The Motley Fool

If you think BHP and Qantas will help propel the ASX higher, I’ve got bad news

A few weeks ago, you may remember how I said the ASX is likely to go NOWHERE for the rest of 2017.

It was a controversial call, for sure.

After all, many brokers are still hanging onto hopes the S&P/ASX 200 Index will hit 6,000 before the year is out.

On that point, you probably saw this headline in today’s Australian Financial Review, with the author saying a push back towards 6,000 “all rests on Qantas, BHP Billiton, Woolworths…”

I’ve got bad news…

Source: AFR

Regular readers will know I own BHP Billiton Limited (ASX: BHP) shares.

So count me in as someone who hopes BHP reports a bumper set of results tomorrow.

The signs are good, given the Fortescue Metals Group Limited (ASX: FMG) share price jumped 5 per cent higher to $5.80 after it reported a doubling of its profit and dividend.

But my guess is the big jump in BHP’s profits and dividend is already priced into the BHP share price — its shares have already jumped 20 per cent higher in the last 12 months.

The same goes for the Qantas Airways Limited (ASX: QAN) share price, already up 70 per cent over the past 12 months.

Both BHP Billiton and Qantas have had some decent tailwinds over the past year or so.

A surging iron ore price has helped the Big Australian, while a falling oil price coupled with the end of the domestic price war and continued cost cutting have helped Qantas.

But those are likely one-off gains, the likes of which will be hard to replicate in the year ahead… especially as no-one, including BHP and Qantas, can predict commodity prices into the future.

Put another way, I simply can’t see a lot of upside from here for those two big companies, something that would hinder the progress of the S&P/ASX 200 Index’s march back towards 6,000.

For me, I continue to focus my investing on companies that are growing their revenues and profits, and have long growth runways ahead of them.

One such company is online voice communications and software business MNF Group Ltd (ASX: MNF).

In a sector rocked by the forthcoming dividend cut for Telstra Corporation Ltd (ASX: TLS), and today’s news that Vocus Group Ltd (ASX: VOC) has ended takeover talks with two suitors — sending the Vocus share price 15 per cent lower — the recently reported 34 per cent increase in MNF Group’s profit stands out like a beacon.

No wonder the MNF Group share price has jumped almost 30 per cent higher in less than two months.

You’re unlikely to read much about MNF Group in the mainstream press. It’s just too small for most fund managers.

But that’s precisely where, as a retail investor, you have an edge.

BHP and Qantas shares are widely followed, and widely researched. Brokers and fund managers will likely have spreadsheets running into hundreds of rows and columns as they attempt to predict their profits for the year.

By contrast, your chances and mine of having an edge over the many people who follow the ASX’s biggest blue chip stocks for a living — including company meetings and site visits — is infinitesimally low.

It’s a whole different story with companies like MNF Group. Fast growing stocks that many fund managers can’t or won’t buy.

A few weeks ago our own Joe Magyer was on Sky News Business.

Joe is the Chief Investment Officer of our fully owned funds business, Lakehouse Capital, and the Portfolio Manager of our first fund, the Lakehouse Small Companies Fund. The fund is currently soft closed to new investors, but you can register your interest by clicking here and scrolling down to the bottom of the page.

The panelists got to talking about the big banks, with one fellow fund manager almost falling off his chair when Joe revealed his weighting towards the big four banks was zero percent.


Most fund managers — either courtesy of their size, or because they are too afraid to deviate too far from the index for fear of losing their job should their fund materially under-perform the market — simply won’t touch these higher risk yet potentially higher reward smaller, but faster growing ASX stocks.

Don’t get me wrong. I’m not talking highly speculative mining exploration stocks, the types that usually blow up in your face.

I’m talking stocks like MNF Group.

Stocks like Ltd (ASX: KGN) which last week reported a massive jump in revenue and profit, something that has sent its share price up 30 per cent in the past week alone.

But there’s one fast growing ASX company that could out-perform them all. It’s a stock we’re calling Elon Musk’s personal “secret weapon.”

I must warn you…

It’s not for the faint-hearted. This is one of the most shorted stocks on the ASX, meaning there are plenty of people betting against this company.

But… if they are wrong, and this ASX stock continues its stunning growth trajectory, there could be fireworks, with this stock potentially shooting significantly higher when markets open tomorrow morning.

There’s only one way to get the full story now… before this ASX growth machine reports results in the morning, and before the last few remaining copies of our proprietary research are snapped up.

Click here now to get all the details on this truly fascinating story.

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Of the companies mentioned above, Bruce Jackson has an interest in BHP Billiton, Telstra and Vocus.

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