Fund managers report that they are finding it harder and harder to identify stock buying opportunities on the Australian sharemarket. But in recent months two managers have added Adelaide Brighton to their portfolios.
In recent investor communication, listed investment companies Australian Foundation Investment Co and Aberdeen Leaders Ltd have both highlighted the addition of the construction materials company to their portfolios.
AFIC says that, given the generally strong market conditions, it has looked to selectively add to existing holdings, often during periods of temporary weakness. Purchases over the past few months include Macquarie Group, Westfield, CSL, Origin Energy, Boral, Clydesdale Bank and Scentre Group.
Sales included reductions in holdings of Incitec Pivot, Coca-Cola Amatil, QBE Insurance and Japara Healthcare. It sold out of Australian Agricultural Co.
The only new holding added during the December half was Adelaide Brighton
AFIC says: “It is difficult to find standout value in the current market. Companies that are displaying prospects for strong growth are being sought be investors and are fully valued.”
Commenting on Adelaide Brighton, it says: “We are confident of its recovery in the Western Australian market and management continues to follow through on its strategy.”
Adelaide Brighton’s share price performed strongly in 2017, starting the year at around $5.20 a share and climbing 25.7 per cent to a peak of $6.54 in December.
The company manufactures and supplies a range of products to the building, construction, infrastructure and mineral processing markets throughout Australia. Principal activities include the production, importation and distribution of clinker, cement, industrial lime, pre-mixed concrete, aggregates and concrete products. It is an S&P/ASX 100 company.
Macquarie Securities has an ‘outperform’ recommendation on the stock. It says the company’s earnings growth will be underpinned by improving market conditions. “Infrastructure activity is helping tighten the market, driving pricing power. We see the prospect for accelerated growth in FY18 as cost pressures (particularly electricity) moderate,” it says.
“While ABC is mindful of the risks in the multi-residential market, the pipeline remains solid at this point.”
Last year the company invested $80 million acquiring a couple of small concrete companies.
“We think prices could yield slightly better outcomes, electricity costs should be a tailwind and volume outcomes remain supported by sold market condictions,” Macquarie says.
