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Why top brokers are backing these 2 ASX 200 shares

Marketwatch.com has delivered its latest “Strong Buy” recommendations and Smartgroup Corporation (ASX: SIQ) and Seven Group Holdings (ASX: SVW) are two picks that I think are worthy of closer investigation.

Smartgroup

Smartgroup provides a range of administrative services including salary packaging and payroll administration as well as fleet management services. Smartgroup derives most of its revenue from large state and federal government contracts. 

An overwhelmingly positive investor presentation on 19 August has encouraged brokers sit up and take notice. It’s no wonder, revenue, earnings and dividends are all up in 1H CY2019. Specifically, revenue is up 3%, profit after tax is up 5% and the fully franked dividend is up 5%. 

If you’re wondering where further growth can be derived, Smartgroup believes that organic growth will continue across salary packaging services and novated leasing. New partnerships have been launched and several are in the pipeline including the online mortgage health checker, Loandolphin. 

Smartgroup is currently trading for $11.21 per share and has a gross dividend yield of 5.59%.

Seven Group Holdings

Seven Group Holdings is best known for its 41% stake in Seven West Media (ASX: SVM) but it also has significant investments in industrial services and oil and gas.

At the recent announcement of full year results, Group CEO and Managing Director, Ryan Stokes, had plenty to say that should fill investors and potential investors with a degree of confidence. Some highlights of Stokes’ presentation are listed below:

  • Group underlying EBIT of $695 million for the year, up 40 per cent on FY18
  • Revenue was up 27 per cent to $4.1 billion
  • Operating cash flow of $411 million was up 62 per cent on the prior year
  • A final fully franked ordinary dividend of 21 cents per share.

It would be of some concern that Seven West Media’s earnings toward Group EBIT was down 13% on the previous year. However, with the AFL finals series about to kick off, potential investors can hope for a strong finish to the calendar year. In 2018, the AFL Grand Final was the most watched sporting event in the country, according to AdNews. Insiders and advertisers will be hoping for a repeat performance this year.

Seven Group Holdings is currently trading at $16.16, and the aggregated broker opinions over at  martketwatch.com see it as a “Strong Buy”.

Foolish takeaway

Smartgroup and Seven Group Holdings are great companies with lots of upside. Brokers have a wide knowledge base and when they herd together in agreement, we should take note. However, as I always say, take some time to scan the range of opinions on offer and read widely. Ask yourself how these shares would fit in with your overall investment strategy, and go from there.

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Motley Fool contributor JWoodward has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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