Stocks of the Week — WLD, ALG

We have two stocks to bring to your attention to this week. These recommendations are based on data from Sunday 30 Jan 2022.

MARKET UPDATE

It’s been anoth­er volatile week as the Aus­tralian mar­ket was offi­cial­ly declared a “cor­rec­tion”. For­tu­a­nate­ly, QAV investors have guide­lines to fol­low dur­ing tur­bu­lent peri­ods, so we just keep doing what we are doing and remem­ber what we learned from the Hitch­hik­er’s Guide.  

 AORD 2022-01-31

Still, it’s not all doom and gloom. As of this morn­ing, the top stock tips we’ve made in the last few months include:

• KRM is up 60% since we rec­om­mend­ed it on 20/9/21
• GWR is up 50% since we rec­om­mend­ed it on 13/12/21!
• MHJ is up 59% since rec­om­mend­ed on 28/9/21
• SFR is up 11% since rec­om­mend­ed on 18/10/2021
• CIA is up 19% since rec­om­mend­ed on 29/12/2021!
• ATP is up 33% since rec­om­mend­ed on 15/11/2021 
• IMA up 15% since we rec­om­mend­ed it on 02/11/2021 

Of the 41 stocks we have rec­om­mend­ed since Sep­tem­ber, 34% are up, 7% are neu­tral, while the oth­er 58% are down, some by a lit­tle, some by a lot, but if you’re fol­low­ing the QAV sys­tem, you’d have already replaced those in your port­fo­lio (QAV Rule #1 – Nev­er Lose Mon­ey). Our goal is to have 60% of our stocks per­form well over the long term. Obvi­ous­ly, dur­ing tur­bu­lent mar­kets, find­ing these is a lit­tle more dif­fi­cult than it is dur­ing upbeat mar­kets, but that’s why invest­ing takes patience and a long-term strat­e­gy for rid­ing out the cycles.

Obvi­ous­ly in the cur­rent cli­mate it’s dif­fi­cult to find stocks to rec­om­mend, but if you turn over enough rocks there is always some­thing that is buck­ing the trend. 

 

THIS WEEK’S STOCK RECOMMENDATIONS ARE:

1. Small Cap: WLD

Wellard Lim­it­ed (XASX:WLD) is a largest cat­tle exporter and a ver­ti­cal­ly inte­grat­ed agribusi­ness that con­nects pro­duc­ers of cat­tle, sheep and oth­er live­stock to cus­tomers glob­al­ly through a ver­ti­cal­ly inte­grat­ed sup­ply chain. Wellard oper­ates in the beef, sheep meat and dairy indus­tries.

Wellard had some prob­lems over the years, involv­ing issues with live­stock exports, but recent­ly had an arbi­tra­tion win with a ship-build­ing firm in Croa­t­ia, which con­sid­er­ably boost­ed their share price.  They also had a qual­i­fied audit in 2020 which removed them from our buy list for a while, but that seems to have been resolved. 

Here are the rea­sons we like WLD this week.

• Based on the cur­rent share price of $0.11, WLD has a qual­i­ty score of 90% and a QAV score of 0.22
• Aver­age Dai­ly Trade of $8,000 is very low, mak­ing it only suit­able for peo­ple with a very small amount to invest 
• Price-to-Oper­at­ing Cash Flow ratio of 4.14
• Finan­cial health is strong and recov­er­ing
• Price is less than book + 30% 
• The cur­rent PE is the low­est in six halves 

 2. Large Cap: ALG

Ardent Leisure Group (XASX:ALG) is an own­er and oper­a­tor of leisure and enter­tain­ment assets across Aus­tralia and the Unit­ed States. ALG’s busi­ness seg­ment includes US Enter­tain­ment Cen­tres and Aus­tralian Theme parks.

While they might be most­ly known here for Dream­world (it’s been five years now since the Thun­der Riv­er Rapids tragedy but I still think of it every time I dri­ve past the place, but RIP John Longhurst), over 90% of the val­ue of the busi­ness is derived from Main Event, a US-based chain of fam­i­ly enter­tain­ment cen­tres. Ardent oper­ates 45 Main Event cen­tres across the US and plans to con­tin­ue expand­ing.

Some of the rea­sons we like ALG this week include:

• Based on the cur­rent share price of $1.30, they have a qual­i­ty score of 64% and a QAV score of 0.10
• Aver­age Dai­ly Trade is $1,146,000
• Price-to-Oper­at­ing Cash Flow is 6.64, a lit­tle high, but under our cut­off 
• Finan­cial health is recov­er­ing (post COVID which obvi­ous­ly smashed theme parks around the globe)
• Cur­rent price is low­er than the ana­lyst con­sen­sus 
• It has a new three point upturn

 

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 Please Note: 

Our rec­om­men­da­tions are based on the share price as of the date of the down­load. If the share price changes, this will affect the QAV score and its rank­ing on our buy list, so please take price changes into account before mak­ing any invest­ing deci­sions.

Also note that while we apply a high lev­el of sci­ence in our selec­tion process, some stocks may not per­form well in the short term. Like War­ren Buf­fett, we aim for a 60% suc­cess rate (mean­ing 60% of our stocks will do well in the short term, the oth­er 40% will not). So it’s very impor­tant to mon­i­tor your port­fo­lio and to sell the ones that don’t per­form to your expec­ta­tions. The way we do this in QAV is using Rule #1 and the 3PTL. If you’re not famil­iar with how to use those, please lis­ten to the pod­cast and con­sid­er join­ing QAV Club.

We have very strict guide­lines about what we dis­close about our own port­fo­lios, and when we buy and sell stocks that appear as our stocks of the week. You can read our guide­lines here.

Final­ly, please also note that this isn’t per­son­al finan­cial advice and you should con­sult a finan­cial plan­ner before mak­ing any invest­ment deci­sions.

Each Monday we publish our COMPLETE buy list for QAV Club members. It usually contains 100–200 stocks.