The Motley Fool

Top stock picks for December

We asked our contributors to pick their favourite ASX stocks to buy this month. Here are their top ideas.

Ryan Newman: Lindsay Australia Limited (ASX: LAU)

The Free Trade Agreement between China and Australia was one of the bigger economic stories of October with agricultural and food companies emerging as some of the biggest winners.

Thinking outside the box a little however, it’s easy to see companies like Lindsay Australia also benefiting substantially. Lindsay is a transport and logistics company with a growing presence in far-north Queensland where there is enormous potential for refrigerated seafood transport. Seafood is a product which is becoming increasingly popular in Asian nations.

With a market capitalisation of just $98 million, investors ought to be mindful of how much cash they allocate to the stock, but it could be a big winner in the years ahead.

Motley Fool contributor Ryan Newman does not own shares in Lindsay Australia.

Sean O’Neill: Woodside Petroleum Limited (ASX: WPL)

Despite the carry-on about falling oil prices in the news recently, Woodside Petroleum looks like an outstanding buy at current prices around $35.

With numerous developments in the pipeline close to existing infrastructure, Woodside can expand for comparatively low costs and enjoys strong margins even at current oil prices. A potential shift away from gas prices being linked to the oil markets is interesting and could be good news, but is little more than talk at this point.

Woodside also pays a very strong 5.8% fully franked dividend, and analyst Morningstar expects this to rise in 2015.

Motley Fool contributor Sean O’Neill does not owns shares in Woodside Petroleum.

Peter Stephens: Fortescue Metals Group Limited (ASX: FMG)

Sentiment in Fortescue Metals Group has improved significantly since China cut its main cash interest rate. Shares in the iron ore miner jumped 9% initially, as investors hoped it could be the start of a series of rate cuts that increase demand for (and the price of) iron ore.

With shares in Fortescue trading on a P/E of just 10.1 and yielding 5.6%, they appear to offer a wide margin of safety regarding the future prospects for iron ore. As such, Fortescue could prove to be a strong value play, with the potential for positive surprises moving forward.

Motley Fool contributor Peter Stephens does not own shares in Fortescue Metals Group Limited.

Jarrod Fitch: Challenger Ltd (ASX: CGF)

The share price of Challenger fell by 7.3% last Friday, following the decision by the Department of Social Services to reverse its means testing assessment for the company’s Care Annuity product. The market seems to have over-reacted, given the company has subsequently revised its 2015 cash earnings projections by but $10 million, from $535 million to $525 million. The decision doesn’t materially change Challenger’s prospects, namely its ability to leverage Australia’s greying population through its annuity, retirement and investment products.

Challenger has lifted annuity sales by 560% over the last six years, and remains one of the fastest growing outright fund managers. Arguably oversold at 10x trailing earnings, with a five-year return on equity of 17%, Challenger looks a compelling buy at today’s price.

Motley Fool contributor Jarrod Fitch owns shares in Challenger Ltd.

Tom Richardson: Woolworths Limited (ASX: WOW)

There look to be some good buying opportunities among the large-cap stocks in the energy space this month, but I’m going for the Fresh Food People at Woolworths. I’m often asked by novice investors where to start in building a portfolio, and the recent sell-off at Woolies looks an opportunity to buy a quality business at an attractive price.

The market seems worried over slower-than-expected food and liquor sales growth, competitive threats, and the Masters Home Improvement losses. I expect the first two issues will have little long-term impact, although taking on Bunnings looks a gamble. However, it won’t take much to shift sentiment in the half year ahead.

Motley Fool contributor Tom Richardson does not own shares in Woolworths Limited.

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