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. Seven Group Holdings (SVW) – $18.37 – The diversified operating and investment company that has a portfolio of industrial services such as Westrac Group, media and property investments, posted its results this week. It delivered a strong FY18 interim result. Here are the dot points: Underlying earnings before interest and tax (“EBIT”) of $223.5m, up 42% on pcp and ahead of previous guidance. Underlying EBIT up 23% on a pro-forma basis adjusting for the changes in ownership interest in Coates Hire and Beach Energy. Underlying earnings per share (“EPS”) up 81% reflecting strong operational performance and capital management. Result reflects the strength of the industrial services businesses with demand from the mining production and infrastructure activity. Interim dividend increased by 5% to 21 cents per share reflecting confidence in the outlook for our industrial services operating businesses and energy investments. Upgrade FY18 underlying EBIT guidance to be 15% above pro-forma FY17 EBIT on a continuing operations basis. The Group has upgraded its previous guidance for FY18 underlying EBIT from continuing operations to now be up 15% above pro-forma FY17 EBIT. Broker View:  Macquarie (OUTPERFORM $18.80) – The broker has a positive write up on the company. Earnings beat its expectations by 11% from all divisions and the outlook is positive for resources, infrastructure and energy. FY guidance appears conservative for the broker. Unconventional View: We agree with Macquarie. This was a cracking result. Profit was up by more than 80% on the back of a recovering mining industry which helped boost earnings from its Westrac business which supplies earthmoving equipment parts. Shares were up as much as 17% and hit record highs. NPAT came in at $159.8m and was a beat on Macquarie’s forecasts. CEO Ryan Stokes said “The continued strength of the mining production cycle with greater utilisation of fleets has supported parts growth and component demand at WesTrac.” Last year SVW sold its Chinese mining machinery division WesTrac China to Chinese firm Lei Shing Hong Machinery for A$540m. It distributes Caterpillar earthmoving, mining and construction equipment throughout eastern China and Taiwan. The deal allowed SVW to focus on supplying an infrastructure boom in the east coast Australian states, which the company expects to peak by 2021. In September last year, SVW bought the 53.3% of Coates Hire it did not own. Also in that month, Seven’s oil and gas play, Beach Energy, acquired Lattice Energy. Some saying the Beach’s acquisition of Lattice was transformational and provides exposure to the east coast gas market and diversification across multiple basins. We think SVW’s move to take control of Coates Hire and up its exposure to the east coast gas through Beach are positive drivers for future growth. Sure it has increased its debt position to $2bn, but that’s ok. Its mining equipment and gas business are booming. Media is lagging. Seven Group went one step further and upgraded its 2018 forecast for EBITDA to be 15% above its comparable result last year. We think this is a positive sign of things to come. It was a strong result with a positive outlook. It’s a sign of things…

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