Sharebrokers' tips for 2001

Did your stocks return 41 per cent or better in 2000? Those picked by our panel did. Here are their winners for 2001. By GEOFF SENESCALL

Some stocks get hammered so hard they just look cheap. Fletcher Forests seems to have assumed that mantle in our latest broker survey.

Asked to pick five outstanding performers for 2001, six of the 12 brokers who took part chose Fletcher Forests.

The simple reason - it has to be good value at these levels.

Anyone monitoring Fletcher Forests' fortunes in the past year will know it was among the worst performers, along with technology stocks.

Its price was trounced when Fletcher Challenge aborted a sales process and opted for a heavily discounted rights issue to raise $414 million to recapitalise the company's woeful balance sheet. In response, its shares collapsed from around 85c to 25c, before recovering to around 28c.

One unlucky broker picked Fletcher Forests in our survey last year. Along with a speculative tech stock, it managed to produce a negative return - one of only two firms to do so.

Those who picked Fletcher Forests this year are hoping that if the market does not rerate its shares, it will become a takeover target once it is transformed into a standalone company in March.

If history is anything to go by, the most-favoured stocks in the past two years have performed handsomely - The Warehouse Group (2000) and Auckland International Airport (1999).

It was by only one vote that The Warehouse was not at the top of the pile for the second year in a row. Five brokers picked it to produce another stellar showing.

Last year six picked The Warehouse, although it was already trading around its all-time peak.

The view now is that Stephen Tindall will repeat his winning recipe in Australia, where The Warehouse is expanding.

With such a record, it is hard not to back him, although the Australian market has proved a graveyard for many New Zealand companies and investors.

Air New Zealand was another to get five mentions. But because of its A and B share structure, it has been segmented.

While not as bad as Fletcher Forests, the flag carrier has had an ugly year. It is also viewed as oversold. Reasons it may rebound include the appointment of a new chief executive - Gary Toomey.

Being a respected Australian, he may help break down the view across the ditch that New Zealanders are a bunch of amateurs.

As a former key executive with Qantas, Mr Toomey should be useful in driving the performance of Ansett Australia - now fully owned by Air New Zealand.

The carrier also has the benefit of having one of the most highly regarded airlines in the world as a 25 per cent shareholder, Singapore Airlines.

Another popular pick was Sky TV, with four votes. Here the betting is on the New Zealand dollar continuing its rebound against the greenback. Sky is a major beneficiary of a strengthening kiwi as most of the pay TV operator's programme costs are in US dollars.

Overall, 31 different companies were picked from the 60 choices. Of these, 14 were chosen once.

The theme this year is towards companies with growth potential, and for defensive-type stocks with steady income.

Consequently, there is only a sprinkling of speculative IT stocks - not surprising, given the sector's collapse last year.

The marked shift is highlighted by DF Mainland not choosing any speculative technology stocks in its portfolio.

In 1999 it blitzed the market by jumping on to the technology boom early. But last year, after a good start, its luck ran out.

Thirteen stocks picked last year are no longer seen as potential top performers. Eighteen new ones are.

One making a return after several years' absence was Telecom. Telstra, formerly the favoured telecommunications player, did not get a mention.

Telecom, on the other hand, got three picks. Its price has been under significant pressure in the past year after it cut its dividend to pursue growth opportunities. But it is another now in the oversold camp.

A big year is expected as it consolidates its move into Australia through AAPT. Corporate activity is also on the cards, with a possible tilt at Cable and Wireless' mobile business in Australia.

For the icing, Telecom's register is wide open, making it ripe for a suitor to snaffle a strategic stake - if it can persuade the Government to ease the 10 per cent ownership cap.

Newly listed RMG, Genesis, Vending Technology, Frucor, Comsoft and Wellington Drive all get a mention.

Debt collector and information services company RMG even attracted two picks, as opposed to its rival Baycorp, with only one.

Agriculture's return to favour saw Wrightson, Affco and Tasman Agriculture selected.

However, the choice of Tasman Agriculture is as much about a break-up scenario as an uplift in the sector.

Stocks picked for their corporate activity potential are numerous. Apart from those mentioned, there are Contact Energy, Carter Holt Harvey, Fisher and Paykel and Tranz Rail, with two picks each, Fletcher Building, with three, and Montana, with one.

Contact and Carter Holt Harvey have become perennial candidates. Last year Contact got three picks, based on a perceived imminent takeover by its 40 per cent shareholder, US firm Edison Mission Energy. Now the word is that Edison could be either a buyer or a seller.

Carter's 50 per cent shareholder, US-based International Paper, has also been rumoured to want the whole company. But last year, as with Edison, speculation turned to International Paper as seller.