Blackwattle Investment Partners has labelled ASX 200 stock Lottery Corporation Ltd (ASX: TLC) a 'somewhat forgotten' share.
Lottery Corporation is the monopoly operator of the state lotteries in all states bar Western Australia.
It was spun out of Tabcorp Holdings Ltd (ASX: TAH) in 2022.
Blackwattle portfolio managers Tim Riordan and Michael Teran reckon the ASX 200 stock has a low business profile.
They said investors generally only hear about Lottery Corporation in the news when there is a record-breaking jackpot.
Riordan and Teran commented:
The stock has struggled recently from a poor run of jackpot luck and was only trading mid 20s PE multiple for FY26 for a high quality, defensive compounder.
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'Forgotten' ASX 200 stock offers defensive appeal
Blackwattle holds the ASX 200 consumer discretionary stock in its Mid Cap Quality Fund.
In a new update, Riordan and Teran noted a 10% rally for Lottery Corporation shares last month.
This occurred because investors were seeking "more defensive growth that would be resilient in an uncertain economic environment".
Remember, the US reciprocal tariffs were announced in early April and caused an immediate market plunge.
Today, the Lottery Corporation share price is $5.31, down 0.38% for the day and up 6.63% in the year to date (YTD).
That makes it a vast outperformer against other stocks this year, with the S&P/ASX 200 Index (ASX: XJO) up only 1.51% YTD.
Importance of quality companies amid market volatility
Riordan and Teran said the market rebound after the US announced a 90-day reprieve was led by more defensive, larger market capitalisation stocks.
But quality can also be found in small-caps and mid-caps, like those in their fund, and they should also weather market volatility well.
They said:
… we have not seen material earnings downgrades from our Quality companies.
Indeed, Quality tends to outperform through most market phases, given the underlying company attributes of stronger margins, cash generation and balance sheets.
What's ahead for the Lottery Corporation share price?
In terms of Lottery Corporation shares, Riordan and Teran said:
We continue to see material upside for TLC as an 'enduring high-quality' business.
We believe TLC is one of the highest quality franchises on the ASX, as a defensive, compounding monopoly business with pricing power, product innovation, structural digital tailwinds, strong cash generation and capital optionality.
ASX 200 stock price snapshot
The Lottery Corporation share price has risen by about 13% since it began trading on the ASX 200 as a separate entity in 2022.
