Morgans just added this ASX 200 share to its model portfolio

The Suncorp Group Ltd (ASX: SUN) share price is outperforming its peers after Morgans added it to its model portfolio.

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ASX shares Model Portfolio, Diversification

The Suncorp Group Ltd (ASX: SUN) share price is outperforming its peers after Morgans added it to its model portfolio.

The Suncorp share price jumped 1% to $10.67 during lunch time trade with the major banks lagging behind.

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price gained 0.5% and Commonwealth Bank of Australia (ASX: CBA) share price was flat.

Meanwhile, the Westpac Banking Corp (ASX: WBC) share price dipped 0.4% and National Australia Bank Ltd. (ASX: NAB) share price lost 0.1%.

The ASX ugly duckling turning into a swan?

But even today’s outperformance, the Suncorp share price is lagging behind the big four ASX banks. Shares in the banking and insurance group only managed a 3% rise over the past 12-months when the big banks rallied by at least 26%.

Even the S&P/ASX 200 Index (Index:^AXJO) is faring better with its 18% uplift.

However, this could leave the Suncorp share price with extra room to outperform as the shares is the latest addition to Morgan’s balanced portfolio.

Strong results justifies model portfolio addition

“SUN’s February result beat market expectations in all divisions, with supportive economic trends pointing to improved earnings into FY22,” said the broker.

“The group is benefitting from reduced impairments on an improving economic outlook, strong positive reserve releases, an ongoing focus on growth and efficiency through automation and digitisation, and an extremely robust excess capital position supporting future capital management/ special dividends.”

Suncorp share price looking cheap

The broker also pointed out that the Suncorp share price is trading on an undemanding price-earnings (P/E) multiple of around 15 times. If Morgans prediction of a near-term capital management initiative is true, the stock could be trading on a yield of around 5%.

As an aside, the ASX big four banks are also in the broker’s balanced model portfolio, which aims to have the best mix of ASX shares with income return and capital growth potential.

Getting cleaned away

But to make way for Suncorp, the broker dropped Cleanaway Waste Management Ltd (ASX: CWY) from its model portfolio.

“CWY has been a strong performer, and we think a large part of its premium rating reflects the performance of management in optimising the business in recent years,” added Morgans.

“We’re now cautious about CWY’s short term performance (and its market rating) as key management has now changed.”

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Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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