Brisbane-based sell side research analyst and stockbroker Morgans has named six "high conviction" ASX shares that it thinks clients should buy ahead of profit reporting season.
The six picks are those that Morgans' equity strategy analyst think offer the "highest risk-adjusted returns over a 12-month timeframe, supported by a higher than average level of confidence". In other words Morgans thinks you should get on the phone to its brokers and buy these stocks now, so let's take a look at them as investment options.
Oil Search Limited (ASX: OSH) is being backed by Morgans largely around the still untapped potential of its PNG operations that are reported to be some of the best LNG assets in the world. The broker believes it looks "ideally positioned for near-term upside" as it "expands its upside case through appraisal and exploration".
The stock is down 9 per cent over the last year and remains leveraged to the long-term direction of oil-linked LNG prices. For that reason, as an investor, I'm not a buyer of Oil Search shares.
ResMed Inc. (CHESS) (ASX: RMD) is the healthcare and sleep treatment specialist that Morgans likes due to its market-leading position, potential to bring new products online, and the tailwind of a falling Australian dollar.
I have to agree with Morgans here and think ResMed looks well positioned to deliver solid total returns to investors prepared to take a 3-5-year view. In fact on August 4, I outlined five reasons why investors should buy ResMed shares.
Westpac Banking Corp (ASX: WBC) is liked by Morgans due to its strong position across home loan markets and its belief that there's a "relatively low risk" of a dividend cut. The big banks like Westpac sure do offer income-seeking investors good dividends and defensive cash streams due to their totally dominant market positions.
Australian Finance Group Ltd (ASX: AFG) is a mortgage broker liked by Morgans due to its valuation, dividend yield, and potential for acquisitive growth. AFG has a market value around $315 million and has been growing nicely.
Bapcor Ltd (ASX: BAP) is the auto-parts distributor formerly known as Burson Group that Morgans likes due to its attractive organic growth profile and potential for more acquisitive growth. I have to agree with Morgans on this one that Bapcor shares are a buy, as it looks a well-managed company growing at breakneck rates.
MotorCycle Holdings Ltd (ASX: MTO) is liked by Morgans due to its potential to consolidate the motorcycle sales and support sector, with the broker expecting it to produce a strong FY 2017 result. The stock is up 26% over the past year and the company has a market value around $165 million.
