Top ten stock picks for this year


John Beveridge

Buying and holding blue chip stocks is not a sure-fire way to make money. Last year the ASX 100 Index fell more than 4 per cent. Here are 10 potential winners for the year ahead.


“You can’t lose buying Australian banks.” This is a very common misconception and it doesn’t always hold true. If you look at the share chart for NAB over the past decade, it has gone precisely nowhere in that time. My pick for 2011 is ANZ, which also produced the best share price performance for 2010. ANZ’s smaller size makes it more nimble and sensitive to improvements while its growing Asian exposure gives it access to the region’s fast growth and high savings rates.


The battle between Rio Tinto and BHP Billiton for a place in the blue chip portfolio is always intense but this year I think Rio is best placed. Rio has been spending billions to increase production from its world class Pilbara iron ore mines and is in the box seat in the race to buy African coal play Riversdale Mining.


After more than doubling its share price last year you might think Iluka shares are about to run out of steam but the mineral sands miner is still undervalued, given its dominant position as a supplier of zircon, rutile, synthetic rutile and titanium dioxide.

Even if Chinese growth were to slow down a little this year, there will still be plenty of paint, new wall tiles and other ceramic products produced there, and that means demand for Iluka.


Australians may have been scarce at the retail tills lately but everybody still has to eat and between them Coles and Woolies grab almost 80¢ of every supermarket dollar. I think Wesfarmers is the pick of the pair this year as the turnaround story of the poorly managed Coles supermarkets picks up some momentum.


Macquarie Group may be something of a local alternative term for greed just like Goldman Sachs in the US but that doesn’t mean it won’t have a great year.

With a share price that fell about 23 per cent last year, 2011 will be the year when chief executive Nicholas Moore’s seemingly risky and novel global expansion strategy starts to pay dividends – or should that be retained earnings?


Orica is one of those rare companies that will do well even if commodity prices fall because it sells the modern equivalent of shovels to miners. As long as volumes hold up, miners and infrastructure builders will need Orica’s explosives to get their minerals out of the ground and since the demerger of Dulux the company can focus on ramping up shareholder returns.


Boring companies can be beautiful indeed and Amcor is one of those masters of the mundane. The acquisition of large chunks of Alcan Packaging from Rio Tinto at a very good price leaves Amcor beautifully placed to ride any growth in the global economy but it also remains a highly defensive stock with robust earnings even in recessions.


Some companies have a structure that begs for a takeover and Alumina is one of those. With its main asset being 40 per cent of Alcoa World Alumina and Chemicals, it seems like just a matter of time before Alcoa cleans up the whole structure and gets full control of the alumina and aluminium production out of the two Australian smelters.


We probably learnt two things out of the successful float of QR National last year - foreigners love buying railroads and Asciano is undervalued. This could be the year when the ports and rail conglomerate finally begins to make some money for investors after spiralling debt levels left it friendless, flatlining and out of favour in the wash-up to the global financial crisis.


Super funds and other long-term investors love putting their money in infrastructure, with its reliable, virtual monopoly returns. I think Transurban is the pick of the Australian infrastructure companies because of its excellent suite of local and offshore toll road assets and pioneering status of paying sustainable dividends.

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