The automotive market appears to be turning a corner! This good news is reflected in the latest update from Carsales.Com Ltd (ASX: CAR) although many brokers are reluctant to recommend the stock as a buy.

Not that there’s anything wrong with the online car classifieds business. It’s just that the Carsales.Com share price has surged 67% since the S&P/ASX 200 Index (Index:^AXJO) struck the bear market low three months ago.

But there might be a better way to gain leverage to this thematic – and that’s through the ASX-listed novated leasing and fleet management companies.

Better option than Carsales.Com?

Morgan Stanley recently upgraded two in the sector as it believes these stocks will be re-rated.

The broker pointed out that new car sales and the macro economic environment are “important drivers” for the sector (I’m sure the pun’s intended).

But it also pointed out that some recent macro and regulatory headwinds can cause a divergence in performance among the individual stock names.

How to pick the best of the bunch

There are three areas the broker is looking at to pick the best winners in the sector. The first is differentiated growth. While all companies will benefit from any improvement in car sales and economic activity following the COVID-19 shutdown, some will benefit from additional growth levers.

Next is business model resiliency. This describes how a company can weather changes in lending appetite and funding, as well as regulatory and consumer scrutiny.

The third is valuation. The key is to look for underappreciated stocks with share price catalysts.

ASX stocks that stand out

The standout after applying these three filters is Eclipx Group Ltd (ASX: ECX) with Morgan Stanley describing the stock as its highest conviction pick.

The broker believes it’s the one with the highest growth potential and with a unique funding model that its competitors are trying to replicate.

Morgan Stanley upgraded the stock to “overweight” from “equal-weight” with a price target of $1.70 a share.

Another stock that got upgraded to “overweight” is McMillan Shakespeare Limited (ASX: MMS). The broker likes McMillan as it has an additional income stream from its Plan Partners business, which helps offset any weakness from novated leases.

The group is also building a strong balance sheet to management options in unlocking value. A strategic review of its business may also trigger a re-rating in the stock.

Morgan Stanley’s price target on McMillan is $11.50 a share.

More reading

• How to try and beat the market with ASX shares
• Is it time to buy BHP shares right now?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 finishes flat, ASX travel shares drop
• Afterpay and 2 more ASX 200 shares to watch this week

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These ASX stocks might be a better option than Carsales.Com appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2zV95pX

If the recent bear market taught us one thing it’s that investors love to try and beat the market with ASX shares.

Increased market volatility in February and March enticed many first-time investors to try their hand at investing. Of course, there was always going to be some winners and losers with so many people trading in the market.

But there’s a reason why Warren Buffett is as good as he is. He wouldn’t just bet on whether ASX shares will go higher or lower. Instead, he’s looking for long-term gains and undervalued companies.

If you want to try and beat the market like the Oracle of Omaha himself, here are a couple of things to keep in mind.

How to try and beat the market with ASX shares

The easiest way to invest is passively by aiming to track a broad-market index like the S&P/ASX 200 Index (ASX: XJO).

But not everyone likes to choose the passive route. While passive investing requires less work and has some solid advantages, there are some big downsides.

For instance, the benchmark ASX 200 index is down 11.1% in 2020. On the other hand, a top-performer like Afterpay Ltd (ASX: APT) has rocketed 97.9% higher.

If you want to try and beat the market, the key is to find undervalued ASX shares in the current market.

That’s much easier said than done. It’s important to change your mindset from what’s valuable today to what will be valuable in the next 20 years.

For instance, you might be a big believer in the role technology can play in the future. If that’s in the data security or storage space, that might mean buying NextDC Ltd (ASX: NXT) shares.

The NextDC share price has jumped 49.4% higher in 2020. The secret is to find ‘the next NextDC’ before it surges higher so you can maximise your potential gains.

Whatever your chosen themes, try and think further into the future and find companies that are being under-bought by investors.

If you can successfully pick what’s valuable and what’s not, and with a touch of luck, you could really accelerate your retirement plans in 2020.

More reading

• These ASX stocks might be a better option than Carsales.Com
• Is it time to buy BHP shares right now?
• Coronavirus second wave potential drives investment portfolio changes
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 finishes flat, ASX travel shares drop

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How to try and beat the market with ASX shares appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2zVluKp