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This week…

• 6 key ASX stock picks for 2015

• One stock new to the market with promise

• A stock hitting new recent highs

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General Advice & Risk Warning

Please note that any advice given by Invast staff is deemed to be GENERAL advice, as the information or advice given

does not take into account your particular objectives, financial situation or needs.

Therefore at all times you should consider the appropriateness of the advice before you act further.

CFDs and Forex are leveraged products and carry a high level of risk and are not suitable for everyone. You can lose

more than your initial deposit so you should ensure CFD and Forex trading meets your investment objectives. We

recommend you seek independent advice. Strategies and charts used in this presentation are for example only. You are

reminded that past performance is not indicative of future performance.

Invast Financial Services is regulated by ASIC. It's important for you to read and consider the relevant Product

Disclosure Statement and Financial Services Guide which contains details of our fees and charges before you decide

whether or not to acquire any financial products. These documents are available at www.invast.com.au

Invast Financial Services Pty Ltd ABN: 48 162 400 035. Australian Financial Services Licence No.438 283

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This week we look at the following topics:

• 6 key ASX stock picks for 2015

• One stock new to the market with promise

• A stock hitting new recent highs

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Dear Readers,

We published our 2015 Outlook Guide last month,looking at global markets and touching briefly on ASXlisted shares in the last section. February is aninteresting and eventful month for the Australianshare market. We aim to dedicate the next four weeksto Australian shares and this is made more exciting bythe rollout of Invast’s DMA CFD offering, which meansmany large global shares can now be traded – eitherlong or short.

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February sees many companies who have a 30 June financial year end date reportingtheir interim results. Some companies will be reporting their full year results, so it is avery busy time in the markets. Our analysis will be broken up as follows:

Week commencing 2 February 2015: Outlook for Australian banksWeek commencing 9 February 2015: Mining companies likely to remain losersWeek commencing 16 February 2015: Our six key picks & further analysisWeek commencing 23 February 2015: Result review & upcoming dividendsWeek commencing 16 February 2015: Our six key picks & further analysis

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Last week we touched on mining companies and the general concern we have withbalance sheets. We saw Rio Tinto come out and report a very poor set of numbers butmanaged to slightly please the market on capital management. We don’t think this issustainable, capital management is only temporary. At the end of the day free cashflows are the most important element in valuing a business and the cashflow profilefor mining companies doesn’t look that great, particularly after a period of high capitalinvestment from 2009-2012. These investments need to start generating adequatelevels of cashflow return, otherwise impairments are coming. Newcrest has been anexception, we wrote about it on the Invast blog section of the website this week.

Our focus last week was on what we don’t like but this week we’re focusing on thenames which we think are high quality and have the ability to perform well, as part ofa very well diversified portfolio.

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We first introduced our list of top performers in January through the 2015 OutlookGuide special report. Our key selections were:

• Aurizon Holdings• Coca Cola Amatil• Medibank Private• Primary Healthcare• Toll Holdings• Woolworths

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Our focus will be on articulating our investment conviction for these stocks. Our view isof at least one year and so we aren’t necessarily looking for quick gains out of thisportfolio. We think mature traders and investors need to have this type of tacticalapproach. Our 2014 selections generated around 30% return in a hypotheticalportfolio, using this approach, compared to the broad market which returned only 5%during the same period of time. If you missed this analysis, you can read it again in our2015 Outlook Guide special report.

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Aurizon Holdings

As the world prints more money, infrastructure and property assets grow in value.Paper currencies are losing their shine and eventually inflation will start to face theglobe as a problem. The smart money is looking ahead of the curve, beyond currentlow inflation readings and repositioning their portfolio for the anticipated increase ininflation. Aurizon is very well placed to benefit from this.

Aurizon (formerly Queensland Rail) transports more than 250 million tonnes ofAustralian commodities, connecting miners, primary producers, and industry withinternational and domestic markets. It provides customers with integrated freight andlogistics solutions across an extensive national rail and road network, traversingAustralia. The Company also owns and operates one of the world’s largest coal railnetworks, linking more than 50 mines with three major ports in Queensland.

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According to the company “…the Company’s success and future growth is linked to thekey demand drivers of the Australian resources sector in global markets and theongoing strength of the Australian economy. Aurizon is well placed to benefit from thecontinued long-term growth in demand for coal and iron ore, particularly from fastgrowing Asian economies such as China and India…”

Bottom line: Results are due on Monday 16 February. We will provide a full analysis inour end of month webinar. We think that the business is very well placed to benefit asthe value of their underlying infrastructure network is very difficult to replicate andhedged against inflationary pressure. Falling commodity prices are a drag in the shortterm, but eventually prices will improve and volumes will need to be transportedacross Aurizon’s network. Keep a close eye on the result and attractive as part of awell-diversified portfolio anywhere below the $5 mark.

