Back in June, analysts from broker Bell Potter released a report detailing their outlook and top ASX stock picks for FY20. The report covers seven sectors: banks and general insurers, listed investment companies (LICs), agriculture, technology, travel and tourism, resources and healthcare.
Below, I’ve highlighted one share from each sector that I’m putting on my watchlist.
Banks and insurers
Bell Potter finds value in Macquarie Group Ltd (ASX: MQG) on the back of the company’s ability to manage risk and adapt to changing market conditions. According to analysts, Macquarie’s lower-risk, annuity style earnings and capital management flexibility make it a top sector pick.
Listed investment companies
Prior to the May Federal Election, the market had priced in the LNP’s proposed rebates for excess franking credits. A surprise ALP victory has returned the focus to LICs with exposure to the Australian market. WAM Capital Ltd (ASX: WAM) is Bell Potter’s top pick for the sector. Analysts noted WAM’s two-fold (long-term and short-term) strategies for investing in small- and medium-cap Australian companies. In addition, analysts cited the company’s consistent and growing dividend as another advantage that sets it apart from the competition.
Analysts note Elders Ltd (ASX: ELD) as one of their picks for the volatile and high risk agricultural sector. Despite the company’s share price falling drastically from its 2018 highs, analysts view Elders as offering seasonal leverage. The rationale behind this recommendation is that the dry weather and conditions that affected the Elders business model are expected to improve in the long term.
Given the re-rating of the technology sector, analysts at Bell Potter have directed their top stock picks based on companies that have forward price-to-earnings ratios of less than 25 times earnings and also have strong growth outlooks. Technology One Limited (ASX: TNE) is of the companies recommended by Bell Potter for the tech sector. Analysts note the company is in a strong position on the back of a growing cloud and consulting business.
Travel and tourism
Given the cyclical nature of the travel and tourism sector, Bell Potter have focused on companies with a diversified business model and exposure to global growth opportunities. Flight Centre Travel Group Ltd (ASX: FLT) is one of the companies picked for FY20. Analysts have picked the company on the back of its brand strength, domestic leisure market and global opportunities for corporate travel growth. In addition, analysts cited Flight Centre’s strong balance sheet and attractive return on capital metrics.
The Flight Centre share price surged yesterday after the company reported its FY19 earnings, including a record total transaction value (TTV) of $23.7 billion, an increase of 8.8% on the prior corresponding period.
With the gold price hitting all-time highs in Australian dollar terms, analysts have noted that local producers are set to make excellent margins. This price action comes as a result of a dovish outlook from the US Federal Reserve and the Reserve Bank of Australia cutting rates for the first time in 3 years. Regis Resources Limited (ASX: RRL) is a top pick for the sector. Analysts note that the company is an established, low-cost Australian gold producer with an excellent track record of production and cost performance. In addition, Regis delivers sector-leading shareholder returns and boasts a debt-free balance sheet.
Regis reported its full-year earnings earlier this week, which saw revenues climb 8% to $654.8 million and a record gold production of 363,418 ounces for the year ended 30 June 2019.
Analysts at Bell Potter note that companies that deliver solid data and commercial outcomes are likely to be rewarded as key themes continue for the healthcare sector in FY20. As a result, Volpara Health Technologies Ltd (ASX: VHT) is one of the top picks for the sector. The med-tech company uses AI technology from the University of Oxford to improve mammography screening and the early detection of breast cancer. Volpara currently holds a 7% market share in the US, which is the largest market for breast screenings accounting for 52% of global mammograms. Volpara looks to grow its market share through further acquisitions and increased regulatory regimes from the FDA.
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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited and Macquarie Group Limited. The Motley Fool Australia has recommended Elders Limited and VOLPARA FPO NZ. 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.