Rudi’s View: Rate Cuts, Growth & Small Caps

This story features UNIVERSAL STORE HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: UNI

Part One of this week’s Weekly Insights was published yesterday: https://fnarena.com/index.php/2024/07/17/rudis-view-corporate-earnings-the-best-indicator/

Part Two contains updates on strategies, model portfolios, key picks, best buys and conviction calls.

Research-based views and strategy updates pass by just about every day at FNArena. This week I have cherry-picked quotes to illuminate and inform about trends in views and forecasts that are underpinning positive sentiment in share markets in July.

Model Portfolios and Best Buy Ideas are, as per usual, further below.

Rate Cuts, Growth & Small Caps

By Rudi Filapek-Vandyck, Editor

“In early April we upgraded our year-end 2024 ASX200 market target on signs of relief from investors that economies were on a more balanced path. Since then sentiment and momentum have driven stocks higher, with the ASX200 breaking through our 8000 market target on Monday.

“Although we remain positive on equities, we keep our year-end target unchanged at 8000 as we await upcoming company results through August. Bull market yes, but no clear signs of market euphoria. Crossing a market milestone allows us to compare and contrast with previous experiences.

“At 8000, the ASX200 sits on a richer than usual valuation multiple, whilst the current dividend yield still seems comparable to history. Bolstering the support for equities is the fact that although both cash and bond yields have risen over the last four years, they don’t offer the attractive pull they once did have against stocks”

(…)

“The cyclical adjusted PE, or CAPE’, allows us to gauge if standard PE ratios are being restrained by an over inflated earnings base. Currently we do not see any such signs of an ‘earnings bubble’, with share prices still being relatively commensurate with the preceding trends seen in earnings. ROE’s also indicate that companies have not been ‘overearning’.”

[UBS]

****

“The door is opening for the Fed to begin cutting rates soon, which we expect to start in September (25bp).

“Second quarter inflation data indicate disinflation is in place. The labour market has rebalanced, and hiring is slowing.

“Our models indicate that GDP growth may slow to below its potential rate. This adds to our conviction that excess demand has subsided, and the broader economic landscape supports a sustained return to price stability.

“Monetary policy looks too tight. Our augmented Taylor Rule gauge of neutral policy rates signals fed funds should be in a range of 3.75-4.0%. We forecast fed funds to be in a range of 3.25-3.50% by Q3 2025.”

[ANZ Bank]

****

“Markets are almost fully priced for a cut at the September 17-18 FOMC meeting, which remains our baseline forecast. But we see a solid rationale for cutting as early as the July 30-31 meeting.

“First, if the case for a cut is clear, why wait another seven weeks before delivering it?

“Second, monthly inflation is volatile and there is always a risk of a temporary reacceleration, which could make a September cut awkward to explain. Starting in July would sidestep that risk.

“Third, the FOMC has an undeniable (if never acknowledged) incentive to avoid initiating cuts in the last two months of a presidential election campaign. This doesn’t mean the committee couldn’t cut in September, but it does mean that July would be preferable.”

[Goldman Sachs]

****

“With the stage now set for Fed rate cuts (our economists see the first cut in September), the question is, how will equities respond to a lower policy rate given it is likely to come alongside softer growth and pricing power?

“We side with the historical precedent, which suggests a quality and growth equity leadership base. As a result, we are not of the view that last week’s brief rotation to lower quality cyclicals persists in a durable manner. We also retain our constructive stance on select defensive pockets, some of which are showing relative earnings revisions strength (…).

“Growth over Value within Small Caps. Growth has recently started to outperform value within small caps as rates have come down. In our view, this is supportive of the idea that longer duration small caps that are more secular growth-oriented and more sensitive to cost of capital have benefitted on a relative basis as yields have come down.

“In contrast, small cap stocks that are more economically sensitive (i.e., value) have not benefitted given lower rates are likely a reflection of slower growth and pricing power. We believe this trade has more relative upside to go as earnings revisions are supportive of small cap growth, and history shows that small cap growth typically outperforms when the Fed begins cutting rates.”

[Morgan Stanley]

****

“In the US, worries continue about stretched valuations, but we see reason to be positive. While the market-capitalisation weighted S&P 500 has a forward price-to-earnings (P/E) ratio of 21, the forward P/E of the equal-weight version of the Index is a more reasonable 16, especially given current interest rate levels. The difference reflects the large weighting big tech has in the benchmark.

