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. NextDC (NXT) – Current Price – $5.56 – Share have fallen following a broker downgrade. The company has not release any new news, so the 6.20% share price fall can be blamed on this report. We last wrote about NXT in July last year then the share price was around $4.40. From its humble beginnings and shaky start, NXT has done a great job. The company continues to raise a combination of debt and equity to increase investment in land and the development of new infrastructure in Melbourne (the most profitable site) and Brisbane. The capital outlay is huge and the earnings is little and slow. The company is slowly but surely turning a profit. With the relentless demand for data set to explode in the coming years, NXT will continue to expand and benefit from this thematic. However the concern is whether the stock has run too hard. Since our last report, it’s up +26%. Broker View: Deutsche Bank (HOLD $5.50) – The broker has downgraded its recommendation from Buy to Hold mainly because the stock has recently outperformed. As a result, it has deemed the stock too expensive and doesn’t believe the current valuation compensates a shareholder for the downside risks being: data centres face disruption, capex requirements are large and high P/B values signal underperformance. Unconventional View: We agree with Deutsche. The tide has changed, it’s time to get out. Lock in profits and run. They’ll be a time to get back in. With no news, it’s obvious the market has listened to Deutsche’s reasoning. Prior to the report the stock was up some 30% since our last report and up 68% year on year. The analysts at Deutsche downgraded purely on price and risk. If you look at the StockOmeter it says it all. Its ROE is only 5.48% and that’s forecast to fall to 2.20%. These aren’t good figures. EPS is -32%. The StockoMeter rating comes in at 37 which is a clear Sell. The risks are now to downside and shares could underperform for the next 12 months. We also agree there is the risk that technological change could disrupt the way NXT stores data. So should you load up on this fall. We think investors should sit on the sidelines for now. Lock in profits and look for better opportunities else-where. Looking at the chart below, NXT can fall all the way back to $5.20. Once it’s closer to its support line, it’s worth a look then. BHP – Current Price – $30.78 – Has achieved a record…

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