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. IOOF (IFL) – Current price – $11.06 – The wealth manager post its FY results this week. Underlying NPAT came in at $169.4 which was a beat on an expected $161m. Final fully franked dividend was 27cps up 4%. Net inflows were up 156% to $4.6bn and Platform net inflows were up 130% to $1.2bn. Platform net operating margin increased 4bps and gross margin increased 2bps. IFL also announced the acquisition of National Australia Trustees Limited which adds scale & enhances national presence offering specialist Trustee capabilities. Broker View: UBS (SELL $9.20) – The broker says IFL’s profit was solid however underlying profit growth remains a challenge as growth margin pressures persist. Gross margin trends remain a concern with revenues failing to keep pace with AUM growth. Unconventional View: We disagree with UBS. The result was a beat on just about every broker forecast. FY17 core earnings proved well above with most brokers upgrading their EPS estimates for FY18 and FY19. The other highlight was IFL’s cost savings which far exceeded guidance. They appear sustainable in the near term and have helped drive most broker upgrades. But it’s not just the headline numbers that gives us confidence in IFL. The firm has always had an eye for acquisitions and to grow bigger. It is actively increasing its team and its FUM. MD Chris Kelaher says the company is looking to grow its adviser numbers to 50 over the next six months and is on the hunt for more acquisitions. At the moment there are a few headwinds with the big banks and larger institutions, so IFL is in the perfect spot to take any opportunities that come its way. On the StockOmeter the ranking comes in at 56, which isn’t great but is moving towards a buy. ROE is stable, its dividend yield is high and debt low. As the wealth management industry continues to consolidate we think IFL is in a prime position for acquisitions and to grow organically. It is also recovering after it suffered reputational damage a few years ago with insider trading and operational errors. IFL is one of the best picks in the financial services wealth management space. On the chart the stock looks particularly attractive. The stock has broken out on the upside and has formed a new bullish uptrend. We advise investors to buy on this upside break out which should see the stock track higher for some time. Carsales (CAR) – Current price – $13.14 – Posted a solid FY result. NPAT came in at $119.1m up 8% and above an expected $117m. The bumper result came at a time…

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