“For the rest of the S&P 500, earnings growth declined on average during the first quarter, which helped to cap valuations. Even so, consensus forecasts expect profits to reaccelerate over the remainder of year, resulting in overall positive earnings growth for calendar year 2024.

“We take a similar view but also note uncertainties around consumer spending, the timing and number of potential rate cuts, and geopolitical tensions. As such, we continue to think investors should focus on high-quality firms whose growth is not dependent on the economic cycle, can generate strong free cash flow, and have reasonable debt levels.

“Today, we think one sector that offers many of these attributes is healthcare. After a multiyear bear market, many biotechnology stocks still trade below the value of cash on their balance sheets. Meanwhile, the broader healthcare sector’s (S&P 500 Health Care Sector) total return lagged the S&P 500’s by more than 20 percentage points in 2023, suffering from a sharp slowdown in COVID-19-related product sales.

“And yet, the healthcare sector is ripe with innovation. Last year, the Food and Drug Administration approved a record 73 novel medicines. These drugs are now beginning what will likely be a 10-year revenue cycle, including in new end markets with multibillion-dollar sales potential.

“Recently approved GLP-1 drugs for diabetes and weight loss, for example, are already annualising more than [US]$30 billion in revenue and are forecast to reach roughly [US]$100 billion in sales by the end of the decade.”

[Janus Henderson]

****

“Our base case remains that inflation will subside enough over the balance of the year for the Fed to cut rates twice, while economic activity will slow, but in an orderly fashion.

“This macro backdrop keeps us constructive despite some caution around current US valuations and signs of tech sector exuberance. We continue to believe that broader market participation will characterize the second half of 2024.

“However, this broader participation will require a clearer signal on growth, which we view as a prerequisite for market breadth to extend beyond mega-cap AI.”

[Wilsons]

****

“Historically, when the market experiences a significant one-day rotation from large to small caps, the trend tends to continue for the following four weeks.

“When reviewing the top 5 instances, the largest 10 companies underperformed the rest of the market by -4.8% over the next month.

“Importantly, the S&P 500 advanced by 4.5% over the same period.”

[Crestone]

****

“Discontent with incumbent leaders has been a common theme leading to several opposition party wins, with economic, trade, and immigration policies and corruption also contributing to voter dissatisfaction. The uncertainty associated with these elections could aggravate an already fragile global economic environment on the cusp of finally reigning in inflation and skirting a more severe downturn.

“With the potential for abrupt changes in fiscal policies, trade, and tariffs on the horizon, markets could become increasingly volatile as they weigh the impacts. Some of this is already playing out across European markets, which appeared to be turning the corner economically just weeks before recent snap elections were announced.

“With more elections to come and the increasing uncertainty around the U.S. elections that are still months out, the uncertainty itself could become an increasing downside risk to growth and one leading to central bankers regretting not snapping at the opportunity when they had it.”

[T Rowe Price]

****

“Inflation is stickier than expected but should further decelerate towards central bank targets in 2025. This will allow major central banks to proceed with a new cycle of cuts to avoid an excessive slowdown, though at different speeds.

“Economic fundamentals support easing in most EM countries, as long as the Fed does not raise rates. Our base case is that the Fed will begin cutting rates by September 2024.

“A less likely downside scenario would be a renewed spike in inflation in the wake of the US election.

“Geopolitical risk is expected to increase in the coming years, with factors such as protectionism, sanctions, tariffs, export controls, and trade wars intensifying. The outcome of the US election will be pivotal, as US foreign policy should significantly differ under a Biden vs Trump presidency.

“Nevertheless, US confrontation with China is expected to rise and Europe will need to assess its approach to China because of its own priorities in defence, resilience of supply chains, and the energy transition.”

(…)

“Overall, we favour high-quality equities, maintain a positive duration stance, and look at commodities as a hedge against inflation.”

[Amundi]

****

“Our base case is for volatility (geopolitical and market) to persist in the short-term and hence we retain a fairly conservative stance in our asset allocation positioning. The risk-reward opportunity in fixed income, particularly high quality domestic credit, remains compelling with yields well in excess of equities and valuations in line with historical levels.

“From an equity perspective we prefer to tilt portfolios towards global (US and Emerging Markets) exposures given more accommodative monetary and fiscal policy backdrops which, in turn, should support earnings and returns over the medium-to-long-term.”

