In this section we provide readers with three stocks that have attracted the interest of the broking community or the ‘herd’. Broker recommendations tend to be biased and highly optimistic. We try and breakdown these barriers and give our own honest opinion. It is important to keep in mind that technical analysis is only one part of the investment process and any recommendations do not give consideration to the underlying fundamentals of each business. Suncorp (SUN) – Current price – $13.68 – Shares took a hit this week after its profit result missed expectations. Roughly $1.2bn was wiped from its market capitalisation after its FY result rose 3.6% to $1.075bn but was lower than an expected $1.186bn. Group top line growth was up 3.6%, its dividend was up 7.4% to 73c and cash ROE was 8.4%. The company is anticipating cooler house price growth nationally. The result did feature an improvement in its insurance business, but its banking and wealth management arm were the laggards along with its earthquake-hit New Zealand division. Broker View: Deutsche Bank (BUY $14.60) – The broker has an optimistic view of SUN despite the recent result. It says the market clearly had very high expectations. The result was a good result with both the insurance and banking & wealth divisions delivering solid results. Unconventional View: We disagree with Deutsche. The result has clearly spooked investors and wasn’t as solid as Deutsche has made it out to be. Roughly $1.2bn or 6% was wiped on weaker than expected sales and a $100m sales initiative. The money is believed to be spent on items such as a marketplace app and continuing to refresh Suncorp’s brand. With sales coming in lower than expected, spending $100m on refreshing the brand seems like an expense the company could do without. The business is pulled back by the low-growth bank and life divisions. SUN has had a good run into results. Because it disappointed, you can expected this 15%-20% run to reverse. We don’t expect the stock to do well until it executes on its additional investment. There was also no special dividend. The stockoMeter reading isn’t too good. It came back with 59. All in all we expect more downside momentum to carry the stock lower. On the chart you can see the stock is heading back down towards its support line which intersects around $12. We don’t think there is any reason to be here. Webjet (WEB) – Current Price $12.20 – Announced the acquisition of JacTravel who are a market leading European B2B travel business. This transaction will help propel the company into the number 2 B2B player globally. Acquisition price of £200m representing 10.5x FY17 EBITDA and is 25%+ EPS accretive in FY17 on a pro-forma basis, before synergies. It represents an attractive earnings growth profile of the combined group. Broker View: Morgans (ADD $13.50) – The broker has upgraded to Add from Hold recommendation on the back of the acquisition. The broker is impressed with the size and the nature of the transaction. It also means that the acquisition is of strategic importance which will transform the business into the number 2 player globally. Unconventional View: We agree with Morgans. This transaction is a real game changer for Webjet. It propels the company into second place globally in the B2B hotel inventory space. The acquisition will cost roughly $330m which will be funded via an equity offer. Webjet will partially finance the purchase via a $164m cap raising and is now second only to Spain’s Hotelsbeds Group in size. The institutional component has already been successfully completed. We think it’s a good deal and it makes the company even more attractive than previously. Management expect the deal to be…

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