Aussie Equities: Portfolio watchlist
Given the public holiday, our focus this week is on some high quality stocks to add as part of a well diversified portfolio. We’ll move back to our regular Small Cap watch-list stocks next week. We recently screened trading opportunities following reporting season and compiled this list which you can use as a well diversified, balanced portfolio. We’ve attached our quick comments next to each stock.
Feel free to add or remove what you think is appropriate. These stocks in a balanced list would work well as a balance complete Aussie equities portfolio, spread across a range of industries.
So we would consider buying:
Altium (ALU) – Continues to build from strength to strength. There aren’t too many Australian technology and software success stories listed on the ASX, this is an exception. The market will always question the valuation, we look forward to the huge growth opportunities still at hand. We’ve been backing this since 2013 in the mid $2 range and continue to like it here. Market cap is still attractive.
Bega (BGA) – The long term food theme is still prevalent and we feel that BGA is working quietly to maintain and grow its market position. The $1bn market cap is attractive given the value of the brand, earnings power and moderate gearing. We like it at these levels as a long term set and forget type of scenario.
Bellamy’s (BAL) – The stock price has come back, excitement is somewhat out of the stock which means it can now be valued on merit. A very well run management team, solid board, strong balance sheet and attractive growth prospects. We see a lot of upside and again in an attractive market cap position.
BHP – Commodity prices will recover and the giants will survive. We were reluctant to add this in the list, but if the ASX200 is to push towards the 6000 level, BHP will have to do a lot of the heavy lifting. The banks don’t have much puff left in them, so having some commodities exposure is not a bad idea.
Blackmores (BKL) – Again the stock price has come back and we feel that the business is now sitting in a nice spot. It has strong earnings and most importantly, corporate momentum. Something special happens when businesses start to believe their growth prospects, especially when they deliver on past promises. We see a much bigger opportunity here, in the same way which DMP defied the skeptics.
Graincorp (GNA) – Not the most exciting stock on the market, but backed by solid infrastructure and market fundamentals. Wheat prices have been suppressed recently, but this is cyclical and eventually the cycle will turn. Dividend support means we can wait for that to happen.
Medibank (MPL) – The long term narrative hasn’t changed. Unlike other insurance businesses, medical insurance in Australia is protected by government regulation which means MPL has one task – manage costs while maintaining market share. It should be able to achieve this.
Telstra (TLS) – Back to a more attractive valuation, backed by solid earnings. Free cashflow will fall in the coming years and capex is increasing – which means the benefits may flow through for many years to come. You can sleep at night holding it in your portfolio.
TPG (TPM) – A victim of its own success, but we live in a connectivity economy and having the customer base combined with the infrastructure backing means TPM may be able to shrug off the recent disappointment and continue moving forward. A quick exposure.
Woolworths (WOW) – Woolies is in trouble. But unlike most other retailers, it has two key things going for it. First it has a rock solid balance sheet, which means it can buy more time and make better decisions. Secondly, it has a fantastic Chairman steering the ship. He has got it right before and will probably do so again. Buy the balance sheet.
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Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.