[Evans and Partners]

****

“We are adding risk to portfolios by moving modestly overweight equities. As global inflation pressures ease, this should set the scene for lower rates, supporting broader financial conditions.

“That said, we are cognisant of the risks to the outlook, including relatively expensive equity valuations. We favour fixed income, with current yields continuing to offer a favourable risk-return outlook.

“Within alternatives, we favour hedge funds and real assets, particularly infrastructure. We lean overweight equities, favouring quality and domestic equities.”

[Crestone]

****

“The key change to our forecasts over the past month was the shift on our view for the timing of the first RBA rate cut. We now expect the first cut to occur in May 2025 though we still expect the RBA to ultimately cut rates by 125bps over the subsequent year or so.

“We acknowledge the upside risks to rates in the near-term, but we ultimately see the RBA maintaining its strategy of trying to hold onto labour market gains. That sees the need to remain on hold for longer.”

[National Australia Bank]

****

“The economic situation has affected Australians differently. Older Australians and retirees have experienced the least pressure, with deep savings and interest income growth.

“Generally, mortgagees, confronting higher interest rates, inflation, and fewer working hours, have been able to manage through with savings built during the pandemic.

“Renters and younger people have come under the most pressure during these times as they have a smaller pool of savings. Assuming the economy evolves in line with the RBA’s forecasts, much of this year will remain challenging for borrowers and renters already under pressure.”

[Shaw and Partners]

****

“On balance, we see the now significant weakness in the domestic consumer as suggesting the upcoming tax cuts, while supportive for consumption, won’t add materially to the inflation backdrop.”

[Wilsons]

****

“Our forecast for an August RBA rate hike and continued lag of the global easing cycle could drive more FX appreciation a help to the disinflationary path via imports.

“In equities, current levels of AUD should not challenge FY24e result outcomes, but should consensus embrace a structurally higher AUD for FY25e+, there would be more meaningful translation headwinds to earnings.

“Offshore investor and corporate interest in Australia would also be influenced.”

[Morgan Stanley]

****

Also:

Ahead of the August reporting season, JP Morgan’s favourite apparel retailers are, in order of preference, Universal Store Holdings ((UNI)), Accent Group ((AX1)), then Lovisa Holdings ((LOV)).

Model Portfolios, Best Ideas & Conviction Calls

Ord Minnett‘s Buy-rated stocks in the local technology sector are currently: Cosol ((COS)), Dropsuite ((DSE)), Hansen Technologies ((HSN)), Life360 ((360)), Qoria ((QOR)), Seek ((SEK)), Siteminder ((SDR)), and Xero ((XRO)).

The list contains one lonely Sell rating, which is reserved for Pro Medicus ((PME)).

****

Market strategists at Evans and Partners bemoan the fact higher for longer inflation numbers in Australia are preventing the RBA from lowering the burden of high interest rates. This, argue the strategists, effectively places a ceiling over the economy and the share market, limiting upside potential.

The key risk for the quarters ahead, argues Evans and Partners, is that high inflation with low growth becomes the consensus view locally. The strategists thus implore investors to be cautious and selective, “scruitinising those businesses and industries facing cyclical headwinds and instead focussing on companies with more diverse earnings drivers.”

Evans and Partners’ key focus has turned to offshore earners, “as well as businesses with strong industry positions benefiting from structural thematics such as digitalization and decarbonisation”.

Selected names:

-Aristocrat Leisure ((ALL))
-Brambles ((BXB))
-Flight Centre ((FLT))
-Macquarie Group ((MQG))
-Treasury Wine Estates ((TWE))
-James Hardie Industries ((JHX))
-Block Inc ((SQ2))

As well as:

-BHP Group ((BHP))
-Rio Tinto ((RIO))
-Monadelphous Group ((MND))
-APA Group ((APA))
-NextDC ((NXT))
-Macquarie Technology Group ((MAQ))

Also worth mentioning, Evans and Partners’ preferred yield ideas are:

-APA Group ((APA))
-Arena REIT ((ARF))
-Qantas Airways ((QAN))
-Telstra ((TLS))

****

Key Stock Picks for the year-ahead noiminated by analysts at Bell Potter:

-Among listed investment companies (LICs); Australian Foundation Investment Company ((AFI)), Metrics Master Income Trust ((MXT)), and MFF Capital Investments ((MFF))

-Agriculture & fast moving consumer goods; Bega Cheese ((BGA)), Rural Funds Group ((RFF)), and Elders ((ELD))

