With market volatility causing some jitters, there might be opportunities to pick up quality ASX stocks at more reasonable prices.
And with that in mind, it's always good to keep a company's fundamentals front of mind.
Quality ASX stocks in favour
Equity Trustees has compiled a 'shopping list' of top-tier ASX-listed companies that boast strong fundamentals.
According to the fund manager, quality is a central tenet to delivering solid investment returns over the long term.
Its 'quality at a reasonable price' (QARP) investment style identifies companies with these characteristics but trading at reasonable valuations.
What defines these companies? Equity Trustees' Chris Haynes says it's fairly simple criteria, according to The Australian:
When we say quality, this means they have above average return on capital, above average growth prospects, strong balance sheets, are the number one or two player in their market, good management, and strong governance.
The firm provides a 'shopping list' of 19 companies that it says have these kinds of fundamentals. Here are three from the list that also have support from brokers.
Goodman Group (ASX: GMG)
The first quality stock is Goodman Group. It has been a standout in the commercial and industrial property sector this year. It was trading at $35.16 per share at Wednesday's market close.
Citi analysts are bullish on Goodman, particularly due to its massive development pipeline and exposure to the artificial intelligence (AI) megatrend through its data centres.
Citi rates the quality ASX stock a buy with a $40 price target, around 14% upside potential for Goodman Group at the time of writing.
For investors looking to add a reliable property stock to their portfolio, Goodman Group could be a good option.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa Holdings is a fashion jewellery retailer that caught the attention of investors in 2024. It has a network of more than 850 stores across 30 countries, putting it in the quality basket.
After a sharp pullback from its previous highs of $34.99, it closed at $34.62 apiece on Wednesday.
Along with Equity Trustees, the stock is also favoured by several institutional players as a quality ASX stock.
Wilsons Advisory included Lovisa as one of its top picks for clients last week. Morgans also sees this as an opportunity for investors, highlighting Lovisa's successful global expansion strategy.
It valued the business at $37.00 per share. For those interested in a high-growth retail stock, Lovisa Holdings might be a place to start looking.
Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
Fisher & Paykel Healthcare is a company that has flown under the radar in 2024 despite its impressive performance.
The company's shares recently hit a 52-week high of $30.36, driven by strong earnings and a positive outlook. At yesterday's close, they were trading at $29.34 apiece, with a dividend yield of 1.3%.
In FY24, Fisher & Paykel reported revenues of NZ$1.74 billion, a 10% increase from the previous year, and net profits of NZ$264.4 million.
Broker Wilsons rates the quality ASX stock a buy, setting a price target of $30, which the stock is just about to achieve if things continue higher.
Aside from that, the business has grown dividends from 9.5 cents per share in FY11 to the FY24 payment of 23.5 cents per year.
That's a compounding growth rate of 13% per year on average.
Foolish takeaway
Whether you're looking for a robust property stock, a high-growth retail company, or a reliable healthcare investment, these ASX stocks might offer compelling opportunities.