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Coca Cola Amatil

Coke has a few issues on its plate. It has to deal with the social trends around bottledbeverages and the shift away from sugar fuelled fizzy drinks. It also has to deal with aduopoly in the local supermarket space (we’ll talk about Woolworths below) and astruggling Indonesia business. But having said all that, there is no better board andmanagement to deal with these issues than Coke itself. Take your focus off thesechallenges for a minute and focus on the three following points:

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• The chairman of a company is usually a very good sign of success and businessmanagement. The chairman drives the ship, sets management expectations andguides other board members with them when making capital allocation decisions.Coke’s chairman is David Gonski, perhaps one of the most highly respected businessfigures in Australia.• The local listed company is backed by the Coca Cola Company in Atlanta, which ownsaround one third of shares. The Coca Cola Company is one of Warren Buffett’ssignature investments, so the local shares have an indirect link with one of the largestand most successful investors in world history.• Companies with history are very important. The legacy of a business and its ability toadapt over a period of time should not be under-stated. It is very easy to write offCoca Cola for all its challenges but this is dangerous. Management has been around fora very long period of time, the current asset base and network of data combined withaccess to capital are all important in turning the business around.

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Bottom line: We’re not sure if Coke will manage to report a turnaround this year. Itmight take longer, but when the market senses that things are back in order andmomentum is returning to the company, there is a very large degree of upsidepotential. We’ll watch the results very carefully and look for that all importantmeasurement which we discussed above – free cashflow generation. Unlikely RioTinto, Coca Cola fares much better in this regard.

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Medibank Private

New to the market and a lot to prove given the share price appreciation sinceNovember. We think Medibank is very well placed now that it is in private ownership.The big upside will come from cutting costs with health providers. There is room for amarket approach and all things will be considered. We don’t think Medibank canafford to unsettle the relationship with its providers immediately but can shift thependulum over a long period of time. Meanwhile, the nature of the health industrymeans that premiums are likely to rise above the rate of inflation. Benefits will flowthrough to the bottom line and hopefully, cashflow generation to shareholders willstart to improve.

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Bottom line: Results are due on Friday 20 February, this will be the first big test for thecompany. We get the feeling that prospectus forecasts might be slightly upgraded, butthe market is expecting this anyway. There isn’t much room for disappointment andtraders should also note that a dividend will not be paid until September this year, sobe cautious on overpaying into the result.

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Primary Healthcare

The share price has performed well during the current market rally, not just shy of $5per share as of the time of writing. We feel that the market has misunderstoodPrimary’s key competitive advantages. There might be a temporary threat to volumesif the government does, in some miraculous way, pass through a co-payment. Buttraders and investors should see the larger picture. The Australian government has anissue with an ageing population and rising health costs. Eventually the government willneed to work with price competitive, efficient and scalable operators. This is exactlywhat Primary has to offer.

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There are always risks with the medical industry. Primary must continue to attract theright talent and there have been concerns around the payment of acquiring theseprofessionals. This should be put into context. Just like many other professionalservices industries have changed in recent years, so too will the medical industry.Practitioners without scale and systems will find it difficult to compete, particularly asthe government can dictate terms. Health providers like Medibank will also look tonegotiate their own terms and so scale providers will be the net winners.

Bottom line: Primary’s earnings result is unlikely to blow the lights out but the onus ison management to show that together with a solid underlying business is huge upsideto provide this solution to governments. The long term benefits for shareholders arereal, it all takes the right management and approach to make this happen. We thinkthe shares can continue to edge higher as this message is sold and articulated to themarket.

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Toll Holdings

Now above $6 per share, Toll is finally starting to find favour with the market. Earningswill be released on 18 February and there will be high hopes, particularly as fuel pricesfall and Australians enjoy record low interest rates. The issue to note here is that theDecember balance date results will not contain the full benefits of lower fuel costs andso the onus will be on management to try and articulate how large these impacts areon future earnings.

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The main reason we like Toll Holdings is because of its large scale, brand and networkbenefits. The current return on assets is inadequate, which to us means that earningscan continue to rise without much new investment. The perfect mix is low interestrates and low fuel costs. Activity and volume are the ultimate drivers and so anysignificant rise in unemployment is a threat, so the responsibility is on management tocapitalise on the opportunities and manage the risks.

