3 all-star ASX 200 shares ECP is going all-in on

Here is a trio of 'high quality' businesses that may be facing near-term headwinds but will be just fine in the long run.

| More on:

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

At this time of the year, there are many predictions and forecasts from experts to wade through.

However, you can't invest directly in macroeconomic trends. And those predictions might be incorrect, or the expert's timing might be off.

So it's much more helpful if the pundits actually mention specific S&P/ASX 200 Index (ASX: XJO) stocks that they're backing.

That way, the fund managers are putting their money where their mouth is, and you can consider buying stocks on the basis of the company's potential rather than ethereal economic drivers.

The ECP Growth Companies Fund did exactly this recently, naming three ASX shares that had mixed fortunes last month but are worth holding for the long term:

a forefinger and thumb hold a small block with a yellow star on it which is being placed next to two of the same blocks so they form a line of three blocks.

Image source: Getty Images

'A high-quality business'

The share price for building materials provider James Hardie Industries plc (ASX: JHX) tanked almost 10% in December.

In fact, with interest rates rising steeply, the past year has been pretty unpleasant for investors, with the stock plunging more than 40%.

"The slowdown in housing continues to weigh on investment appetite, particularly the rate of deterioration in volume outlook and lack of visibility," read ECP analysts' memo to clients.

"Growing their economic footprint may be challenging in the near term."

​​

Despite these short-term pressures, the fund is sticking with James Hardie because of its excellent prospects in the longer run.

"James Hardie remains a high-quality business demonstrating its commitment to managing supply and demand, with a clear focus on product mix," the memo read.

"Colourplus growth remains strong, with 31% volume growth in 2Q23, which should support average selling price and margins."

'Strongly positioned' to grow in 'structurally attractive' market

Financial services software maker Netwealth Group Ltd (ASX: NWL) had a pretty ordinary Christmas too, with the share price plummeting 12% last month.

According to ECP analysts, there was no news from the company to justify the de-rating.

"Short-term investor sentiment has remained focused [on] the cadence of in-flows to wealth platforms with advisors regaining client consolidation momentum as markets have stabilised."

​​

Despite the short-term hiccups, the ECP team is keeping the faith in Netwealth. 

"Notwithstanding variable quarterly flow results, we continue to believe Netwealth is strongly positioned to continue gaining market share in the structurally attractive wealth platform market."

Netwealth shares have dipped 21% over the past 12 months.

China could be ramping up

December was a different story for the stock price of mining giant Rio Tinto Ltd (ASX: RIO), as it soared more than 6%.

The ECP team attributed this to China's COVID-19 reopening triggering a rocket under iron ore prices.

"The Chinese government has also been making positive noises in relation to economic growth and have signalled that they plan to address issues related to residential property prices," read the memo.

"Infrastructure spending is also likely to be a focus."

The Rio Tinto share price has been on a wild rollercoaster over the past year, dipping as low as $87.60 and flying as high as $128.55.

​​

Motley Fool contributor Tony Yoo 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 Netwealth Group. The Motley Fool Australia has positions in and has recommended Netwealth Group. 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

Business man marking buy on board and underlining it.
Broker Notes

10 ASX shares given buy ratings this week

Brokers are bullish on these shares. Let's see what they are recommending.

Read more »

YES! spelt out in orange on red background.
Broker Notes

4 ASX shares scoring upgraded ratings this week

Brokers have new confidence in Guzman Y Gomez, TechnologyOne, and others this week.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says this top ASX 200 share could rise over 30%

The broker thinks this blue chip could be undervalued at current levels.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Broker Notes

5 ASX 200 shares downgraded by the experts this week

Brokers reduced their ratings on Telstra, IAG, and other stocks this week.

Read more »

Business man at desk looking out window with his arms behind his head at a view of the city and stock trends overlay.
Broker Notes

Brokers name 3 ASX shares to buy right now

Which shares are top brokers feeling bullish about this week?

Read more »

Happy, neutral and sad smiley faces with a finger pointing at the smiling emoji.
Broker Notes

7 ASX shares with strengthened buy ratings this week

Brokers retained a positive view on Tuas, Megaport, Graincorp, and other shares this week.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face.
Broker Notes

Upgrade alert! Top broker upgrades this small-cap ASX share and predicts 75% upside

Bell Potter has turned bullish on this stock after a key acquisition.

Read more »

A group of six work colleagues gather around a computer in an office situation and discuss something on the screen as one man points and others look on with interest
Broker Notes

This mid-cap ASX tech share could be 30% higher in 12 months

Bell Potter has named this tech stock as a buy this week. Here's why it is bullish.

Read more »