9 ASX 200 shares now trading at ‘significant discounts’: broker

Top broker Goldman Sachs has revealed its top picks among the battered ASX 200 shares.

| More on:
Man looks shocked as he works on laptop on top a skyscraper with stockmarket figures in graphic behind him.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The ASX 200 closed 0.77% higher on Friday
  • Broker Goldman Sachs says new value is now emerging for ASX investors
  • In a note, the broker names nine stock picks among the battered ASX 200 as the market correction continues

The S&P/ASX 200 Index (ASX: XJO) closed up a robust 0.77% on Friday at 6,578.7 points.

In 2022, the index has dropped by around 13%, presenting ASX investors with potential new opportunities.

Top broker Goldman Sachs says new value is emerging. In a new note, the broker names its best ASX 200 picks as the market correction continues.

ASX 200 P/E ratio now 15% below 20-year average

The broker says the ASX 200 is trading at a 12.2x forward price-to-earnings (P/E) ratio, according to reporting in the Australian Financial Review (AFR).

Goldman Sachs analysts Matthew Ross, Bill Zu, and Tony Wu say that’s 15% below the 20-year average.

According to the note:

From a valuation perspective, our global strategists believe that market pricing is more consistent with a mild recession than an average or deep recession, a view we share in the context of the Australian market.

While we expect multiples on most ‘growth’ stocks to continue to unwind, a growing number of these names have now de-rated so significantly that they have fallen out of our “High P/E” screen and now trade at significant discounts to their five-year averages.

So, which ASX 200 shares does Goldman like?

Goldman’s picks of the ASX 200 are A2 Milk Company Ltd (ASX: A2M), Aristocrat Leisure Limited (ASX: ALL), ARB Corporation Limited (ASX: ARB), Blackmores Limited (ASX: BKL), Breville Group Ltd (ASX: BRG), Domain Holdings Australia Ltd (ASX: DHG), EML Payments Ltd (ASX: EML), Pinnacle Investment Management Group Ltd (ASX: PNI), and Reece Ltd (ASX: REH).

Goldman notes that the impact of higher interest rates and slowing economic growth are yet to feed into consensus earnings revisions.

The broker said investors should keep in mind that while long-duration growth assets have de-rated, they remain expensive relative to the current level of interest rates.

Goldman says commodity stocks are trading well below all prior valuation troughs, and they comprise a uniquely large component of the ASX 200.

It also said ASX shares offer slightly less value than bonds compared to before the sell-off.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended EML Payments, Goldman Sachs, and PINNACLE FPO. The Motley Fool Australia has positions in and has recommended EML Payments and PINNACLE FPO. The Motley Fool Australia has recommended A2 Milk, ARB Corporation Limited, and Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

Broker looking at the share price on her laptop with green and red points in the background.
Broker Notes

Broker gives its verdict on the CSL share price post-FY22 results

Here's what this broker is saying about the CSL share price...

Read more »

a man sits in unhappy contemplation staring at his computer on his desk in a home environment, propping his chin on his hand.
Resources Shares

The ASX 200 share Firetrail just bought after brutal sell-off

If a stock has lost one-third of its value over the last four months, would you be courageous enough to…

Read more »

a man and a woman sitting in a technology related work environment high five each other while the man wears headphones around his heck and the woman sits in front of a laptop.
Growth Shares

Revenue up 169%: 2 ASX tech shares showing explosive growth

Growth stocks have roared back the past few weeks. Here is a couple that Cyan fund managers think can go…

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Broker Notes

Is the BHP share price a buy after the miner’s FY22 results?

Is this mining giant a buy? Here's what this broker thinks...

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Broker Notes

Top brokers name 3 ASX shares to buy today

Brokers are feeling bullish about these ASX shares...

Read more »

A woman sits crossed leg on seats at an airport holding her ticket and smiling.
Travel Shares

Own Flight Centre shares? Here’s what to expect from its FY22 results

Here's what to expect from Flight Centre's FY 2022 results...

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Blue Chip Shares

Brokers say BHP and this ASX 200 share are buys

Here are two ASX 200 shares rated as buys....

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Broker Notes

Goldman Sachs tips huge returns for the Goodman share price

Goldman Sachs says Goodman's shares could rise materially..

Read more »