Bottom line: The market is expecting a reasonable result and given the way that Tollhas under-delivered in the past, there is a strong chance that we might finally see thistranspire. The guidance outlook is perhaps the most important element, traders andinvestors will want to see the two elements mentioned above are starting to positivelyimpact the volume flowing through the business. Toll also has overseas operations andso that translated earnings should be positively impacted by the lower Australiandollar, so also some guidance here.

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Woolworths

The highest quality retailer in Australia. When we first mentioned Woolworth’s as oneof our key picks in the 2015 Outlook Guide, there were many that questioned trivialfactors like the performance of Masters for example. Since then, the share price hasbounced by at least 10% in just over one month. We have a very high regard forWoolworths for some of the same reasons as Coca Cola. Woolworths and Coke are ourhighest quality picks among these list of six stocks for this year. They are thecompanies that we don’t mind holding beyond 2015 if for whatever reason ourconvictions don’t pan out according to plan.

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Woolworths will report its earnings on 27 February. We think the market hasunderestimated the benefits from recent investment in stores. The quarterly salesnumbers are already known in the market, the focus for us is on returns on investmentand a very strong commitment to pay fully franked dividends. As the largest retailer inthe country, Woolworths has huge access to consumer data. It will provide a strongindication.

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Bottom line: Go with quality. The 10% or so return since publishing our view in mid-January is attractive but scope for upside is still very significant. Traders and investorsshould not ignore the capacity and ability of Woolworths to pay a very strong dividend.These franked dividends are exactly what investors are looking for in a low cash rateenvironment. Once the market gets a feel that earnings are under control and Mastersis not a significant threat in the overall scheme of things, we would expect to seeconfidence return to the share price and further gains to continue into the dividendpayment period.

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Next week we will review many of the above mentioned results, as they come tomarket, and also the top 10 index constituents. Anything that hasn’t reported by theend of next week will be covered in our month webinar, with details below:

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Which Shares to Buy? ASX Reporting Season Webinar

Invast Insights chief editor and contributing author Peter Esho will summarise hisoutlook on Australian shares during February reporting season. Esho will document hisfindings based on the performance of key stocks and where he believes the bigopportunities lie next year. His presentation will focus on the following 5 themes:

Performance and outlook of the Australian banksPerformance of mining companies and which to avoidHis 6 key stock picks for 2015Key performance result highlights

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Esho is a regular contributor on CNBC, Bloomberg and host of ‘Your Money YourCall’. His webinar will cover both the fundamental and technical outlook on thesekey themes and a basic introduction to Invast’s new DMA CFD product offeringwhich complements MT4 and other services. This webinar is expected to fill fast.Q&A will be open straight after the presentation. Register now by CLICKING HERE.

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Go to www.invast.com.au/insights to get a complimentary 4 week trial and receive the latest insights as they are published to our live clients.

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DisclaimerPlease note that you are receiving this report complimentary from Invast Financial Services Pty Ltd(AFSL 438 283). Invast staff members may from time to time purchase securities which areincluded in this or future reports. The authors of this report may or may not be holding a positionin the securities mentioned. Please note that the information contained in this report and Invast'swebsite is of a general nature only, and does not take into account your personal circumstances,financial situation or needs. You are strongly recommended to seek professional advice beforeopening an account with us.

General Disclaimer: This newsletter contains confidential information and is intended only for theperson who downloaded it. You should not disseminate, distribute or copy this newsletter. Invastdoes not accept liability for any errors or omissions in the contents of this newsletter which ariseas a result of downloading this newsletter. This newsletter is provided for informational purposesand should not be construed as a solicitation or offer to buy or sell any financial product. InvastFinancial Services Pty Ltd is regulated by ASIC (AFSL 438 283 | ABN 48 162 400 035).

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Risk Warning: It's important for you to read and consider the relevant Product DisclosureStatement, and any other relevant Invast Financial Services Pty Ltd documents before you decidewhether or not to acquire any financial products listed in this email. Our Financial Services Guidecontains details of our fees and charges. All these documents are available here on our website, oryou can call us on +612 8036 7555. CFDs and Foreign Exchange are leveraged products and carry ahigh level of risk and you can lose more than your initial deposit so you should ensure CFD andForeign Exchange trading meets your personal circumstances.

General Advice Warning: Being general advice, this newsletter does not take account of yourobjectives, financial situation or needs. Before acting on this general advice you should thereforeconsider the appropriateness of the advice having regard to your situation. We recommend youobtain financial, legal and taxation advice before making any financial investment decision.

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