Edited Transcript

Matthew Kidman: Welcome to Buy Hold Sell brought to you by Livewire Markets. My name’s Matthew Kidman, and today I’m joined by Stuart Welch from Alphinity and Emma Fisher from Airlie, and we’re talking about bad performing blue chips. Who would have thought blue chips in a coronavirus year could do so badly.

Right at the top of the pile, CSL. It’s down about 15% Emma, who would have thought? It was a go-to when COVID-19 happened and it’s just faded the whole way. Buy, hold or sell?

CSL (ASX:CSL)

Emma Fisher (BUY): I’ll say buy. I think buying a good business on a hiccup is usually a good strategy, and it’s even better when the hiccup isn’t their fault. Plasma supply issues are outside their hand, they’re pandemic-induced, I think they’re short term. And it’s a great entry point to a business with one of the best track records in Australia. So buy.

Matthew Kidman: We’ve always said Stuart, great business to buy, is this the opportunity? Buy, hold, or sell?

Stuart Welch (BUY): I think it’s a buy also. It’s a matter of the plasma collections, so donors in the US just haven’t been coming in for fear of COVID-19. Vaccinations in the US are rolling out very quickly. It’s highly likely that rolling forward a few months that we’d start to see people come back in and those plasma collection issues will be rectified. So I think it’s a buy here.

Coles (ASX:COL)

Matthew Kidman: And we all saw the vision last year, everyone lining up at the supermarkets. Who would have thought Coles, one of our big supermarkets, flat on the year? Who would have thought when the guys from Status Quo were singing prices down, down, they were going to be talking about the share price? Coles, buy, hold or sell?

Stuart Welch (SELL): I think that one’s a sell. They’ve been seeding a bit of market share to Woolworths, and they’re certainly behind in the online strategy, which is going to require a pretty significant investment at a time when sales volumes are probably going to roll over. So I think it’s a sell.

Matthew Kidman: It’s been a bad performer, Emma. Is it time to turn the red hand up or down? Buy, hold or sell?

Emma Fisher (BUY):  I think it’s a buy. I think turn the red hand up. I think it’s pretty well understood that they’re going to have some challenging comps. The whole space will this year. And meanwhile, they’ve generated a tonne of cash. They’ve gone from net debt to net cash position. And so I think they’ve got a real opportunity to invest in the business and close that perennial margin gap with Woolworths and with it, the valuation gap. So I’d say buy.

Brambles (ASX:BXB)

Matthew Kidman: It seems strange to me that a lot of goods have moved around while people have stayed still in the last 12 months. Brambles, pallets, goods. Buy, hold, or sell?

Emma Fisher (HOLD):  I’m going to say hold. I think it’s getting close from a valuation perspective. What’s always kept me on the sidelines with this business is the fact it’s a very capital intensive business model. Now management has done some good work on addressing that, but with lumber prices ripping, it’s the main input into their CapEx. It’s going to really undo a lot of their good work and basically, they have to spend more cash just to stand still. So it’s a hold for me.

Matthew Kidman: We have had a number of upgrades for brambles over this year that would have normally driven the share price. It just can’t win any investors over. Buy, hold, or sell?

Stuart Welch (HOLD): Yeah, I think it’s a hold also. It looks reasonable from a valuation perspective, but there are input cost pressures. Lumber is one, also transport, and labourers. So there is a bit of a concern there in terms of the input cost pressures and despite a pretty strong pricing environment over the last few years, they’ve really struggled to generate any operating leverage. And it’s hard to see in the environment going forward with more of that input cost pressure coming through that they’re going to be able to do that.

Macquarie Group (ASX:MQG)

Matthew Kidman: We’re going to make it really easy for you Stuart. You’ve just got to pick one stock from the top 20. Only 20 stocks to pick out of, that you think is good value at this point and is a blue chip.

Stuart Welch (BUY): I think Macquarie Bank is probably one. They’ve obviously had a couple of upgrades in the last few months. They upgraded their strategy day and then some of the volatility driven by the Texas freeze allowed them to upgrade again, which has papered over quite a few other cracks or earnings risks and worries that I think the market had during COVID-19. Meanwhile, the medium-term and long-term thematics from what they’re doing still remain. So I think it looks pretty attractive here.

Aristocrat Leisure (ASX:ALL)

Matthew Kidman: Emma, have you’ve got something in that top 20 that’s got you very excited?

Emma Fisher (BUY):  Well, I echo your sentiments on Macquarie. But the stock that I’d also point out as a buy today is Aristocrat. I think as the US opens up, people are going to be going back to the casinos. They’ve got the best product suite there. I think the digital business is booming and that’s probably a structural story for them. Meanwhile, on FY22 earnings, it’s around a market multiple and the business does double the returns of the market. So I think it’s a really high-quality business.

Matthew Kidman: It’s time to roll the dice and push all your blue chips into the middle. If you enjoyed that show, please subscribe to the Livewire channel on YouTube.

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