The key question for investors making decisions on buying shares next year should be whether a company can deliver earnings growth, according to sharebroking firm Forsyth Barr.
SEVEN ISSUES FOR INVESTORS
1. The overall economic background is positive, but more emphasis needs to be placed on profits growth because valuation multiples are currently elevated.
2. The election result will be a "coin toss" with the the worst-case scenarios expected to be priced by the market. "Opportunities will exist once this has occurred."
3. Australian economic conditions are expected to be a "headwind".
4. Interest rates have risen and will go higher, but they will not derail economic growth.
5. Global dairy demand looks unassailable and could be understated.
6. The housing and construction boom bodes well for building stocks, but the effects could flow on to other cyclical stocks.
7. Merger and acquisition activity will increase.
FORSYTH BARR'S PICKS
1. Air NZ: Near-term earnings could improve as competitive advantage is gained through lower capital cost of new aircraft fleet.
2. A2 Corporation: A2 benefits from strong dairy demand, promising strong growth as well as being a potential acquisition target.
3. Contact Energy: The single-buyer electricity model is already priced in.
4. Mainfreight: Cyclical and structural growth looks likely as Australia recovers.
5. Opus International: Will benefit from local construction activity as expectations for its overseas operations are improving.
6. Skellerup: Demand for industrial products is growing as the global economy recovers. Exposure to the dairy sector is also positive.
7. Sky TV: Competitive and regulatory risks could be overstated while positive cash flows have not been reflected in the share price.