The world is full of investment analysts and stockpickers. Some are experts, some charge you for their knowledge, while you can always venture into the online world of other retail investors to get their hot tips.
One list of stock tips is getting quite a lot of publicity at the moment, and it comes from Richard Schellbach, the Sydney based analyst for Swiss bank UBS.
In making his pick, Schellbach makes the point that historically global investors have been largely disinterested by Australian shares, and have preferred to go chasing bigger returns particularly in the US.
But with the rest of the world facing a recession and beset with issues as a result of the war in Ukraine, our relative isolation is now apparently a good thing and is likely to insulate his list of Australian stocks from risk and also from competition, meaning that margins and earnings will be protected.
Here is a list of his Top Ten, and remember that he’s advocating they be held for ten years, not flipped next week after the shareprice shows a slight improvement.
The list is also interesting in that it hints at some of the investment themes Schellbach thinks will make money long term, so if you look at similar companies there might be reasons to invest in them too.
BHP. The company is now back headquartered on Australian shores after a brief flirtation with London, and has also built an impressive new headquarters in Perth, so can rightly be called the “Big Australian” once more. BHP remains one of the world’s biggest producers of commodities such as iron ore, copper, nickel and metallurgical coal used in steel making. If you don’t like coal fired power stations, then you might be satisfied to know that BHP is committed to exiting from its production of thermal coal, the lower quality coal used to make energy. BHP also delivers a healthy dividend stream. Other companies like BHP are Rio Tinto and Fortescue Metals.
Commonwealth Bank. Interest rates are on the way up and this is good for bank margins and profits. In terms of banks, they don’t come bigger than the CBA, which is Australia’s biggest with a market value of around $180 billion. Like BHP – and the other big banks – CBA is beloved by retirees for its dividends, which makes it a favourite for long term investors. Other similar stocks are the other big banks, ANZ, NAB and Westpac.
IDP Education. Listed on the ASX, IDP has a global operation as placing students not only at Australian universities but also in NZ, the US, UK, Ireland and Canada. The company is poised to benefit from the re-opening of borders after the pandemic as students look internationally for the qualifications they need. IDP is largely a unique opportunity in that its main competition is unlisted and not on the ASX.
REA Group. Everyone loves real estate, right? Founded in Melbourne in 1995, REA operates the realestate.com.au website and has offices in Hong Kong and also India. Owned by media giant News Corp and itself the owner of the Mortgage Choice broking brand, REA dominates the Australian property market. If you want to find a similar exposure from another stock, the only comparison is with Nine Entertainment, which owns a majority stake in competitor site Domain.
Suncorp. The Brisbane company is somewhat unique in that it sits outside the Big Four banks as a rising regional banking provider. It has bought the Bank of Queensland – which earlier bought ME Bank – and owns insurer AAMI, so it’s a company on a growth spurt and a challenger brand. One comparison is with the Bendigo and Adelaide Bank, another regional player.
Transurban. Another Australian company which has become a global success story, now owning toll roads here in Australia and with significant assets in the US. The company dominates Melbourne, where it owns CityLink, and also Sydney and Melbourne. There are no competitors of similar size, although Toll Holdings is a major provider of logistics and transport infrastructure and has some similar characteristics.
The Lottery Corporation. Australians love a bet and always have and that’s not likely to change, certainly not in ten years. The company was spun out of Tabcorp, and now runs Lotto and Keno brands. Former parent Tabcorp is still listed on the ASX.
Wesfarmers. This Perth based company has turned itself into a retail conglomerate, owning Bunnings, Kmart and Office Works. Matching stocks might be the big grocers, Coles and Woolworths, while Scentre Group has major exposure to retail as a landlord.
Worley. A major engineering company with its finger in just about every sector in Australia, from industry to defence. Can be compared with Downer EDI, another big integrated services company with a specialty in engineering.
Wisetech. With Wisetech you get a combination of software and exposure to the logistics industry, where it sells most of its products. Founded in Australia, Wisetech has gone global and its speciality is in easing supply chains with its software solutions. Most of its competitors are private companies, so in many ways the company is a unique opportunity.