While past performance is no indicator of future potential, it is often comforting to know that a particular business has a culture of building success and a knowledgeable management team.
And this assurance has never been more critical than right now, when all sorts of economic headwinds are buffeting all ASX shares.
Ord Minnett senior investment advisor Tony Paterno picked out a couple of such examples to buy this week:
A potential market-breaking product
Macquarie Group Ltd (ASX: MQG) briefly became one of the four biggest banks in Australia last year when the share price sailed above $200.
But after the close of market on Monday, it sat at $161.50 after falling 21.3% year-to-date.
For Paterno this is a nice buy-the-dip opportunity, as the banking giant has a potentially massive product release coming.
“This diversified financial services group plans to increase the interest rate it pays on everyday transaction accounts to 1.50%, a premium of 145 basis points to the average market rate,” he told The Bull.
“After disrupting the home loan market in recent years, this could have an impact on the deposit market if it gains traction.”
Another tailwind is that this month the bank may need to reportedly buy some of its own shares to fulfil its employee bonus commitments.
The professional community is mostly bullish on Macquarie shares, with CMC Markets showing nine out of 15 analysts rating them as a strong buy.
Macquarie, dubbed “the Millionaires’ Factory” for the way it rewards its staff, has also made many investors rich over the years. The stock is up almost 80% over the past five years and about 540% over the last decade.
Ready to get rich with these guys again?
Another ASX share that’s handsomely rewarded investors over the long term is real estate classifieds site REA Group Limited (ASX: REA).
The stock price is up a stunning 629% over the past 10 years, despite almost halving this year.
According to Paterno, it’s time to take a look at REA shares again as the company is targeting double-digit revenue and earnings growth.
“This will require higher investment spending,” he said.
“Capital expenditure guidance was increased to between 7% and 9% of sales. The historical average is between 6% and 8%.”
With property prices falling in Australia, he admitted it does face challenges in the short term.
“In our view, listing headwinds are likely to persist, although double-digit yield growth should act as a key offset.”
A Market Matters report earlier this month identified REA as one of the stocks to pick up for cheap after end-of-financial-year tax-loss selling.
“This is a quality, almost monopolistic-style business with some useful pricing power, but it currently is in the wrong place at the wrong time.”