Once a month the team at Morgans picks out its best ideas. These are the shares that it believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.
On this occasion, let's take a look at the top picks in the financial sector:
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Macquarie Group Ltd (ASX: MQG)
Morgans has this investment bank on its best ideas list. The broker believes its shares are "relatively inexpensive" and likes Macquarie's "exposure to long-term structural growth areas such as infrastructure and renewables." Though, its analysts acknowledge that the bank could "face earnings pressures from the impact of soft economic conditions" in the near term.
While it may be on this list, Morgans currently only has a hold rating and $200.00 price target on Macquarie's shares.
QBE Insurance Group Ltd (ASX: QBE)
This insurance giant has been named as one of Morgans' best ideas. It like the insurance giant due to its attractive valuation and margin expansion potential.
The broker commented: "We see QBE as likely having positive underlying momentum into next year. QBE has been putting through top-line rate increases of around 9%, which should assist margin expansion into FY22. With QBE's balance sheet recently reset, pricing tailwinds evident and the stock relatively inexpensive trading on 11x FY22F PE."
Morgans has an add rating and $14.32 price target on QBE's shares.
Westpac Banking Corp (ASX: WBC)
A final ASX share in the financial sector that makes the list is Westpac. It is Morgans' "preferred major bank" with "the most compelling valuation" in the group.
Morgan added: "In terms of quality of overall risk profile, we believe WBC is a close second to CBA. On credit risk, we believe WBC is positioned relatively defensively due to its loan book being more skewed to Australian home lending."
The broker currently has an add rating and $29.50 price target on Westpac's shares.
