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3 stocks I want to buy before earnings season

Earnings season is just around the corner which is one of the two most exciting times for investors, we get to see how our investments have performed since the last update.

If you believe that a price decline on a particular company has been too harsh, the days before a company reports can be a good opportunity to buy at a cheap price. Of course, your investment choices should still be in companies that you plan to hold for a long time, however now could be the right time to buy if the shares are low.

Here are three stocks I’m thinking about buying before they report:

Healthscope Ltd (ASX: HSO)

Healthscope is the second-biggest private hospital operator in Australia with a market capitalisation of $3.8 billion.

In the September 2016 quarter it reported patient numbers were essentially the same as September 2015. If patient numbers aren’t increasing, the profit probably won’t be increasing. So the shares were sold down and are still 26% lower than before the announcement.

Over the long term, patient numbers are clearly going to keep increasing. Australia’s ageing population means more people will need to use a hospital for one reason or another. The Australian government is also facing increasing costs and visits to its public hospitals, so it will want to direct more patients to private hospitals to save money.

If Healthscope reports growing patient numbers in the December quarter, I can see a quick recovery of its share price. In time, there will be more patients even if it’s not this quarter where the recovery is.

Healthscope is trading at 19.4x FY17’s estimated earnings with a dividend yield of 3.38%.

TPG Telecom Ltd (ASX: TPM)

TPG is one of the largest telecommunications companies on the ASX with a market capitalisation of $5.5 billion.

Its shares grew strongly thanks to organic growth and acquisitions, notably of iiNet. However, consolidation of the market appears to be over, there aren’t many targets left and the market repriced TPG for much slower growth.

But I think the market was too harsh on TPG, it has just won a spectrum auction in Singapore for a mobile network which could be a decent profit booster in the years to come. There’s a chance that TPG will want to enter the mobile phone market in Australia and this would create another avenue of growth for management.

It could keep taking market share of NBN customers due to its low-cost prices and active advertising. Once it releases its half yearly report, I think investors may come back around to this business particularly as it actually has defensive characteristics.

TPG is trading at 14.7x FY17’s estimated earnings with a grossed up dividend yield of 3.2%.

Vita Group Limited (ASX: VTG)

Vita’s main business is the operation of over 100 Telstra stores and business centres, it has a market capitalisation of $490 million.

Management recently disclosed that the agreement with Telstra Corporation Ltd (ASX: TLS) has been renegotiated and there will be a change in remuneration to Vita. The market didn’t like this update, even though there’s potential for Vita to actually benefit from the contract change over the long term.

With Vita’s share price down 40% since its all-time high I think there’s a good chance the market will react positively when it sees the damage isn’t as bad as first thought.

Vita is trading at 13.6x FY16’s earnings with a grossed up dividend yield of 6.28%.

Foolish takeaway

All three of these businesses would make good, growing additions to any Foolish portfolio. Out of the three, Healthscope would be my favourite to buy at these prices thanks to its long term tailwinds. It is the most likely candidate for a market recovery as long as patient numbers are growing again. However, I would want to make sure I sell these other three stocks before earnings season.

These 3 stocks could be the next big movers in 2020

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Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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