-Technology; TechnologyOne ((TNE)), Gentrack ((GTK)), and REA Group ((REA))

-Diversified Financials; Perpetual ((PPT)), Regal Partners ((RPL)), and McMillan Shakespeare ((MMS))

-Real Estate; Dexus Convenience Retail REIT ((DXS)), HealthCo Healthcare & Wellness REIT ((HCW)), and GDI Property Group ((GDI))

-Retailers; Premier Investments ((PMV)), Universal Store Holdings ((UNI)), and Propel Funeral Partners ((PFP))

-Aerospace & Defence; Electro Optic Systems ((EOS)) and Austal ((ASB))

-Industrials; Brickworks ((BKW)), IPD Group ((IPG)), and Cleanaway Waste Management ((CWY))

-Healthcare; Telix Pharmaceuticals ((TLX)), Cyclopharm ((CYC)), Aroa Bioscience ((ARX)), MedAdvisor ((MDR)), and Neuren Pharmaceuticals ((NEU))

-Gold sector; Capricorn Metals ((CMM)) and Santana Minerals ((SMI))

-Base metals; Aeris Resources ((AIS)), Nickel Industries ((NIC)), and Mineral Resources ((MIN))

-Strategic Minerals; Alpha HPA ((A4N)), IperionX ((IPX)), and Liontown Resources ((LTR))

-Energy sector; Boss Energy ((BOE)) and Paladin Energy ((PDN))

-Mining services; Seven Group Holdings ((SVW)), Mader Group ((MAD)), and SRG Global ((SRG))

****

Barrenjoey Chief Equity Strategist Damien Boey has been among the first to declare it’s time to pivot the investment portfolio in favour of a more defensive positioning (not that the market has been paying any attention).

Barrenjoey’s Bucket List of conviction calls includes the following selection:

-Woolworths Group ((WOW))
-Viva Energy Group ((VEA))
-TechnologyOne ((TNE))
-Medibank Private ((MPL))
-Steadfast Group ((SDF))
-Aussie Broadband ((ABB))
-QBE Insurance ((QBE))
-Santos ((STO))
-Northern Star ((NST))
-Ampol ((ALD))
-Insurance Australia Group ((IAG))
-Ventia Services Group ((VNT))
-AUB Group ((AUB))
-Aristocrat Leisure ((ALL))
-Brambles ((BXB))
-Origin Energy ((ORG))
-Cochlear ((COH))
-Car Group ((CAR))
-Metcash ((MTS))
-Aurizon Holdings ((AZJ))
-Cleanaway Waste Management ((CWY))
-ResMed ((RMD))
-Orora ((ORA))
-Telstra ((TLS))
-CSL ((CSL))

Boey’s reasoning for a more defensive portfolio positioning is because global risk appetite is currently much higher than the economic outlook deserves it to be. Even with the prospect of central bank rate cuts underpinning positive sentiment, Boey thinks it’s more likely risk appetite will, at some point, pull back.

Potential triggers include the Bank of Japan diverging away from its global peers, and devaluations of JPY and/or the Chinese Yuan.

In Australia, the Barrenjoey strategist worries about the RBA raising rates further in response to stubbornly high inflation. With excess savings depleting rapidly among Australians, consumer spending remains at risk of slowing further, with negative flow on effects for the labour market.

Barrenjoey is thus underweight banks and domestic rate-sensitive cyclicals and believes Insurance, Staples, Telcos, Healthcare and Utilities are defensive in this environment.

****

JP Morgan‘s last update on Emerging Companies (“small caps”) showed Superloop ((SLC)) is the Top Pick and Dicker Data ((DDR)) is the broker’s Bottom Pick.

The first is lauded for its strong operational momentum on still an undemanding valuation, while the market is seen as too optimistic for Dicker Data’s outlook which includes slowing top line growth.

