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The Experts

Tony Featherstone
Expert
+ About Tony Featherstone
Tony is a former managing editor of BRW, Shares, Personal Investor, Asset and CFO magazines. He specialises in small listed companies, IPOs, entrepreneurship and innovation and writes a weekly blog for The Sydney Morning Herald/The Age on small companies and entrepreneurs.

Would you buy an airline stock?

Monday, February 11, 2019

Large airline stocks are hard to buy at the best of times. They are capital hungry and affected by the oil price, weather, intense global competition, price discounting, business-travel cyclicality, safety and terrorism risks.

US investment legend Warren Buffett once described airlines as the “worst kind of business” because they need high fixed investment and deliver low profit margins. But even he became bullish on the sector in 2017, when Berkshire Hathaway Inc bought into three US airlines.

Qantas Airways defied the airline bears when it rallied in 2017 and the first half of 2018. Its gains were deserved: Qantas’s Return on Equity (ROE) has improved from barely positive a decade ago to 26% at the end of FY18 – an excellent result, especially for an airline.

CEO Alan Joyce, one of Australia’s best business leaders, has led the airline’s transformation. Also, the airline’s Frequent Flyer programme, once touted as a multi-billion-dollar spin-off, showed the latent value in Qantas and its potential to become a technology business of sorts.

I became bullish on Qantas in June 2016 at $3 a share, writing for this Report: “On some valuation metrics, Qantas is one of the world’s cheapest large-cap airline stocks”. Qantas hit a 52-week high of $6.92 in 2018, buoyed by better passenger volumes and margins.

After that rally, I became bearish on valuation grounds and nominated Qantas in January 2019 as a stock to sell.

To read Tony Featherstone's full article, including his analysis of Alliance Aviation Services and Regional Express Holdings (REX), click here to take a free 21-day trial to the Switzer Report.

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Which home-delivered food stock could be worth sampling?

Monday, February 04, 2019

Picture this: by 2030 Australians spend 10 times more on home-delivered food than they do now. Many order at least one meal online daily and some eat every meal this way.

Fewer families plan meals in advance, buy ingredients, cook dishes and eat together. Instead, they fight over which takeaway to have and pass the smartphone App around to order. Thirty minutes later, restaurant-cooked meals are delivered to their door.

Restaurants change their business model. Virtual restaurants (with no shopfront) emerge and old suburban factories are converted into industrial kitchens. Streets are full of busy couriers carting food, drink and other items in the on-demand economy.

Supermarkets, too, change their business model. Fewer people cooking at home reduces demand for fresh ingredients. Supermarkets sell more takeaway food and pre-prepared meals, and integrate that service into online food-delivery platforms.

For younger generations, complex meal-preparation tasks are outsourced and cooking becomes a basic or redundant skill – much like sewing. Home design changes because fewer people need elaborate kitchens and more food is eaten in front of a screen.

This predication is not as crazy as it sounds. Investment bank UBS last year estimated the global food-delivery sales market will grow from about US$35 billion to US$365 billion by 2030, a tenfold increase in the value of home-delivered food in little over a decade...

To read the full article, click here to take a free 30-day trial to the Switzer Report.

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$107 million Powerball prize sparks interest in Tabcorp

Friday, January 18, 2019

A few days ago, a friend left an urgent message for me: “Make sure you buy a ticket in this week’s $100-million Powerball!” Lotteries are a low priority for me, but it’s amazing how a jackpot attracts interest – and sales for gaming companies – from people who don’t normally gamble.

To recap, the Powerball prize that was won last night by a Sydney woman, rose to $100 million in mid-January after no Division One winners surfaced in the previous week’s draw. The jackpot, unclaimed for eight weeks, is the largest in Australian history, matched only twice this decade.

Remarkably, one in three Australian adults were expected to buy a ticket in the draw, many of whom were not regular Powerball players. The $107 million win was the largest Australian lottery prize won by a single entry.

Mega-jackpots are important for ASX-listed Tabcorp Holdings, operator of Powerball. High-profile jackpots boost the company’s revenue, bring new customers to the game and stimulate repeat purchases. Mega-jackpots spark a blaze of free publicity.

Lotteries are huge business. The industry, worth $7.2 billion in 2017-18, delivered just over a half a billion dollars of profit from 288 firms, IBISWorld research shows. Tabcorp has a 37% market share of the Australian lotteries industry, by far the largest. 

Want to know more? Click here to take a free trial to the Switzer Report and read the full story.

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Check under the bonnet of these 2 car stocks

Monday, November 19, 2018

Here are 2 car stocks that could suit investors who can wait two or three years for the market to get into gear.

Click here to take a free 21-day trial to the Switzer Report and continue reading.

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