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Morgans just added this S&P/ASX 100 large cap to its “conviction buy” list

Our market is on tenterhooks as investors wait to see the how the next phase of the global trade war unfolds at the G20 meeting later today.

US President Donald Trump will hold private talks with China’s head honcho Xi Jinping to see if the men can reach an agreement to deescalate trade tensions between the world’s two largest economies.

The outcome of the meeting will determine how our S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index trades into December, if not beyond.

Even if the leaders can strike a deal, there is still a wall of worry for investors to climb in 2019!

A safe stock to buy?

Given the uncertainty, Morgans has decided to add Cleanaway Waste Management Ltd (ASX: CWY) to its S&P/ASX 100 (Index:^ATOI) (ASX:XTO) “conviction buy” list.

The CWY share price may have slipped 0.3% to $1.70 in lunch time trade, but it’s holding out a lot better than the ASX 200 which has tumbled 0.9%.

“Against the market volatility, we see an opportunity to add Cleanaway (CWY) again following its removal from the list in July,” said the broker.

“New management has worked to improve the cost base, capital intensity, revenue generation, and balance sheet over recent years. Going forward, we expect relatively defensive and solid earnings growth driven by organic sources, announced major contract wins, and the acquisition of Toxfree (including cost-out synergies).”

Morgans has a price target of $1.89 per share.

Other changes

The addition of Cleanaway comes at the expense of CML Group Ltd (ASX: CGR). Morgans has opted to dump CML from its conviction list because the stock is illiquid.

That’s a big negative when markets are as volatile as they are now. Illiquid stocks can suffer a bigger than normal drop as shareholders hit the “sell” button.

Fundamentally, there’s nothing wrong with the stock, according to Morgans. The broker has a positive view on the outlook for CML and continues to rate it an “add”.

Besides Cleanaway, other stocks on the broker’s large cap conviction buy list include sleep disorder treatment device maker RESMED/IDR UNRESTR (ASX: RMD), copper miner OZ Minerals Limited (ASX: OZL), our second largest mortgage lender Westpac Banking Corp (ASX: WBC) and plumbing products company Reliance Worldwide Corporation Ltd (ASX: RWC).

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Motley Fool contributor Brendon Lau owns shares of Reliance Worldwide Limited and Westpac Banking. The Motley Fool Australia has recommended ResMed Inc. 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.

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