Tamsyn Parker

Money Editor for NZ Herald

Brokers' 2013 hottest picks

Ryman, Diligent and PGG Wrightson are the favourites to perform well next year.

With a market capitalisation of over $2 billion, Ryman is at the big end of town. Photo / File
With a market capitalisation of over $2 billion, Ryman is at the big end of town. Photo / File

Three stocks have the strongest backing from brokers in the 2013 broker picks.

Ryman Healthcare, Diligent Board Member Services and PGG Wrightson have been chosen by three out of seven brokers as the hot favourites to perform next year, but they all have very different business cases.

Ryman, which operates retirement villages, has been a perennial favourite with brokers and, given its strong performance over recent years, it is probably no surprise it's on the list again. Ryman shares rose more than 68 per cent in the past year after the company revealed a record annual profit in May.

Mark Lister, head of research at Craigs Investment Partners, says Ryman is the best-performing stock on the New Zealand market. over just about any given period, with an average annual return of 31 per cent over the past decade.

"Ryman has consistently grown its earnings and dividend while never coming back to shareholders to ask for any extra capital."

Lister said the business was of "outstanding quality" and remained well supported by the growth tailwind of an ageing population and growing demand for healthcare services.

Rob Mercer, head of private wealth research at Forsyth Barr, is also a fan of the company and notes Ryman has continued to deliver a high-quality product. "It has the scale, in-house expertise and development pipeline to capitalise on this demand and is a recognised market leader. Ryman is a leading NZ-focused success story with a solid growth profile."

With a market capitalisation of over $2 billion, Ryman is at the big end of town but size doesn't always matter when it comes to growth potential.

Boardroom technology company Diligent is a good example of a fast-growing start-up business. It had a rocky start after floating in 2007 but has since grown exponentially.

Shares in the company have soared more than 130 per cent in the past year on the back of strong revenue and sales growth, making it the second-best-performing company on the sharemarket this year.

In June it moved on to the NZX 50 index. There is speculation the firm could consider a Nasdaq listing in the future.

Lister said Diligent was a market leader and had significant global opportunities ahead for growth.

"The company has quickly moved from a loss-making position a few years ago to generating strong profits, it has $25 million of cash on its balance sheet and there is the prospect of a dividend in 2013 which will be a strong signal for the company's earnings sustainability."

Some brokers are also keen on the turnaround prospects for rural services provider PGG Wrightson.

Wrightson returned to profit this year after making a $30.7 million loss in 2011. The company has been in transformation mode, selling off its finance arm and other non-core parts of the business over the past two years.

Mercer said Wrightson was one of its top picks because of the progress made in improving its underlying operating performance and growth prospects.

"Its proprietary seed business remains in a strong position with a competitive advantage in its significant research and development facilities. Assuming no further drastic climatic condition issues in Australia and New Zealand, we believe PGG Wrightson is well positioned to achieve solid earnings growth over the medium term."

Tower, Sky Television, SkyCity Entertainment Group and rubber products maker Skellerup were also popular, gaining two picks each.

Disclaimer
Before using the Business Herald survey to choose a broker or stocks, readers should recognise that the results are skewed by some features. The figures exclude brokerage fees. Brokers are asked to choose the securities that will give the best short-term performance. If they had been asked to choose, for example, a five-year term, the results might be different. The survey does not allow brokers to review choices during the year. The survey implied a one-size-fits-all approach. It takes no account of individual circumstances such as an investor's appetite for risk, need for income or tax circumstances. The views expressed do not constitute personalised finance advice and are not directed at any person. Finally, past performance is no guarantee of future performance.

- NZ Herald

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