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. Domain Holdings (DHG) – Current Price – $3.50 – Fairfax’s offshoot real estate business Domain, finally listed on the ASX this week and it made a strong debut. No new money was raised, it was a demerger. For every 10 Fairfax shares, shareholders received 1 Domain share. Fairfax fell 30% to take into account the Domain demerger. Shares in Domain traded around $3.90 on the first day giving the company a market cap of around $2.12bn. FXJ holds about 60% of DHG. At the time of writing DHG closed at $3.50 and FXJ at 69c. That gives a combined value of $1.04. Analysts were tipping shares to trade around $3.50, so it’s about right. DHG delivered 2017 revenue of $320m. Broker View:  Broker Recommendation: Citi (SELL $3.40) – The broker has released a mixed review of the spin off saying its earnings growth path is positive but the current valuation is too much. The business is counter cyclical to the property market and thinks a weakening in the construction sector will add negative pressure. It has initiated with a sell. Unconventional View: We disagree with Citi. For years Roger Montgomery has stood by REA Group (REA) saying time and time again how it ticks all the right boxes and is a solid and robust business. He was right. Shares are hitting all-time highs and he’s done well. I always questioned how well REA would do during a property downturn. The thing about REA is that is that the business is transactional. It has the ability to raise prices in the face of excess supply. Regardless if there is a boom or bust, REA will still capture earnings upside from people selling in a downturn or people buying in an up-turn. Getting back to Domain. Citi believes a softening in the housing industry will affect Domain’s earnings. We actually think it’s more likely to be the opposite. Listing activity will start to increase not decrease. We think Domain will be the better play over REA going forward. It’s a more nimble business ready to take on REA. Now more than ever. There’s a good chance the stock will start to really take off from here. It’s the number two player, reborn and rejuvenated. It’s hungry and ready to reinvent itself so it can take on REA. Domain will be volatile in the short term until it stabilises, that’s expected. At the moment there are 3 Sells on DHG with Deutsche Bank, Citi and Macquarie all saying the stock is too expensive despite having wonderful growth prospects going forward. It’s a bit contradictory. We think DHG is a Buy. Coca-Cola Amatil (CCL) – Current Price – $7.59 – CCL released presentation ahead of its investor day in Indonesia. The company reaffirmed FY17 NPAT to be broadly in line with FY16 i.e. NPAT of $418m. What the market didn’t like was a warning that FY18 will be impacted by the pull-forward of its reinvestment plans. That is $40m of P&L investment in 2018 from the expected cost savings to be realised in 2019 and 2020. Shares closed at its lowest level in a decade. Broker View:  Macquarie (OUTPERFORM $7.59) – The broker is relatively positive on the company having reaffirmed NPAT to be broadly in line with the previous year. Despite reinvestment plans being brought forward and it hitting the bottom line, market expectations are low and as a result it sits on an Outperform rating. Unconventional View: We disagree with Macquarie. We last wrote about CCL in June this year after the company released its game changing “Coke No Sugar” product. It was hailed as the life saver that was going to turn Coke’s fortunes around and put it back on the shopping list. Yeah right. Credit Suisse in June even went ahead and upgraded their recommendation to Outperform with a target price of $10.30. It said CCL wasn’t in trouble or that its recent downgrade was evidence of a…

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