On a recent investor call, lead managers from Wilson Asset Management Limited (ASX: WAM) discussed the key themes and stock ideas behind their portfolio holdings.
The stocks that managers think could outperform stretch across a broad range of sectors, including technology, healthcare, automotive and consumer staples. Here are 5 stock ideas they outlined.
Temple and Webster Limited (ASX: TPW)
The Temple and Webster share price has soared more than 90% in 2019 and is currently trading at 52-week highs. The company is a leading online retailer of furniture and homeware, boasting the largest range of products in Australia.
Managers from Wilsons were impressed with the strong momentum of Temple and Webster and expect the company to beat expectations in the near term. Temple and Webster currently have a 5% share of the Australian market and 15% market share in the USA and UK.
The company recently experienced a 40% increase in revenue growth and looks to build on its core offering and continue expanding its logistics and mobile shopping capabilities.
Qube Holdings Limited (ASX: QUB)
Qube has had a strong 2019 with the company’s share price up more than 27% for the year. Qube is a diversified business focused on transport and logistics. Managers from Wilson’s believe that despite facing several headwinds, the company still managed to grow and look to outperform again.
Despite slower trade growth and weak exports from Australia, Qube was able to increase full-year revenue by 4.7% when the company reported earnings late last month. In addition, the company saw earnings before interest, tax, depreciation and amortisation (EBITDA) surge more than 9.5% and underlying net profit after tax (NPAT) rocket more than 15% in comparison to the prior year.
Western Areas Ltd (ASX: WSA)
Western Areas is an Australian-based explorer and producer of nickel. The nickel spot price has surged in 2019 after Indonesia (the second-largest producer of the commodity) announced plans to cease exports in 2022. Nickel is a key input for the production of stainless steel and managers anticipate there is a long-term opportunity in Western Areas to leverage its market position.
AP Eagers Limited (ASX: APE)
AP Eagers is the second largest car dealer in Australia and recently announced the proposed acquisition of market leader Automotive Holdings (ASX: AHG). Lead managers believe that the acquisition is well timed as the new car sales cycle may bottom, whilst also allowing AP to deliver double-digit earnings growth in the future.
Eclipx Group Ltd (ASX: ECX)
Eclipx is a leading fleet and novated leasing business in Australia, however the company’s share price is actually down more than 26% for 2019. Managers from Wilsons expect that the appointment of a new CEO and plans to cut non-performing assests could see the company outperform.
Eclipx currently has a price-to-earnings (P/E) ratio around 10x future earnings, in comparison to peers such as McMillan Shakespeare Limited (ASX: MMS), which currently trades at 14x earnings. Eclipx recently sold its non-core and loss-making Commercial Equipment Finance Australia business, which could see an increase in EBITDA forecasts.
Should you buy?
I wouldn’t recommend jumping in straight away and buying shares in these companies on the back of analyst predictions. I think a more prudent strategy would be to keep these companies on a watchlist and wait for price action to determine whether you should invest. Alternatively, investors could just buy shares in WAM to get exposure to all the companies listed.
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Motley Fool contributor Nikhil Gangaram 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.