group Holdings, Mainfreight (Total shareholder returns 56.57%, 44.87%, 5.03%) – average return 35.49%

CRAIGS INVESTMENT PARTNERS
Fisher & Paykel Healthcare, Ryman Healthcare, Diligent Board Member Services (56.57%, 73.19%, -36.01%) – average 31.25%

FORSYTH BARR
Mainfreight, PGG Wrightson, Sky City (5.03%, 1%, 3.66%) – average 3.23%

HAMILTON HINDIN GREENE
PGG Wrightson, Chorus, Tower (1%, -37.95%, -7.77%) Average -14.91%

Source: NZX Data

DISCLAIMER: Information in relation to these stocks to watch is intended as general information and not financial advice. Readers should obtain professional advice before making investment decisions. Copies of disclosure statements of NZX adviser firms mentioned in this article can be obtained by contacting the firms.

dwilliams@nbr.co.nz