One of Australia’s leading brokers, Morgans, has released its best ideas for the month of August.
These are the ASX shares the broker believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.
Three of the ASX shares that Morgans classes as its best ideas are listed below. Here’s what it is saying:
Australia and New Zealand Banking GrpLtd (ASX: ANZ)
Morgans believes that the ANZ share price is trading at a very attractive level for investors. Especially given its exposure to a number of industry tailwinds and its cost cutting plans.
It explained: “We believe ANZ is the most compelling of the major banks on a valuation basis. We expect ANZ to benefit the most of the major banks from the tailwinds currently in place for treasury and markets income. We expect ANZ to continue to focus on absolute cost reduction over the medium term. ANZ has de-risked its loan book over recent years –particularly its institutional loan book –such that the quality of its loan book has increased.”
Morgans has an add rating and $34.50 price target on this banking giant’s shares.
Macquarie Group Ltd (ASX: MQG)
Another ASX share in the banking sector that Morgans likes is Macquarie. This is due to its positive long term outlook thanks to its exposure to infrastructure and renewables.
Morgans commented: “We still see MQG as relatively inexpensive and continue to like its exposure to long-term structural growth areas such as infrastructure and renewables. Near term MQG is likely to face earnings pressures from the impact of soft economic conditions but it remains well positioned to ride out the current COVID-19 period and seize opportunities on the other side.”
Morgans has an add rating and $172.30 price target on this investment bank’s shares.
Treasury Wine Estates Ltd (ASX: TWE)
A new addition to the broker’s best ideas list this month is this wine company. While Morgans believes it will take some time before its lost earnings in China are recovered in new markets, it notes that other sides of the business are performing positively.
Its analysts said: “TWE has the China reallocation risk and it will take 2-3 years to recover these earnings in new markets. However, outside of China, its key markets, particularly the US, are recovering faster than expected from COVID. The new business units centred around the brands, are now fully in place and we are excited to see what they can earn with TWE effectively creating the benefits of a demerger without the extra costs. It also demonstrates that the SOTP [sum of the parts] is worth materially more than the whole. It shines alight on Penfolds and its best-in-class margins and may ultimately lead to corporate activity in some form in the future. We rate this management team highly.”
Morgans has an add rating and $13.00 price target on its shares.