2 powerful ASX stocks very cheap right now: expert
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Although past performance is not an indicator of future potential, it is often comforting to know that a particular company has a culture of success and a capable management team.
And that assurance has never been more critical than right now, as all sorts of economic headwinds rock all ASX stocks.
Ord Minnett’s Senior Investment Advisor, Tony Paterno, picked out a few such examples to buy this week:
A potentially revolutionary product
Macquarie Group Ltd. (ASX: MQG) briefly became one of Australia’s four largest banks last year when the share price rose above $200.
But after the market closed on Monday, it settled at $161.50 after falling 21.3% year-to-date.
For Paterno, this is a great buying opportunity, as the banking giant has a potentially massive product release coming up.
“This diversified financial services group plans to increase the interest rate it pays on current account accounts to 1.50%, a 145 basis point premium to the mid-market rate,” it said. he told The Bull.
“After disrupting the home loan market in recent years, this could impact the deposit market if it gains traction.”
Another tailwind is that this month the bank may need to buy some of its own stock to meet its employee bonus commitments.
The professional community is overwhelmingly bullish on Macquarie shares, with CMC Markets showing nine out of 15 analysts consider them a solid buy.
Macquarie, dubbed “the millionaire factory” for the way it rewards its staff, has also made many investors rich over the years. The stock has increased nearly 80% over the past five years and about 540% over the past decade.
Ready to get rich again with these guys?
Another ASX stock that generously rewards long-term investors is the real estate classifieds site REA Group Limited (ASX: REA).
The stock price is up 629% over the past 10 years, despite falling nearly in half this year.
According to Paterno, it’s time to re-examine REA’s stock as the company aims for double-digit revenue and profit growth.
“It will require higher capital expenditure,” he said.
“The investment forecasts have been increased to between 7 and 9% of turnover. The historical average is between 6% and 8%.”
With house prices in Australia falling, he admitted it faced short-term challenges.
“In our view, headwinds to listings are likely to persist, although double-digit yield growth should act as a key counterweight.”
A Market Matters report earlier this month identified REA as one of the stocks to salvage at a low price after the year-end tax-loss sale.
“It’s a quality, almost monopoly-style company with some useful pricing power, but it’s currently in the wrong place at the wrong time.”