With the US Federal Reserve this week lifting its cash rate, many experts feel it’s inevitable Australia will follow in the coming months.
The fact is that even if the Reserve Bank of Australia disagrees, Australia’s rate can’t diverge too far off the US’. This is because the Australian dollar could otherwise skyrocket in value, causing our exports to collapse.
Considering this ominous situation, WAM Leaders Ltd (ASX: WLE) analyst Anna Milne had three ASX shares in mind that would be prudent buys right now.
Australians still have to eat
Milne said her team has analysed past cycles of high inflation, rate hikes, and the post-hike market.
“In all of these situations, consumer staples outperform the market,” she told a conference call to clients this month.
“Within consumer staples, we like the supermarkets. It makes sense that when inflation is high, consumer balance sheets and budgets are stretched — and people eat out less.”
Among the supermarket ASX shares, she favours Coles Group Ltd (ASX: COL) after a “really good” results season when it reported “extreme cost discipline” over a “challenging period” of Omicron and Christmas.
“Previously, Coles has not been as good as Woolworths Group Ltd (ASX: WOW) at managing its costs and that’s one of the reasons why there is a valuation differential between the two,” she said.
“However, delivering the result it just did, it brings a differential into question, which is one of the reasons why we prefer Coles over Woolworths currently.”
Coles shares closed Thursday at $17.78, down 1.28%.
Healthcare giant ready to take off again
The share price for CSL Limited (ASX: CSL) hasn’t really gone anywhere since the ASX share’s big acquisition of Swiss company Vifor Pharma in December.
But Milne reckons the market is underestimating the healthcare giant.
“Going into January, into the start of February, we saw a few green shoots across the business,” she said.
“We have since met with management and have even more confidence in the medium-term outlook for the business.”
Milne listed rising plasma collections, new plasma devices and the influenza vaccine as some of the tailwinds about to push CSL stocks upwards.
“I think, more importantly than that, it is one of the most high-quality names on the ASX, with a great management team. So it remains a core holding of ours.”
CSL shares are down 8% for the year so far. They closed Thursday at $270.59, up 0.77% on the day.
Insurance stock pick that’s not QBE for once
While it is generally acknowledged insurance companies would benefit from higher interest rates, most analysts seem to pick QBE Insurance Group Ltd (ASX: QBE) as their favourite.
Not Milne though.
“Insurance Australia Group Ltd (ASX: IAG) reported a really good February result,” she said.
“We have since met with the management team and we are confident that the legacy issues are behind them and they are now focused entirely on the future of the company, earnings growth and the outlook.”
IAG is already cashing in on “strong rates in the insurance cycle”.
“They benefit from rising rates in the financial market. They have a cost-out program and capital management on the way,” Milne said.
“We don’t think any of this is reflected in the share price, so that is another core holding of ours.”
QBE shares finished Thursday at $10.91, up 0.46%.
WAM Leaders shares closed at $1.53 on Thursday afternoon, which is up 2% this year. The listed investment company was trading at a 3.4% premium to net tangible assets as of 28 February.
The post Why expert says this supermarket ASX share is a better bet than Woolworths (ASX:WOW) appeared first on The Motley Fool Australia.
Wondering where you should invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.
*Returns as of January 12th 2022
More reading
- 2 ASX dividend shares to buy for this year and beyond: experts
- Top brokers name 3 ASX shares to sell today
- Do ASX biotech shares offer ‘good buying’ after the sell-off? Experts weigh in
- The Woolworths (ASX:WOW) share price has only added $4 in 8 years. Have the dividends been worth it?
- Is the CSL share price heading back over $300 in 2022?
Motley Fool contributor Tony Yoo owns CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended COLESGROUP DEF SET and Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
from The Motley Fool Australia https://ift.tt/yQiZ2Nk
Leave a Reply