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As the market moves away from hyper-growth tech and medical companies, the “old school” sectors are back in favor.
Whether it’s building homes, facilitating e-commerce or selling shoes, business activities considered more essential to consumers’ lives are exploding in the face of rising interest rates.
Let’s take a look at 3 examples that experts have rated as “buy” this week:
Who needs shoes? EVERYONE
Bell Potter securities adviser Christopher Watt sees Accent Group Ltd. (ASX: AX1) as good value for money at the moment.
The stock price has fallen more than 41% for the year so far.
“The stock looks attractive given recent levels of price weakness,” Watt told The Bull.
“Accent has an impressive portfolio of footwear businesses, including athlete’s foot, Platypus and Timberland.”
He added that Accent is really building “a positive point of difference” in Australian retail.
“The company has over 500 stores and over 20 online platforms. It pays fully franked dividends.
Indeed, the title distributes nearly a yield of 4%.
Almost no more empty space
Medallion Financial Group analyst Jean Claude Perrottet currently likes the look of Goodman Group (ASX:GMG).
“This proprietary group is a quality business, with approximately $68.2 billion in assets under management.”
He cited Goodman’s 98.4% occupancy rate as a testament to the quality of the business.
“Goodman delivered a strong result in the first half of 2022, with growth in key indicators,” Perrottet said.
“Operating profit of $786.2 million increased 28% over the prior corresponding period. The company has raised its earnings per share guidance for fiscal 2022.”
Goodman is a major beneficiary of consumers’ shift to online shopping, leasing huge warehouse space to retailers.
Morgan Stanley is also a fan, pricing Goodman shares as a buy this week with a price target of $27.88.
That’s an 18% premium to Wednesday’s closing price of $23.63.
“Dominant share” of the American market
building materials supplier James Hardie Industries plc (ASX:JHX) is also a current buy for Watt from Bell Potter.
“This building materials company holds a dominant share of the US fiber cement market amid huge exposure to the attractive US real estate market.”
The stock price has cooled considerably in 2022, falling almost 30% so far.
But in the face of persistent inflation and rising interest rates, Watt appreciates James Hardie’s ability to set his own prices.
“Strong pricing power allows the company to pass on increased manufacturing costs, which protects profitability.”
Firetrail analysts agree with Watt, saying exposure to a growing US market could prove fruitful.
“We estimate that current margins of 29% in North America could increase to 46% by FY27, which is significantly higher than consensus margins of 34% for FY27,” they said in a note to customers last week.
“We believe the market is missing out on the significant market share and margin-building opportunity that awaits James Hardie as he moves his product line into higher-margin products.”