****

The full list of UBS’s Least Preferred stocks now includes:

-Aurizon Holdings ((AZJ))
-ASX ((ASX))
-Bank of Queensland ((BOQ))
-CommBank ((CBA))
-Cochlear ((COH))
-Domain Holdings ((DHG))
-Pilbara Minerals ((PLS))
-Reece ((REH))
-Scentre Group ((SCG))

UBS’s full list of Most Preferred stocks:

-AGL Energy ((AGL))
-BlueScope Steel ((BSL))
-Orica ((ORI))
-Origin Energy ((ORG))
-Rio Tinto ((RIO))
-Santos ((STO))

-AUB Group ((AUB))
-Computershare ((CPU))
-nib Holdings ((NHF))
-QBE Insurance ((QBE))
-Suncorp Group ((SUN))

-Brambles ((BXB))
-Coles Group ((COL))
-CSL ((CSL))
-James Hardie ((JHX))
-NextDC ((NXT))
-Super Retail ((SUL))
-Telstra ((TLS))
-Treasury Wine ((TWE))
-Universal Store ((UNI))
-Worley ((WOR))
-Xero ((XRO))

****

Ord Minnett analysts’ Conviction List consists of the following:

-Alliance Aviation Services ((AQZ))
-ARB Corp ((ARB))
-Cosol ((COS))
-EQT Holdings ((EQT))
-Lindsay Australia ((LAU))
-Pinnacle Investment Management ((PNI))
-Red 5 ((RED))
-Regis Healthcare ((REG))
-Select Harvests ((SHV))
-SRG Globval ((SRG))
-Waypoint REIT ((WPR))
-Webjet ((WEB))
-Whitehaven Coal ((WHC))

****

Goldman Sachs’s High Conviction calls for the Asia-Pacific region includes only four ASX-listed companies:

-Lynas Rare Earths ((LYC))
-Woolworths Group ((WOW))
-Qantas Airways ((QAN))
-Xero ((XRO))

****

Jarden’s select list of preferred small cap stocks in Australia (“Emerging Companies key picks”):

-Temple & Webster ((TPW))
-Lovisa Holdings ((LOV))
-Siteminder ((SDR))
-Nick Scali ((NCK))
-Universal Store Holdings ((UNI))
-Dicker Data ((DDR))

Plus also (“sector picks”):

-Ingenia Communities Group ((INA))
-National Storage ((NSR))
-Telix Pharmaceuticals ((TLX))
-Karoon Energy ((KAR))
-Domain Australia Holdings ((DHG))
-Inghams Group ((ING))
-NRW Holdings ((NWH))
-Light & Wonder ((LNW))
-Pepper Money ((PPM))
-Champion Iron ((CIA))

****

Morningstar’s Best Equity Ideas for ASX-listed stocks contains 14 inclusions, with Brambles, Dexus and Endeavour Group joining in and a2 Milk, Ventia Services and Lendlease no longer included. Morningstar’s approach is traditionally centred around ‘cheap value’, or in Morningstar’s own words:

“monthly Best Stock Ideas highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to our assessed fair values.”

-Brambles ((BXB))
-Dexus ((DXS))
-Endeavour Group ((EDV))
-TPG Telecom ((TPG))
-Domino’s Pizza ((DMP))
-Bapcor ((BAP))
-Santos ((STO))
-AUB Group ((AUB))
-ASX Ltd ((ASX))
-Aurizon Holdings ((AZJ))
-Pexa Group ((PXA))

As well as Fineos Corp ((FCL)), ResMed and Newmont Corp among international ideas.

****

Morgan Stanley’s Australia Macro+ Focus List contains the following 10 stocks:

-Aristocrat Leisure ((ALL))
-Car Group ((CAR))
-CSL ((CSL))
-Macquarie Group ((MQG))
-Origin Energy ((ORG))
-Paladin Energy ((PDN))
-QBE Insurance ((QBE))
-Suncorp Group ((SUN))
-Treasury Wine Estates ((TWE))
-Woodside Energy ((WDS))

****

Morgan Stanley’s Macro+ Model Portfolio consists of the following 32 constituents:

-ANZ Bank ((ANZ))
-CommBank ((CBA))
-National Australia Bank ((NAB))
-Westpac Bank ((WBC))
-Macquarie Group ((MQG))
-QBE Insurance ((QBE))
-Suncorp Group ((SUN))
-Goodman Group ((GMG))
-Scentre Group ((SCG))
-Stockland ((SGP))
-Aristocrat Leisure ((ALL))
-Car Group ((CAR))
-Domino’s Pizza ((DMP))
-The Lottery Corp ((TLC))
-Wesfarmers ((WES))
-James Hardie ((JHX))
-Orica ((ORI))
-Coles Group ((COL))
-Treasury Wine Estates ((TWE))
-CSL ((CSL))
-ResMed ((RMD))
-AGL Energy ((AGL))
-Origin Energy ((ORG))
-Telstra ((TLS))
-Transurban Group ((TCL))
-BHP Group ((BHP))
-Newmont Corp ((NEM))
-Rio Tinto ((RIO))
-South32 ((S32))
-Paladin Energy ((PDN))
-Santos ((STO))
-Woodside Energy ((WDS))

****

Wilsons‘ list of Highest Conviction Investment Ideas: TechnologyOne, Worley ((WOR)), Woodside Energy, Aristocrat Leisure, and Collins Foods ((CKF)).

