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Top stock picks for February

Credit: Simon Cunningham

We asked our writers to name some of their top share picks for February and below is what they came up with:

Tom Richardson: 1300 Smiles Ltd (ASX: ONT)

This founder led dental business ticks the boxes thanks to its consistent track record of revenue, profit, and dividend growth. It’s growing organically and via acquisition, although importantly the acquisitive growth has come without an ever-expanding share count or debt. In fact 1300 Smiles has no debt and a significant cash pile, while earnings per share have grown from 11.7 cents in 2008 to 30.7 cents in 2017. It has also increased dividends in 9 of the past 10 years.

The valuation on around 21x trailing earnings is not cheap, but for a high-quality small-cap sitting in the relatively defensive area of dental care it could offer strong returns over the next 5 to 10 years.

Motley Fool contributor Tom Richardson has no financial interest in 1300 Smiles Ltd.

Tristan Harrison: Bapcor Ltd   (ASX: BAP)

Bapcor is the largest provider of auto parts in Australia. I believe that it’s a market beating idea because it’s only trading at 25x FY17’s earnings, whilst predicting net profit after tax growth of 30% for FY18. Management has a habit of beating expectations through profit margin expansion and integrating new businesses well, such as the recent Hellaby’s purchase.

I think Bapcor will provide good, defensive earnings and returns over the next few years, particularly if it expands into Asia.

Motley Fool contributor Tristan Harrison owns shares of Bapcor Ltd.

Stewart Vella: Fortescue Metals Group Ltd (ASX: FMG)

I think investors have extrapolated discounted iron ore prices and an international preference for high quality iron ore too far into the future. A rise in the iron ore price and signs that Chinese steel mills are returning to lower quality ingredients are good for Fortescue. The company current trades at an enterprise value to operating earnings multiple of 4.1 – indicating that the stock is heavily discounted. A fully franked dividend of 7.9% (equivalent to 10.4% including tax credits) is also attractive.

Motley Fool contributor Stewart Vella owns shares in Fortescue Metals Group.

 

Steve Holland: Emeco Holdings Limited  (ASX: EHL)

The mining service company’s share price embarked on a downward spiral a few years ago amid a mining downturn and it struggled to stay afloat.

Emeco has since turned around with the company benefitting from renewed optimism in the mining sector with increases in commodity prices and production rates. Emeco’s share price is up by more than 200 per cent in a year, the company almost doubled revenue in the first quarter of FY 2018 on the prior quarter and looks set to once again become a profitable business.

Motley Fool contributor Steve Holland has no financial interest in Emeco Holdings Limited

Rhys Brock: Afterpay Touch Group Ltd  (ASX: APT)

I think Afterpay is probably the best tech growth stock on the market right now. Even though its share price has more than doubled since August, I still think it offers great long-term potential.

Its platform is simple to understand and scalable. Afterpay allows shoppers to buy now and pay later in four equal fortnightly instalments. But it doesn’t charge any interest to the consumer, instead taking a small fee off merchants who adopt its payment platform.

With sales tipped to reach $2 billion for FY18 and plans to expand internationally, I rate this fintech disruptor as a strong addition to your portfolio.

Motley Fool contributor Rhys Brock has no financial interest in Afterpay

Tim Katavic: Aristocrat Leisure Limited (ASX: ALL)

The 2017 acquisition of Big Fish complements the existing social casino Product Madness portfolio as the company strengthens its digital business and diversifies its revenue mix. Increasing the company’s digital footprint is in alignment with current industry trends as mobile gaming represents the largest and fastest growing segment in the gaming industry.

The Trump tax cuts should also see a material boost in the company’s bottom line given the substantial amount of U.S. revenues the company generates. The stock trades around 25x forward earnings and still has room for multiple expansion given its growth prospects.

Motley Fool contributor Tim Katavic owns shares in Aristocrat Leisure Limited.

Ian Crane: Jumbo Interactive Ltd (ASX: JIN)

Jumbo sells Tatts lotto and charity lottery tickets online through the company’s smartphone app and OzLotteries.com website. Jumbo is led by its founder and largest shareholder, Mr. Mike Veverka, while Tatts Group also acquired a significant stake in 2017, prior to being acquired by Tabcorp.

In early January Jumbo upgraded its first half FY2018 guidance, stating revenue is expected to rise 20% and net profit after tax 43%, compared to the previous corresponding period.

Jumbo shares have risen 300% over the past two years and yet are still reasonably priced around 23x trailing earnings.

Motley Fool contributor Ian Crane owns shares in Jumbo Interactive Ltd.

Simon Proudman: Sydney Airport Holdings Pty Ltd (ASX: SYD)

Sydney Airport has come under a lot of price pressure recently, being regarded by some financial commentators as a ‘bond-proxy’ and then sold off as U.S. bond yields increase.

Yet, the underlying business is continuing to perform well, with monthly traffic figures continuing to impress. The December totals showed that international travellers using the airport grew by over 7% year-over-year.

Sydney Airport remains a monopoly, the low-cost Western Sydney rival is still at least 8 years from completion, while tourism from Asia to Australia continues to grow rapidly. Patient investors are also rewarded with a growing dividend, which is currently just under 5%.

Motley Fool contributor Simon Proudman owns shares in Sydney Airport.

Carin Pickworth: Orora Ltd (ASX: ORA)

The quiet-achiever focuses on fibre and beverage packaging in Australia and distribution in the US, with 85 distribution sites and 39 manufacturing plants across seven countries.

Orora delivered a hearty 20% share price rise in the last year and has recently reported acquisition activity to be back on the agenda, perhaps confirming the January 29 broker forecast out of Bell Potter that its earnings growth rate will slow as acquisitive growth picks up. With an achievable 12-month price target of $3.60 and franked dividends keeping shareholders happy it looks to be a buying opportunity.

Motley Fool contributor Carin Pickworth has no financial interest in Orora Ltd. 

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The Motley Fool Australia owns shares of and has recommended Bapcor and Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 1300SMILES Limited. 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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