Brokers in both Forsyth Barr and ABN Amro Craigs were asked to pick five shares in New Zealand and five shares in Australia they believed could excel in what is expected to be another mixed year for investors.
As interest rates fall, listed companies who regularly pay dividends at good yields are expected to come back into vogue.
The Australian stock market will offer investors the best buying opportunity in a generation in 2009, after the bourse suffered its the biggest annual decline ever in 2008.
Australia's main share indices are expected to rebound by up to 30% in the second half of 2009, making up some of the losses in 2008, as the yields on stocks eclipse those offered by cash or bonds and equity investors anticipate an economic recovery.
New Zealand's NZX is expected to show some recovery although much depends on how confident investors are this year.
ABN Amro Craigs brokers Peter McIntyre and Chris Timms have selected a portfolio of resource, infrastructure and energy stocks, including five Australian stocks, among their total top 10 picks, taking a defensive stance in the face of the global recession and market volatility.
Defensive stocks often have a large customer base, be it energy, retail or travel, but more importantly in the face of recession they have good, historical, dividend streams and strong balance sheets, and in these tough times many will have the opportunity and ability to acquire complementary companies.
Many were "robust" market leaders and were historically under good management, Mr McIntyre said.
From New Zealand, the pair identified Auckland International Airport, Contact Energy, Ryman Healthcare, TrustPower and Vector, while the Australian stocks are Beach Petroleum, AGL Energy, Newcrest Mining, Woolworths, and QBE Insurance Group.
Mr McIntyre noted in his pick of Beach Petroleum, trading about A84c, that it was now the fifth-largest Australian-listed oil and gas company in terms of market capitalisation, about $A1 billion, and was the third-largest Australian-listed oil and gas company in terms of reserves and production.
"Australia is a big gas producer and exporter. It has the ability to secure supply cheaply then export to the rest of the world," he said.
AGL Energy, trading about $A15, was the largest publicly owned natural gas, lpg and electricity utility in Australia and New Zealand.
The group's distribution assets included the bulk of the New South Wales gas networks and the Solaris electricity networks in Victoria.
"After its recent acquisition of Pulse Energy, AGL has more than three million retail customers across the energy market.
"The company's other major investments include a 30% interest in the Australian Pipeline Trust, a 50% stake in the AGL-ACTEW joint venture and a 50% interest in lpg distributor Elgas," Mr McIntyre said.
Newcrest Mining had been on watch with Mr McIntyre for some time.
It was formed in 1990 and its operating interests comprise Cadia (100%), Ridgeway (100%), Gosowong-Toguraci Gold Mine (82.5%) in Indonesia, Cracow Gold Mine (70%) in Queensland and Telfer Gold Mine Development (100%) in Western Australia.
Newcrest's strategy was to develop large, long-life operations, or small high-margin projects, which were low cost, Mr McIntyre said.
While gold prices had been depressed in recent months and financing had been difficult with the credit crunch, Mr McIntyre was picking some resurgence in gold later this year when the United States dollar weakened.
Woolworths, trading about $A25, was an Australian-based retailer with more than 1500 stores and annual sales of over $$A45 billion in Australia and New Zealand.
Its major brands included: Woolworths, Safeway, Dick Smith Electronics and PowerHouse, Tandy, Woolworths Liquor, Plus Petrol, BIG W, Foodtown, Countdown, Fresh Choice and Supervalue in New Zealand.
"The supermarkets division is its largest business, representing over 80% of sales and operating earnings," he said.
A tightening in household budgets because of the recession was expected.
However, Mr McIntyre highlighted people would travel less and entertain more at home, which would underpin household spending as customers used supermarkets as "one stop shops".
Contact Energy, trading about $8.60, was established in 1995 and earns most of its revenue from the sale of electricity and gas, being the second-largest generator in New Zealand, with about 27% of the market and about 36% of the gas wholesaling market.
Contact was the second-largest retailer of electricity and the largest retailer of gas in New Zealand, Mr McIntyre said.
Mr Timms picked as his premium share buy Auckland International Airport which was established in 1988 and owned and operated Auckland's airport.
While acknowledging a global downturn in tourism was under way, the weakening New Zealand dollar made the country more attractive for visitors, while the falling price of oil, which was more than $US100 per barrel cheaper than in July, would be reflected in fare prices.
It was New Zealand's biggest airport, both by passenger and aircraft movement.
In addition, AIA owned more than 1500ha of freehold land, with about 180ha to be developed in the medium term, Mr Timms said.
Ryman Healthcare was another defensive company liked by Mr Timms.
It had been operating retirement healthcare facilities for the elderly in New Zealand since 1984, and currently provided services to over 2800 residents.
Ryman provided integrated facilities, from independent apartments through to serviced units, rest-home and hospital beds, catering for the changing needs of occupants as they aged.
The company was leveraged to New Zealand's aging population, which was expected to drive demand for its villages going forward, and provide solid and sustainable market growth.
QBE Insurance Group is an Australian-based non-life insurer writing both general insurance and reinsurance business.
The company operates in Australia, Asia-Pacific, North America and Europe.
QBE was a major player in the Lloyd's market.
QBE was in the ASX top 10, had a market capitalisation above $A24 billion and was easy to access for investors because it was an established global insurer.
"QBE has the ability to acquire other businesses, in these recessionary times, and can raise cash quickly on the markets," he said..
TrustPower, which generated and sold electricity throughout New Zealand, was another company favoured by Mr Timms.
It was the biggest generator in the country, with the most output from renewable energy resources, and it was increasing that output with new ventures.
By customer numbers, TrustPower was the fourth-largest electricity company in New Zealand.
"The company has been a successful player in acquiring additional customers and generation assets throughout the country," Mr Timms said.
Vector was listed in late 2005 in conjunction with its takeover of Natural Gas Corporation.
It was a multi-network infrastructure company that owned and operated a range of energy and technology businesses and assets.
Vector had a 35% share of New Zealand's electricity distribution industry with over 650,000 connections.
Most of these electricity consumers are located in the high-density urban areas of Auckland and Wellington.
It also owned and operated more than 2300km of high-pressure gas pipelines as well as 6668km of natural gas network.
Those were located in about 30 towns and cities throughout the North Island, supplying more than 150,000 gas customers.
Mr Timms said Vector represented an "excellent defensive company", with its strong cash flows, attractive dividend yield and low volatility earnings making it highly attractive, given the volatility of the current market.
The financial disclosure documents of the ABN Amro Craigs and Forsyth Barr brokers are available on request.
