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. Bank of Queensland (BOQ) – Current Price – $12.83 – Delivered a record profit result which came with a surprise special dividend of 8c. NPAT was up 4% to $352m rising on the back of lower bad debts and higher cost cutting. The cash profit was up 5% to $378m beating expectations. Broker View: Macquarie (UNDERPERFORM $12.75) – The broker wasn’t pleased with result. It says it was below its earnings forecasts and considers BOQ’s organic capital generation rather weak. If you add in weakening credit growth conditions and headwinds from the mortgage space, regional banks aren’t the place to be. Unconventional View: We disagree with Macquarie. In-fact we disagree with almost all the brokers. There are 3 Sells and 5 Holds on the stock but not a single Buy recommendation. Which we find rather surprising. This week’s result was a record profit that came despite a challenging banking environment. Cash profit beat expectations, its credit quality improved and its bad debts fell 28%. You can’t really ask for much more? We’ve come away from the result confident that the bank have turned the tables. There’s no sign of stress in their loan book and the bank’s capital buffers are stronger. Sure the industry faces headwinds driven by a cooling property market, but we still think BOQ is well placed to hammer through. With this result, BOQ not only beat dividend expectations but issued a special dividend of 8c. Housing credit growth accounts for roughly 60% of its loan book and there may be pressure on credit growth due to APRA caps and softer residential housing demand. Nevertheless we think BOQ is well prepared. BOQ posted the lowest level of impaired loans in five years and it looks like it might be the only bank that is raising their dividend instead of cutting it. That’s usually a positive sign. On fundamentals BOQ is trading on a PE of 14.89x which is in line with its peers. ROE is stable and yield is high. EPS is also rising. Its intrinsic value of $17.14 is well above its share price of $12.83. Undervalued. On the chart, BOQ isn’t screaming buy although the trend is up. It looks as if the stock is tracking at the upper end of an uptrend channel. Ideally you’d want to be picking up the stock closer to its support line say around $12.50. We like the story and we are even more confident following this week’s profit result. Look to buy around $12-$12.50. Bellamy’s (BAL) – Current Price – $12.83 – Upgraded guidance by 10%. FY18 revenue growth guidance is now expected to be 15-20% from 5-10% and 17-20% EBITDA margin from 15-20%. The guidance excludes the Company’s Camperdown business. Broker View: Morgans (HOLD $9.95) – Whilst acknowledging that the company has had a strong start to trading in FY18 and has upgraded guidance, it believes the stock is priced at fair value and has kept a hold rating. Unconventional View: We disagree with Morgans. If you look at Bellamy’s intrinsic value it comes up with $5.19. Its share price is double that. Bellamy’s is trading well above its intrinsic value but does that matter? Not with this sort of a stock. Infant formula stocks run on hot air and rise exponentially. In-fact Bellamy’s hit close to $14 last year and then dropped to $3. It can very easily hit that high again. So…

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