When an expert gives us an ASX share tip, it usually pays to at least consider it. Experts get investing calls right and wrong, as do we all. But it can still be useful to hear an educated opinion from an expert whose job it is to make money in the markets.
It can also help to perhaps alert us to a quality ASX share that we might have otherwise overlooked.
So today, let's discuss an ASX share tip or two from Alison Thai, portfolio manager of the First Sentier Investors Australian Equities Growth strategy.
Thai, speaking to the Australian Financial Review (AFR), names ASX healthcare stock Pro Medicus Limited (ASX: PME) as one of its best picks right now. Interestingly, Pro Medicus shares have already had a stellar year, rising more than 72% over 2023 so far.
However, Thai warns investors not to dismiss this company due to its "rich valuation".
Here's some more of what she had to say on the Pro Medicus share price:
Its IT platform, Visage 7, allows radiologists to read and annotate images remotely, on any device and, most importantly, at high speed. Its competitive edge has been validated by contract wins with some of the most prestigious US hospitals such as Mayo Clinic.
So what about its "richly valued" share price, which indeed is currently trading on a choke-on-your-porridge price-to-earnings (P/E) ratio of over 156? Hardly your standard ASX bargain, one might think. Well, Thai reckons it is easily justifiable:
Based on our discounted cash flow valuation, we see an upside to Pro Medicus' price, driven by further sharemarket gains, product development and geographical expansion.
The company has achieved earnings per share (EPS) three-year compound annual growth rate of 44 per cent, operating margins over 65 per cent and return on equity of more than 40 per cent.
This is all backed by 100 per cent cash conversion, making it one of our highest quality picks.
One for the money, two ASX share tips for the show
But Thai didn't stop with Pro Medicus. When asked to name the most undervalued share in the market right now, she picked insurance broker AUB Group Ltd (ASX: AUB). AUB shares have also had a stellar 2023, rising more than 23% this year.
However, Thai reckons there's plenty of petrol left in the tank:
It will continue to benefit from the strong commercial premium rate cycle, which has accelerated to over 10 per cent annual increases. Premium rates have been sustained by rising reinsurance costs, exacerbated by recent weather events and inflation.
AUB's business model is particularly attractive, as it takes a share of insurance premiums through commissions or fees but doesn't take on the claims risk like insurers, making it highly capital efficient.
So there you have it, two ASX share tips from an expert, and just in time for Christmas too. As with all predictions, only time will tell if they prove to be accurate. But no doubt shareholders of both companies will feel vindicated by Thai's views.
