MENU

Top broker is tipping these 5 stocks to outperform from now till June

The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) may have ended the week on a backfoot but there is a small group of stocks that is ready to rally over the next month or so, according to Morgan Stanley.

The top 200 index has slid 0.2% to 6,081 in the final hour of trade – taking its weekly loss to 0.6% – as both the large cap miners like BHP Billiton Limited (ASX: BHP) and the big banks like Commonwealth Bank of Australia (ASX: CBA) came under pressure.

Resource stocks are coming into some profit taking following their recent strong rally while banks are in the sin-bin for bad behaviour and a weakening outlook.

If you are feeling lost on where to look for near-term buying ideas, Morgan Stanley has a tip for you.

The broker is looking to the next S&P/ASX 200 quarterly change for inspiration as stocks that are about to be added to the benchmark have historically rallied by more than 7% on average in the 20 days prior to the official announcement from Standards and Poor (S&P), which manages the index.

“For the period March 2007 to March 2018 inclusive, inclusions outperformed the market by +7.6% for the period 20 days prior to announcement to implementation,” said the broker.

“Combining this with exclusions (long/short) increased the return to +13.2%, with a 77% success rate of outperformance over the 45 rebalance periods measured.”

Morgan Stanley thinks we will see five changes to the top 200 index in June. The two stocks that are most likely to be added to the index include poultry supplier Inghams Group Ltd (ASX: ING) and student placement company Idp Education Ltd (ASX: IEL).

The two additions will come at the expense of struggling franchisor Retail Food Group Limited (ASX: RFG) and media group Seven West Media Ltd (ASX: SWM).

Another three potential (but less likely) inclusions into the index are consumer financing company Afterpay Touch Group Ltd (ASX: APT), rural services group Elders Ltd (ASX: ELD) and artificial intelligence developer Appen Ltd (ASX: APX).

If these stocks are added, they could potentially replace personal care products supplier Asaleo Care Ltd (ASX: AHY), drugs and beauty products group Australian Pharmaceutical Industries Ltd (ASX: API) and storage and information services company IRN MTN/IDR UNRESTR (ASX: INM), better known as Iron Mountain.

If you wanted to buy these potential inclusions, or short-sell the possible dropouts, you will need to do that now as S&P will announce the index changes in three weeks, on June 8.

But these aren’t the only group of stocks that are well placed to beat the market. The experts at the Motley Fool are tipping three other “disruptors” that are poised to run ahead in 2018 and beyond.

Follow the free link below to find out what these stocks are and why they should be on your radar this year.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Cochlear or REA Group.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor Brendon Lau owns shares of AFTERPAY T FPO and BHP Billiton Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended Elders 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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!