Australian (ASX) Stock Market Forum

Out of favour sectors?

Ken

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Hi,

Looking back over the past 12 months we have had a number of sectors perform well. We started with uranium, moved to biotechs, copper, iron ore, oil and gas, gold, and financials.

Why did these sectors outtperform in a given period of time??? Out of favour? oversold? Or maybe just the next bubble. Anything with Uranium in their name at one point went up, like wise with iron ore.

Now what sector am I looking at now???

I thought what is the most out of favour sector at the moment. And I cam up with the US housing market.

Stocks that I have found this sector are James Hardie and boral Bricks.

James hardie is an interesting stock, because it is still making great a profits, in a sector that has reported to be struggling. They have a monoply on the market over there, so the question is how will JHX perform if the Housing market picks up. Lets say in 3-5 years. Their EPS are increasing.

If James hardie and Boral are cyclical stocks, isn't the time to buy when they are out of favour??


The US dollar has had a effect on these two companies, but if there is an interest rate rise, it will probly see the Australian Dollar come off wont it???

MY view is that the Australian dollar / US dollar will correct in 2008 thus leading a number of US exposed stocks such as JHX, BLD, and you could probly throw in Newscorp, MIG, and Iluka, Aristocrat, CSL and any other highly leveraged US stock.

I guess its all a timing thing. But for those long term investors, wanting quality companies not just the next fad, biotech, or iron ore explorer, it's worth considering why quality companies such as JHX, Boral, etc are dropping.

The US dollar, and the housing sector is making a massive difference to a number of stocks,
 
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My tip for the next hot sector would have to be good old coal!

China is building a new coal fired plant every few weeks - demand will increase dramatically - pushing the spot price ever higher

coal stocks that are already producing will benefit greatly

ie- CEY, CHF, FLX etc
 
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With the i/r rise in Australia and i/r cut in the US will mean a stronger Aussie dollar in turn being negative for companies relying on income from overseas especially the US.
The housing figures out of the US are not looking great and their economy will only get worst which will hit companies like James Hardy the hardest.
Taking the above 2 factors into consideration I will not be moving into this sector just yet.
 
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Mineral sands. ILU and BMX seem to be two companies which are not priced to their potential. I held BMX for some time waiting for it to perform and sold it when it didn't. I have it and ILU on a watch list as I believe I will eventually invest in them. (when I get the right signals). Because they are used in the production of products associated with the steel industry the could realign with the iron ore prices.
 
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My tip for the next hot sector would have to be good old coal!

China is building a new coal fired plant every few weeks - demand will increase dramatically - pushing the spot price ever higher

coal stocks that are already producing will benefit greatly

ie- CEY, CHF, FLX etc
I tend to agree regarding Coal. Uranium will take over long term but those power stations take a long time to build and the companies that are building them are few and don't grow on trees so it will take a long time for those 250+ stations to be built and operational. Coal is currently the only fuel that gives us the "on demand" power we need.

My 2c
 

Ken

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Question?

How can we be in a mining boom... where china is eating up all this demand for iron ore and copper. They are obviously building..... Does Asia have no demand for building products that Boral, or James Hardie have?

Or is the market to hard to get into?

With Rinker the last real big company to be taken over out of the top 50.

I am confused how economies can be growing at record rates yet there is no demand for building companies such as Boral and James Hardie.

Is that highly leveraged to the US market?

CEY is a stock that is in favour at the moment, and you could say uranium is taking a breather or found a bottom.

Building stocks however are taking a pounding.

The US dollar is feel is the main reason. Reporting season will be interesting to say the least. Boral still pay a 34 cent dividend per year, growth probly not a factor at this point.
 
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I think LPT's is an out of favour sector. The company I work for (CNP) is an LPT and it's share price has been lagging for 6 mths now. From hitting historical highs of $10 it has been lagging at the $7.20 to $7.50 range for 6 mths now.

Yet yields have never been higher. At some point the market must take notice of the yields again and the share price will rise. Goodman, Stocklands, CER etc have all been tracking side ways after a period of sustained rises. At some stage Aussie LPT's will have to become flavour of the month again as profits are great and companies are setting up platforms to launch into Europe etc.
 
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next 5 years

mining & energy services - especially those with some competitive advantage to overcome the rising costs and provide savings.

research.....................
 

moXJO

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stocks that deal with the food/water shortage in the next media scare campaign in the coming years.
 
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Many current "investors", myself included have gotten used to looking at shares without even looking at a companies dividends. I've not held a share more than 6 weeks since I've been trading and have made consistant returns of between 10-30%. The shares that didn't perform as I expected I sold for losses of around 5%, these only constituted around 10% of my trades. Without even realising it, I've "evolved" from an investor to a trader.

I think once this huge volatility comes out of the market more "investors (speculators/traders) will start to look at the dividends a company can give, rather than predicting or expecting the shares to rise.

My 2c
 
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Question?
How can we be in a mining boom... where china is eating up all this demand for iron ore and copper. They are obviously building..... Does Asia have no demand for building products that Boral, or James Hardie have?
Commercial and residential (lots of units to fit the billion odd people) would use concrete for the floors, walls and roof takes out the requirement for plasterboard usage. Not to mention the Chinese specialty copying a product to sell at a cheaper price, send them a sample of a product and some money they will replicate it with only 1 question asked, how many would you like?
 
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Can I ask why this thread is called 'out of favour sectors' when every sector that's been mentioned, and lesser extent LPT's (which are half construction companies) are cyclicals........the whole point of miners and construction is dramatically changing fortunes in a six month timeframe and timeframes of 10 years...that's the nature of having a high fixed cost base and thin margins....none of these sectors are really out of favour, in fact they are all still quite hot......the king of cyclical: mining, can anyone spell 'bubble'...just my 2c
 
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Base metals and gold stocks have been punished recently, especially explorers.

What other sectors are out of favour at the moment and worth looking at for bargains?
 
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Base metals and gold stocks have been punished recently, especially explorers.

What other sectors are out of favour at the moment and worth looking at for bargains?
My top 3 commodities for the next decade would be:

1. Iron Ore

2. Uranium

3. Tin

India has a lot of infrastructure to build, and will need a lot of power to boot.
 
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Base metals and gold stocks have been punished recently, especially explorers.

What other sectors are out of favour at the moment and worth looking at for bargains?
nothing seems to be better than gold / miners. that has been smashed recently, almost no bulls left, and you know what that means, yes! big rally coming soon. But we have to wait a big first.

Later in the year I think it will fly. I have been nibbling, and think this will be where I will concentrate also.
 

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