Analysts at Morgans have been busy running the rule over a number of ASX shares.
Two that have been named as its top ideas for December are listed below. Here's why the broker is tipping them as buys this month:
Light & Wonder Inc (ASX: LNW)
Morgans thinks that Light & Wonder could be an ASX share to buy in December.
It is a global gaming company with a focus on delivering innovative content across land-based gaming machines, free-to-play digital platforms, and online casino markets.
The broker notes that since its rebranding from Scientific Games in March 2022, Light & Wonder has undergone a significant transformation. Under its revamped management team and board, the company has aggressively reduced its leverage from 8x to 3x in less than two years.
In addition, Morgans believes that Light & Wonder's growth strategy is well on track, with management's 2025 earnings targets seen as achievable by the broker.
While recent litigation with Aristocrat Leisure Limited (ASX: ALL) in relation to the Dragon Train game has caused negative sentiment, Morgans sees this as an overreaction. It commented:
While litigation remains an overhang, we think the share price decline is overdone. Negative sentiment around the injunction and upcoming legal catalysts will linger, but it shouldn't detract from the company's strong fundamentals.
Light & Wonder has a solid track record of delivering and in our opinion has the potential to be a multi-year compounder. It boasts top-tier game developers, including much of the team behind Aristocrat's standout growth in the 2010s. Light & Wonder is busy buying back stock as it believes the share price undervalues the business. We agree and regard the discount to Aristocrat on which Light & Wonder trades as unwarranted.
Firetrail Australian Small Companies Fund Active ETF (ASX: FSML)
Another ASX share that Morgans has named as a buy in December is the Firetrail Australian Small Companies Fund Active ETF.
The broker thinks it could be a top option for investors that are seeking exposure to the small side of the market. It notes that the fund is managed by a highly experienced team and offers a high-conviction portfolio of Firetrail's top ideas in domestic small cap stocks.
And with a proven track record of delivering 12% per annum outperformance (net of fees), Morgans feels that Firetrail has demonstrated its ability to identify strong investment opportunities.
Overall, with the broker feeling confident on small cap stocks, it feels this could be one to buy. It said:
FSML provides investors with a simple, accessible, liquid and transparent means of gaining access to a higher performance, diversified small cap manager – a sector of the market we at Morgans are particularly bullish on.
Performance-wise, the fund has consistently and handsomely outperformed its benchmark, the S&P/ASX Small Ordinaries Accumulation Index. This impressive track record is further supported by the fund's strong risk management practices and the team's disciplined approach to portfolio construction, making it a solid option for investors looking to diversify their portfolios beyond the mostly fully valued ASX large caps.