More ideas come with “long term growth” profiles:

-Ridley Corp ((RIC))
-Universal Stores ((UNI))
-ARB Corp ((ARB))
-Neuren Pharmaceuticals ((NEU))
-Pinnacle Investment Management ((PNI))

Among Resources stocks, there are two favoured ideas:

-Beach Energy ((BPT))
-Liontown Resources ((LTR))

And there’s a Speculative basket too:

-Immutep ((IMM))

****

Wilsons’ Focus Portfolio‘s largest overweight remains towards growth companies, including a large overweight to the healthcare sector. The largest underweight allocation remains for local banks. The Portfolio also holds a slight overweight allocation to resources, but this is due to “active positioning” in green metals and energy (underweight iron ore).

The Focus Portfolio encompasses the following:

Consumer Discretionary
Aristocrat Leisure ((ALL)), Lottery Corp ((TLC)), Collins Foods ((CKF)), Breville Group ((BRG)), Webjet ((WEB))

Energy
-Woodside Energy ((WDS))

Financials
-ANZ Bank ((ANZ)), National Australia Bank ((NAB)), Westpac ((WBC)), Macquarie Group ((MQG)), Insurance Australia Group ((IAG)), Netwealth Group ((NWL)), Steadfast Group ((SDF))

Healthcare
-CSL ((CSL)), ResMed ((RMD)), Telix Pharmaceuticals ((TLX))

Industrials
-Worley ((WOR))

Information Technology
-TechnologyOne ((TNE)), Xero ((XRO))

Materials
-BHP Group ((BHP)), Amcor ((AMC)), Evolution Mining ((EVN)), Mineral Resources ((MIN)), Arcadium Lithium ((LTM)), Sandfire Resources ((SFR)), South32 ((S32))

Real Estate
-Goodman Group ((GMG)), HealthCo Healthcare & Wellness REIT ((HCW))

****

Macquarie Wealth’s recommended Growth Portfolio:

-Goodman Group ((GMG))
-Seek ((SEK))
-Aristocrat leisure ((ALL))
-Northern Star ((NST))
-CSL ((CSL))
-Computershare ((CPU))
-NextDC ((NXT))
-Flight Centre ((FLT))
-Mineral Resources ((MIN))
-Cleanaway Waste Management ((CWY))
-Steadfast Group ((SDF))
-Arcadium Lithium ((LTM))
-ResMed ((RMD))
-Pexa Group ((PXA))
-Treasury Wine Estates ((TWE))
-Viva Energy ((VEA))
-Xero ((XRO))

Macquarie Wealth’s recommended Income Portfolio:

-Suncorp Group ((SUN))
-Telstra ((TLS))
-National Australia Bank ((NAB))
-Westpac Bank ((WBC))
-ANZ Bank ((ANZ))
-BHP Group ((BHP))
-CommBank ((CBA))
-Premier Investments ((PMV))
-Coles Group ((COL))
-Viva Energy ((VEA))
-Atlas Arteria ((ALX))
-Aurizon Holdings ((AZJ))
-APA Group ((APA))
-GPT Group ((GPT))
-Deterra Royalties ((DRR))
-Metcash ((MTS))
-Amotiv ((AOV))
-Charter Hall Retail REIT ((CQR))
-Amcor ((AMC))

****

Shaw and Partners Research Monitor for the June quarter shows the broker’s ASX100 Large Caps Model Portfolio consists of the following ten members:

-Aristocrat Leisure ((ALL))
-Domino’s Pizza ((DMP))
-Evolution Mining ((EVN))
-James Hardie Industries ((JHX))
-Pilbara Minerals ((PLS))
-Qantas Airways ((QAN))
-ResMed ((RMD))
-Suncorp Group ((SUN))
-Treasury Wine Estates ((TWE))
-Xero ((XRO))

Preferred exposures among ’emerging companies’ (smaller caps) are:

