3 ASX shares I’m telling my clients to buy: advisor

Ask A Fund Manager: Shaw and Partners’ Adam Dawes reveals two stocks he’s adding to client portfolios, plus one more that he’s bought as his own investment.

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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Shaw and Partners senior investment advisor Adam Dawes gives us a trio of hot buy tips.

Investment style

The Motley Fool: How would you describe your services to a potential client?

Adam Dawes: I work for Shaw and Partners, but I’m a stockbroker dealing with clients to talk about their financial wealth, increase their financial wealth, and look after their investment needs. It’s pretty simple.

MF: Do you have a particular investment philosophy?

AD: Our investment philosophy is always looking at the best companies that sit inside the ASX or the S&P/ASX 300 (ASX: XKO). But then having a little bit more alpha to try and find some of those smaller companies that are really going to excite clients’ portfolios. 

But generally sticking to that main portfolio side of things, then just trying to find some of those smaller stocks that’ll outperform over the longer period.

MF: The horizon sounds more longer term than short?

AD: Well, it is longer term. I think you have to be, in investing. 

People, they want to be rich in a year’s time. And I say, “Well, I’m not that kind of advisor.” 

Hottest ASX shares

MF: What are the three best stock buys right now?

AD: Okay. So for one, we really like Wesfarmers Ltd (ASX: WES) at the moment. There’s a lot of talk obviously about not just the consumers’ discretionary side of the business, but the other businesses that they do hold, which is lithium battery technology and those kinds of things. So I think that’s going to definitely do that well. 

We’ve seen the market upgrade numbers on Wesfarmers the other day. So I think [it’s a] good quality blue-chip stock. I think that one is a good buy at the moment.

MF: The share price has come down a bit, hasn’t it?

AD: Yeah, it certainly has. So that’s why I think there’s some definite value there at the moment. 

Talking about prices that have come down, so there’s [also] Xero Limited (ASX: XRO). Looks really, really good. Down here, it’s $87, $88 wherever it is today. 

I think that’s certainly one of those ones, those technology stocks that have been belted over 40% and look pretty good going forward. 

My third one is a small speculative stock, which is one I hold myself. It’s a company called Terracom Ltd (ASX: TER), and it’s a coal stock.

This one, obviously coal’s a little bit on the nose at the moment, but it’s certainly a very interesting business.

MF: The share price has gone spectacularly well this year.

AD: Yeah, it has. We got a lot of clients in at 50 cents and will continue to do well because, basically, they’ve just paid down all of their debt that they’ve had over the last two to three years. That’s all been paid off now. 

And they’ve talked about coming back out to the market about being a dividend-paying stock going forward. 

Now you never buy a resource stock for dividends, but Terracom is looking to pay some fairly hefty dividends going closer to the end of the financial year and to the end of the calendar year. And they own a mine called Blair Athol, which is an ex Rio Tinto Limited (ASX: RIO) mine. And, certainly, with coal prices where they are at the moment, it’s a good little business to own, going forward.

MF: How are you feeling about the coal price though? The higher it is, could you argue that there’s more scope to fall?

AD: Well, if you take out Russia and Ukraine. I don’t know about you, but I don’t think that’s going to get resolved anytime soon. That’s certainly something that will keep the coal price higher. 

Obviously, the world is moving towards a coal-free or moving towards a greener energy stance. But in that interim, coal is definitely needed to power India, to power a lot of countries around the world. 

People like having cheap energy and we’re not seeing that at the moment. That’s certainly something that I think overall is going to be pretty tough. So I think that will definitely mean that things will continue to support the coal price, going forward.

Motley Fool contributor Tony Yoo has positions in Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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