Every now and then it’s worth taking a look at what businesses local stock brokers or sell side researchers rate as the best growth shares to buy. As if nothing else it might give you some ideas on companies to research.
The brokers and research houses are also able to recruit some of the best analysts so that should give them a leg up in terms of identifying shares to buy.
However, of course the principle of caveat emptor remains across the share market and investors should always take responsibility for their own decisions. Brokers are only human after all and will often make mistakes unfortunately.
Keeping all this in mind let’s take a look at three shares rated ‘strong buys’ by brokers according to the latest consensus market data.
Lynas Corporation Ltd (ASX: LYC) is the Malaysia-based rare earths miner that also has processing operations in Western Australia. It has faced regulatory pressure from the Malaysian government, but recently had its Malaysian mining license extended. Analysts probably rate the stock highly as China has threatened to halt rare earth exports as part of its ongoing trade war with the U.S. I am not a buyer of Lynas share myself.
Z1P Co. Ltd (ASX: Z1P) is the buy-now-pay-later rival to Afterpay Touch Group Ltd (ASX: APT). Z1P is also growing at impressive rates in a genuinely disruptive sector. Despite its success it’s still not widely-covered by analysts and given it’s never posted a profit it’s hard to value using a conventional discount and terminal rate on a cash flow analysis.
Z1P is close to profitability though and analysts are probably reaching their bullish verdicts based on some strong profit growth assumptions.
Qantas Airways Ltd (ASX: QAN) is profitable and trades on a low multiple of earnings to suggest several analysts feel it’s undervalued using a discounted cash flow analysis and sensible discount rate. However, the forecasting of airlines’ earnings is a tricky business as rising oil prices or a downturn in consumer confidence can send profit forecasts eschew. As such I’m not a buyer of Qantas shares.
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Tom Richardson owns shares of AFTERPAY T FPO and Dicker Data. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Dicker Data and ZIPCOLTD FPO. 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.