-Abacus Storage King ((ASK))
-Bannerman Energy ((BMN))
-Black Cat Syndicate ((BC8))
-Global Lithium Resources ((GL1))
-Helloworld ((HLO))
-Metro Mining ((MMI))
-Retail Food Group ((RFG))
-Vista Group ((VGL))
-Tyro Payments ((TYR))
-Webjet ((WEB))

****

Stockbroker Morgans‘ list of Best Ideas currently consists of the following 32 ASX-listed companies:

Among Large Caps:
-Coles Group ((COL))
-CSL ((CSL))
-QBE Insurance ((QBE))
-Woodside Energy ((WDS))

Cyclicals:
-GQG Partners ((GQG))
-WH Soul Pattinson ((SOL))
-ALS Ltd ((ALQ))
-Beacon Lighting ((BLX))
-GUD Holdings ((GUD))
-Universal Store Holdings ((UNI))
-Elders ((ELD))
-Acrow ((ACF))
-Maas Group ((MGH))
-Dalrymple Bay Infrastructure ((DBI))
-Karoon Energy ((KAR))

Structural Growth:
-ResMed ((RMD))
-NextDC ((NXT))
-TechnologyOne ((TNE))
-Mach7 Technologies ((M7T))
-Camplify Holdings ((CHL))
-Superloop ((SLC))

Tactical Ideas:
-Treasury Wine Estates ((TWE))
-ClearView Wealth ((CVW))
-Inghams Group ((ING))
-Avita Medical ((AVH))
-Flight Centre Travel ((FLT))

Preferred Resources:
-South32 ((S32))
-Stanmore Resources ((SMR))

A-REITs:
-Cedar Woods Properties ((CWP))
-Dexus Industria REIT ((DXI))
-HomeCo Daily Needs REIT ((HDN))
-Qualitas ((QAL))

****

In December, Shaw and Partners released its 10 Best Ideas to benefit from the anticipated small caps’ revival in 2024.

The selected ten:

-AIC Mines ((A1M))
-Austin Engineering ((ANG))
-FireFly Metals ((FFM)), previously AuTeco (AUT)
-Chrysos ((C79))
-Gentrack Group ((GTK))
-Metro Mining ((MMI))
-MMA Offshore ((MRM))
-Peninsula Energy ((PEN))
-ReadyTech Holdings ((RDY))
-Silex Energy ((SLX))

****

Macquarie’s ASX Quality Compounders

The highest quality ‘compounders’ as identified by Macquarie quant research inside the ASX300:

-James Hardie ((JHX))
-Cochlear ((COH))
-REA Group ((REA))
-TechnologyOne ((TNE))
-ResMed ((RMD))
-Data#3 ((DTL))
-Pro Medicus ((PME))
-Jumbo Interactive ((JIN))
-PWR Holdings ((PWH))
-Netwealth Group ((NWL))
-Aristocrat Leisure ((ALL))
-Spark New Zealand ((SPK))
-Codan ((CDA))
-Clinuvel Pharmacauticals ((CUV))
-Redox ((RDX))

Given Macquarie’s research strong leaning on the past five years, with high barriers to match, the following 11 companies fell just outside the above list:

-Fisher & Paykel Healthcare ((FPH))
-Medibank Private ((MPL))
-Coles Group ((COL))
-The Lottery Corp ((TLC))
-Lovisa Holdings ((LOV))
-CSL ((CSL))
-IDP Education ((IEL))
-Pinnacle Investment Management ((PNI))
-ARB Corp ((ARB))
-Breville Group ((BRG))
-Johns Lyng ((JLG))

My research and All-Weather stock selections are 24/7 available for paying subscribers: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi’s View stories. Go to My Alerts (top bar of the website) and tick the box in front of ‘Rudi’s View’. You will receive an email alert every time a new Rudi’s View story has been published on the website. 

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

FNARENA VIDEO

Dani and I have put together a video to explain our focus (and enthusiasm as investors) for GenAi, the fourth industrial revolution:

https://fnarena.com/index.php/fnarena-talks/2024/07/15/investing-in-genai-the-fourth-industrial-revolution/

SPECIAL REPORT

Earlier this month, FNArena published a 78 pages Special Report on GenAi, the fourth industrial revolution with lots of in-depth insights, forward projections, and useful links to companies for investors in the Australian stock exchange.

This Special Report remains exclusive for paying subscribers. Download your copy via the Special Reports section on the website.

FNArena Subscription

A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (21 since 2006); examples below.

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