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. When assessing these companies we take into account the upside and downside risks and determine whether the company is worth adding to your portfolio. We also look at the company’s fundamentals and thematics to come up with a final decision. Telstra (TLS) Company Overview Telstra (TLS) – Is Australia’s largest provider of telecommunications and information products via its range of businesses namely fixed broadband, mobile, data, IP, network application & services, digital media and international. Telstra provides telecommunication product and services to consumer and business customers in Australia. This month Telstra provided an update on trading for FY18 and re-affirmed guidance but with EBITDA to be at the bottom end of its guidance range. Broker View: UBS (NEUTRAL $2.80) – The broker has a bearish view on the telco saying rising competition and debt have deteriorated Telstra’s credit position. UBS thinks progressive cuts to the dividend from FY20 will be needed but it should hold steady at 22c for FY18-19. Target reduced to $2.80. Unconventional View We disagree with UBS. The broker see further downside in the telco emanating from rising debt and its inability to compete in a hotting up sector. TPG Telecom, Vodafone, Optus and Vocus are all vying for the same space and same customer. This means rising competition could force these telco’s to compete on pricing and data. It hasn’t been an easy week for Telstra after its entire 3G and 4G networks went down leaving customers across the country unable to make calls or use data due to a glitch. It’s the third time this month it has happened. Whilst the network is back up, life goes on. But it is a little embarrassing for Telstra who charge its customers a premium to access its reliable failsafe network. Will it cause mobile subscribers to switch carriers? We don’t think so. The only other alternatives are Optus or Vodafone and their networks are far inferior to Telstra’s. Telstra’s outage caused issues across Australia. Telstra’s guidance update is what has caused shares to fall 15% this month. The trading update was disappointing but free cash flow guidance surprise on the upside. Telstra’s underlying earnings in the 2017 financial year will be at the lower end of its guidance range of $10.1bn-$10.6bn. With its share price hitting its lowest level since December 2010, what else could possibly go wrong? We think all the downside is now well and truly factored into the share price. Expectations for Telstra are low at a time when Telstra is cost cutting, unveiling new unlimited plans, becoming more competitive and investing heavily in its network. All positive things going forward. All Telstra needs to do is meet expectations. It has already started to come in aggressively with its unlimited data plans. Trading on a PE of 8.55x, a ROE of 23% and a gross yield of 11.99%, Telstra is looking mighty cheap and attractive. The stock is stuck in a sentiment hole, but if it releases a positive result come August, the stock will quickly re-rate. Fairfax Media (FXJ) Company Overview Fairfax Media (FXJ) – Is a media group with a range of publishing news, information and entertainment businesses that deliver content via newspaper, magazine, online formats and radio broadcasting. In Australia, mastheads include The Sydney…

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