Analysts from broker Morgans have shared 10 of their best large-cap ASX stock picks. According to analysts, the listed stocks offer the highest risk-adjusted returns over the next 12 months and are supported with a higher than average level of confidence.
APA Group Limited (ASX: APA)
Analysts view the APA Group as the best-of-breed among the listed energy infrastructure stocks on the ASX. According to the company’s FY20 guidance, dividends per share (DPS) with the current share price gives APA a 4.5% forward cash yield. Analysts believe that DPS is capable of growing by around 5% per annum across FY20–FY24.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
Sydney Airport Holdings is considered a high-quality and well-managed infrastructure asset by analysts, with strong defensive attributes and strong balance sheet. With great exposure to the overseas travel thematic, analysts view monthly pax (passenger growth) and the Productivity Commission’s final report as the key events to watch.
Treasury Wine Estates Limited (ASX: TWE)
According to analysts, Treasury Wine Estates is a great example of leveraging a premium brand portfolio to generate strong results in China. As a result, Treasury is Morgan’s top pick for the consumer staples sector with its strong earnings visibility and a runway of earnings growth potential.
Oil Search Limited (ASX: OSH)
The broker also likes Oil Search over the next 12 months for the company’s robust profitability and globally competitive LNG operations. According to analysts, the political risk in PNG has moderated and Oil Search is expected to secure the P’nyang gas agreement, allowing the company to move forward with its PNG expansion projects.
Westpac Banking Corp (ASX: WBC)
Westpac Banking Corp is the preferred major bank for analysts at Morgan. This is because the bank has a relatively low risk profile in regards to its loan book and has low reliance on treasury and markets income. Analysts cited Westpac’s strong capital position and sound asset quality to support its dividend payout as positives.
Sonic Healthcare Limited (ASX: SHL)
The Sonic Healthcare share price is one to watch over the next 12 months. Analysts cited the company’s defensive earnings and a benign regulatory environment as driving underlying momentum. Sonic also has a pipeline of potential acquisitions and boasts an attractive 3.1% yield.
Telstra Corporation (ASX: TLS)
Analysts predict that market sentiment for Telstra will improve regardless of TPG Telecom Limited (ASX: TPM) merging with Vodafone. If the merger is successful, analysts think the market will become more rational and if the merger fails, TPM will be unable to build a mobile network that can compete with Telstra.
Wesfarmers Limited (ASX: WES)
Wesfarmers Limited is a core holding for Morgan. Analysts cite the company’s diversified business portfolio and core Bunnings division as positives. In addition, Wesfarmers has a healthy balance sheet with capacity for value-accretive investments.
Woodside Petroleum Limited (ASX: WPL)
Woodside Petroleum has the largest and most sustainable dividend profile in the oil and gas sector. In addition, analysts rate the company’s balance sheet as the strongest among its large-cap peers on the ASX, which puts it in a solid position to support new growth and maintain a high yield.
Woolworths Limited (ASX: WOW)
According to analysts, Woolworths is another core holding for Morgans. The company is the dominant supermarket operator in Australia, with defensive characteristics, experienced management team and healthy balance sheet.
Should you buy?
In my opinion, the ASX shares highlighted by Morgans analysts are of extremely high quality and the analysis is well balanced. However, I think it would be irrational for investors to jump the gun and start buying all the stocks listed. A better plan would be to do further research on each company to determine if they fit your strategy before making an investment decision.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited, Telstra Limited, Treasury Wine Estates Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Sonic Healthcare 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.