Top fundie ASX share tips: 'One of our highest quality picks'

This ASX expert has two stock picks for investors this Christmas.

| More on:
A woman relaxes on a yellow couch with a book and cuppa, and looks pensively away as she contemplates the joy of earning passive income.

Image source: The Motley Fool

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

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.

Motley Fool contributor Sebastian Bowen 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 Pro Medicus. The Motley Fool Australia has recommended Aub Group and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Best Shares

An executive stands looking out a glass window over the city.
Best Shares

The ASX bosses getting richer on the back of soaring ASX shares

These founders and CEOs made money hand over fist last financial year...

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Best Shares

The best ASX shares to invest $1,000 in right now

Analysts think that putting your money into these stocks could be a smart move.

Read more »

Happy shareholders clap and smile as they listen to a company earnings report.
Best Shares

Top ASX shares to buy before earnings season

It's almost time to take a look at the books!

Read more »

Five happy young friends on the coast, dabbing and raising their arms in the air.
Best Shares

The 5 most popular ASX shares bought by investors

The favourite stocks comprise 4 exchange-traded funds and an ASX lithium share.

Read more »

Businessman smiles with arms outstretched after receiving good news.
Best Shares

Top ASX shares to buy for FY25

In with the new!

Read more »

Deterra share price royalties top asx shares represented by investor kissing piggy bank
Best Shares

The best ASX 200 share of each market sector in FY24

These 11 ASX 200 shares were the best performers for price growth in each market sector in FY24.

Read more »

ETF spelt out with a piggybank.
ETFs

The 5 best ASX ETFs of FY24 revealed!

These ETFs blew the ASX 200 out of the water in FY24.

Read more »

Man in an office celebrates at he crosses a finish line before his colleagues.
Best Shares

Leaders and laggards of the ASX market sectors in FY24

The No. 1 ASX market sector rose by more than 30% and we reveal the top 5 stocks within the…

Read more »