Eight housing and consumer stocks to short

The AFR has another of those terrible Deutsche stock stories today, “Eights housing and consumer stocks to buy”:

  • Asciano. The stock is cheap (below 15x), and offers decent growth and a good yield (around 4 per cent).
  • Boral. The closest to a large cap pure-play housing exposure on the Australian market.
  • Echo Entertainment. Domestic gaming trends continue to improve, in both Sydney and Queensland.
  • Fletcher Building. See Boral
  • Flight Centre.
  • Harvey Norman. Housing leverage as well as exposure to improving consumer spending and offers a good div yield.
  • REA Group. The stock has de-rated substantially, with the PE ratio now at 21x vs the 2-year average of 30x.
  • Stockland. Below market PE and superior dividend yield on offer.

From the top:

  • 15x for Asciano, which is not a growth stock, is ludicrous multiple and it is exposed to slowing in the mining economy
  • Boral and Fletcher are exposed to a property construction boomlet that will peak in the next six months. The market will de-rate them in advance. Same goes for Stockland;
  • Echo has a good story on Chinese tourism but is not a housing or consumption play so shouldn’t be on the list;
  • Flight Centre will be hit as the AUD falls;
  • Harvey Norman may run a bit longer than the housing construction stocks as interest rate keep falling, but really, it is going to be horribly exposed once the bubble pops in the medium term.

I am in no way recommending that peeps do it but from a top down perspective it’s a pretty good short list!

David Llewellyn-Smith
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