At the start of each month analysts at Morgans reveal the shares that they rate as buys with the highest conviction.
These high conviction shares are the ones the broker believes offer the highest risk-adjusted returns over a 12-month timeframe.
Five conviction buys from the ASX 100 this month are as follows:
Oil Search Limited (ASX: OSH)
This energy producer continues to be Morgans' top large cap pick in the oil and gas industry due to the strength of its earnings and the quality of its growth profile. According to the note, the broker believes its current share price is "adequately reflecting the value of existing production from PNG LNG T1 & T2 operations, while we believe the market remains too conservative on the upside potential for the PNG expansion and Alaska projects."
OZ Minerals Limited (ASX: OZL)
Another option in the resources sector that Morgans rates highly is this copper producer. The broker is a fan of the company due to its robust cashflows from an established production base in copper and its belief that OZ Minerals has one of the "best outlooks in the commodities suite, driven by electrification of the developing world." In addition to this, the broker notes its strong balance sheet and potential upside from the Carrapateena development project. Overall, it sees recent share price weakness as a buying opportunity.
ResMed Inc. (ASX: RMD)
This sleep treatment-focused medical device company continues to be a favourite for Morgans. It believes ResMed is well positioned "with solid growth expected across the core business, an "exciting" pipeline of new products and a growing digital platform via new module launches, new customer adds and price increases." Furthermore, it was pleased with its fourth quarter result which beat on both the top and bottom lines and appears confident in its growth prospects. This is because 12 million Americans are believed to be suffering from sleep apnoea, but less than 4 million are diagnosed or treated.
Sonic Healthcare Limited (ASX: SHL)
Another conviction buy for Morgans is this international medical diagnostics company which offers laboratory medicine, pathology, and radiology services. Its analysts believe Sonic is capable of high single digit earnings growth through to 2021. This is because Sonic Healthcare is "ideally positioned as a global diagnostic and pathology provider, backed by defensive earnings, growing scale and a strong balance sheet." It also believes the Aurora Diagnostics acquisition offers cross-selling opportunities which should support profit growth and margin expansion.
Westpac Banking Corp (ASX: WBC)
Finally, Morgans top pick in the banking sector continues to be Westpac. It likes Westpac due to its relatively low risk profile in relation to loan book positioning and its low reliance on treasury and markets income. Furthermore, it notes that its strong capital position and sound asset quality should support its dividend.
