Some of the most popular stocks on the sharemarket, including Commonwealth Bank, CSL, Goodman Group, ResMed and Woolworths, have been slammed as too expensive by one of Australia’s leading fund managers.
“The macro at the moment is hard to call,” says Maple-Brown. “No one has a great read on whether we get the soft or hard [economic] landing, hence people are forced into things that look safe. Last Friday, $49 billion healthcare giant ResMed reported its net profit climbed 12 per cent to $US949.8 million on sales up 18 per cent to $US4.2 billion for the 12 months to June 30, 2023. However, its shares crashed 16 per cent across two trading sessions as the result fell short of analysts’ forecasts.
Sell-side research groups and brokers in Australia also constantly adjust stock ratings and share price targets, partly to encourage investors to trade and pay brokerage fees. However, price targets are a static number in a dynamic market, which inherently means they need periodic adjusting and those investors induced to trade end up the brokers’ product.
Binsted describes CSL as “moderately unattractive” and Commonwealth Bank as “incredibly richly priced” given its valuation relative to domestic and international banks. Woolworths shares have rallied 17.1 per cent in 2023 as investors decided to pay more for its future cash flows given it’s considered more defensive in an economic downturn.This means Woolworths trades on 25.7 times Goldman Sachs’ forecasts for profits in financial 2024, with Coles slightly cheaper at 23.5 times. The market is demanding strong results from both this month.