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. ANZ – $26.92 – ANZ is in hot water again. First with the Royal Banking Commission now with ASIC. The regulator has found that the bank failed to provide documented annual reviews. ANZ did not give reviews to +10,000 ‘Prime Access’ customers from 2006 to 2013. It’s an integral part of the Prime Access package. A service offered to its financial planning clients for an annual fee from 2003. ANZ will now pay $3m following the investigation for the failure to provide annual reviews.  ANZ has also told the banking royal commission that continued processing errors saw it charge customers the wrong amount of interest and fees on their home loans. The amount equals roughly $90 million. ANZ home loan customers have been refunded $75m. That leaves another $15m in compensation that needs to be paid. Broker View:  Morgan Stanley (BUY $30.00) – The broker is quite bullish on ANZ despite the recent share price decline. It has in-fact upgraded the price to Buy from Neutral. It thinks ANZ will be able to increase its pay-out ratio to 80% from 65% in the 2H20. Unconventional View: We disagree with Morgan Stanley. Whilst ANZ shares are down in the doldrums having fallen 14% this year, we think investors should avoid the entire sector. The major banks fell 6.5% in March alone which has left them looking remarkably cheap. PE ratios have fallen to 11.58x down from 12.5x in 2016 and gross dividends have gone up to 8.53%. Dividends are unlikely to be cut, a property collapse is also unlikely and there is further scope for cost cutting. So the sector is cheap and attractive, but on the downside: the sector is beholden to outcome of the Royal Baking Commission. It’s a huge negative that we think the market is discounting. The inquiry will not only last quite a while but it will be a drag on the sector for the entirety. That doesn’t even take into account the outcome of the Commission which could include: Strict new lending and financial planning regulations to enforce strict standards. A slowdown in credit growth which may cause a housing downturn. Massive fines that could eventuate as a result of findings. Tier 1 capital ratios may need to be raised or the amount of capital held against loans. Any recommendation can create a burden for banks. A UBS analyst was particularly bearish saying a higher level of due diligence from the banks could mean fewer loans being written and that would lead to a credit crunch and lower share prices. ANZ has its own problems such as credit card fraud and financial planning clients not receiving annual reviews. What this all boils down to is a tarnishing of the banks reputation and trust. How can customers regain the trust of the banking community after…

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