Investors remain on edge during this reporting season as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index tries to regain its composure after the brutal sell-off.
The top 200 stock benchmark rebounded from morning losses to trade 0.5% in the black in the last hour of trade thanks to strong gains by miners Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) as well as telco Telstra Corporation Ltd (ASX: TLS).
I don’t think the worst is over for our market and the volatility can present a buying opportunity for those with the stomach for risk, and there are three stocks that brokers are urging you to buy amid the chaos.
One stock where investors should buy the dip is Aristocrat Leisure Limited (ASX: ALL). The Aristocrat share price has fallen over 3% this week and Macquarie Group (ASX: MQG) reckons it’s a buy – particularly as the company is about to launch its video poker bar top product.
The broker thinks Aristocrat could launch it as soon as this month with initial trials expected in the next 90 days.
“The North American Video Poker segment is largely concentrated within Nevada and split across two products: uprights (66k machines mainly in casinos) and bartops (14k machines mainly in taverns),” said Macquarie which has a 12-month price target of $31.50 on Aristocrat.
“Overall, the main supplier is IGT with >95% of the Video Poker installed base and given limited innovation and competing product, the segment has not undergone a material replacement cycle – some product is still performing well despite being installed more than 15 years ago.”
Short-term pain, longer-term gain
Another stock worth wagering on is the Tabcorp Holdings Limited (ASX: TAH) share price, according to UBS.
The broker reiterated its “buy” recommendation and upgraded its price target by 10 cents to $5.40 per share after undertaking a wagering survey.
While Tabcorp faces near-term earnings challenges, the broker thinks more patient investors should take a position in the stock.
“The markets fear around lower growth in FY20 (as we cycle a very strong run of lottery jackpots) is overshadowing a robust 3-year CAGR of 11%,” said UBS.
“For those willing to be more constructive on the medium-term upside we think the current share price offers an attractive entry point.”
Structural growth to bank on
But Tabcorp isn’t the only one facing short-term pain but with a brighter longer-term outlook. Wealth manager Pinnacle Investment Management Group Ltd (ASX: PNI) has a similar outlook and Morgans believes this makes the stock a worthy buy.
“Short-term (12-month) investment performance has been weak across two core affiliates (Firetrail and Antipodes) which presents some risk to flows in FY20/21,” said Morgans.
“[But] in our view, PNI has structural growth embedded in the business (the maturing profile of existing affiliates and investment strategies) and future optionality from adding new affiliates.”
Morgans has a target price of $5.65 on the stock.
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The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra 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.