2020 has been to the economy what 2001 was to airport security. But as Australia's hospitality and travel industries limp away from March, the ASX, buoyed by a miraculous NASDAQ rally, is sprinting already.
While experts agree it will take years for the ~real~ economy to grow back to 2019 levels, the stock market is currently living in a world of its own. Whether this can be maintained (some say thanks to government backing it can) or whether it's an over-ripe peach about to go putrid, we'll leave for the experts to debate.
What's not up for question is that there are currently, for those who like risk in their lives, some mind-boggling stocks on the market right now. Rather than trust your mate, though, who 'heard a tip from his brother's friend' (or your Uber driver who assures you 'there's still momentum'), DMARGE hit up an expert for his top three ASX stock tips this week.
Enter: Luke Laretive, CEO of Seneca Financial Solutions in Melbourne. Luke sent DMARGE his top three stock tips for July 2020, which include two (relatively) safe bets and one "very naughty" pick. Here they are.
July 2020 Picks
All figures in Australian dollars (1 AUD = 0.71 USD at time of publishing).
Amazon (NASDAQ: AMZN) US$2,961.97
E-commerce remains the #1 pass-time of the locked-down and socially distanced. We can’t spend money on travel, restaurants or experiences (which has been a key investment theme of the past few years, experiences over ‘stuff’) – we are now back on the consumerism bandwagon!
Amazon is primed to capture the vast majority of this shift. It’s growing dramatically outside the US, at very high margins (AWS, media, ad business) and is a now a multi-sector monopoly. If it gets hit with an anti-trust driven breakup, it will only unlock additional value for shareholders in my opinion.
In short: Probably going to get bigger, better and more dominant.
Super Retail Group (ASX: SUL) $8.19
SUL owns Super Cheap Auto, BCF, Rebel & Macpac. See above RE: the new consumerism bandwagon. We also can’t travel overseas, so once borders open you’re going to see people doing up their cars, buying caravans and campers and going hiking and camping and 4WD’ing all over Australia.
In the US, LCI Industries recently reported earnings 40% ahead of analyst estimates citing:
“Increased demand for RVs drove accelerated outdoor recreational products sales, which was well ahead of increasingly bullish expectations as we moved through the early part of Q2. In this post-COVID environment, RVs continue to be one of the safest ways for American families to take a vacation. Underscoring this strength, a recent RVIA survey reported that 46M people intend on taking a trip in an RV in the next 12 months.”
SUL is not too expensive 5.6x EV/EBITDA on consensus estimates (vs 5 year average of 7.7x) either.
In short: A rare business in retail with structural tailwinds at a reasonable valuation.
TNT Mines (ASX: TIN) $0.14
I always like to throw in something saucy for the punters. TNT recently acquired a strategically located land package in Utah that is highly prospective for uranium and vanadium (used to batteries). I like management, I like the tight company structure (not too many shares on issue, low market cap, cash in the bank and management alignment) and I like how under the radar this company is… for now. With less-attractive peers valued at multiples of the current value of TIN, results pending and not many shares around, it won’t take much for this to pop in my opinion.
In short: Very high risk, very speculative, very naughty.
This article is of a general nature only and does not consider your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your objectives, financial situation and needs before acting on it and obtain copies of any relevant disclosure documents. Seneca Financial Solutions does not warrant the accuracy or reliability of the information in this report. Luke Laretive, Seneca Financial Solutions, it’s Directors and it’s associated entities may have or had interests in companies mentioned. They may have or have had a relationship with or may provide or has provided investment banking, capital markets and/or other financial services to those companies mentioned.
Luke provides clients with a daily note, which you can access here.
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