Market on the defensive in 2008

Financial services firm Ord Minnett has announced its stock picks for domestic equities, with a strong focus on defensive, blue chip shares.

Ord Minnett head of research Simon Kent-Jones said given the uncertainty in the markets, the approach taken when choosing the stock picks this year was more defensive and cautious than in previous years.

“From the stock market’s point of view, the debate over whether the US economy is mired in recession or not appears of little significance. The dismal start to the year provides a clear indication that the market’s already deciding how the economic cards will fall,” he said.

According to Kent-Jones, there are four investment themes that will be important in 2008: selecting quality companies with strong defensive qualities, stocks with true blue chip characteristics, having the right exposure to resources and seeking positive returns on a share portfolio.

“These stocks are a mixture of both large and small capitalisation stocks, including blue chip, growth and income stocks,” Kent-Jones said.

“Many of the stock picks for 2008 can be combined with other stocks to form the core of an investment portfolio, whilst others … can be used to enhance the performance of an existing portfolio.”

Ord Minnett’s recommendations included Spark Infrastructure, Toll Holdings, DWS and Woolworths for their defensive qualities; ASX, CSL and Macquarie Group as true blue chip picks; BHP Billiton, Territory Resources and Mac Services for their strong resources outlook; and Commonwealth Bank PERLS IV and St George CPS II for their potential for positive returns.

Kent-Jones said Commonwealth Bank PERL IV and St George CPS II warranted closer inspection as they offered investors a “parcel of good news”.

“Currently, both securities offer a yield that is similar to that offered by the ordinary shares of the respective banks, but as we have previously mentioned, with far lower levels of price volatility. This provides investors with preservation of capital and an attractive yield.”