Motley Fool writer and analyst Mike King recently alluded to 3 reasons why you should ignore the brokers’ stock tips. I am in full agreement with his sentiments, particularly as there can be an element of short-term thinking. However, the three recommended broker buys in this case happen to correspond with my prior and ongoing suggestions for ideal medium-to-long term investments. Two of the three are in my four top picks across the whole market.
According to recent research by broker Morgans, “The safest sectors heading into August (reporting season) appear to be the banks, healthcare, information technology / telcos and property, while we see risks in the retail, resources, capital goods and services sectors”.
The three stocks that were highlighted as the best positioning ideas heading into the reporting season were as follows (in no particular order):
Domino’s Pizza Enterprises Ltd (ASX: DMP)
Renowned author Jim Collins, who examined the performance of 1,400 companies over 40 years wrote a book upon which I based an article on Domino’s using the same name, “Making the leap from good to great”. By comparing companies in the same industry at a point in time, Collins determined the reasons for outperformance by successful companies.
One major revelation was the low priority technology played in beginning the company. The emphasis was in developing a good process and then using technology as an accelerator of momentum, not a creator of it. It is this technology edge that has allowed Domino’s to acquire 75% of Domino’s Japan last August and immediately transform operations. This leaves the door ajar for Domino’s to make acquisitions all around the world.
Morgans suggests, “Domino’s should beat its guidance” and the company is: “Building an empire, generating years of further earnings and dividend growth”.
Telstra Corporation Ltd (ASX: TLS)
A recent piece, 6 stocks I bought for my brother…, highlights my high conviction in relation to Telstra. The prospect of management announcing a dividend increase, a special dividend or a share buyback adds spice to the upcoming profit release on Thursday.
Morgans can: “See upside risk ahead of NBN renegotiations as Telstra positions to win further work to fast track the NBN rollout on behalf of the Government”.
SEEK Limited (ASX: SEK)
A further recent article reviewing the August reporting season, 3 high-growth stocks to watch this results season highlighted that SEEK has a plethora of growth options ahead. These centered mainly on the Asian region. It also suggested buying or holding the stock as it was in a virtuous cycle of upgrades. In short, this is the flipside of a famous quote about downgrades. “There is never just one cockroach”.
Morgans indicate that: “Post the IDP float, SEEK will be significantly under-geared and primed for capital management or further acquisitions”.
Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article. Mark Woodruff has an indirect interest in Telstra Corporation Ltd and Domino’s Pizza Enterprises Ltd.
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