The Australian stock market this year has experienced a lot more volatility than in 2017. However, with volatility, comes opportunity.
With the market in the depths of a correction towards the end of 2018, those who are brave enough to pick up a bargain have a wealth of opportunity with many stocks trading well below their fair value.
The Three Main Market Drivers
Stock markets are generally driven by three factors within the markets, understanding these forces helps us time the market and buy or sell stock at the most opportune moments.
In general, the markets and stocks are firstly driven on a short-term basis via supply and demand imbalances. This is the order flow on a day to day basis as investors buy or sell stock for different reasons. This order flow is generally hard to forecast and requires strong technical analysis and understanding of the underlying market to properly time.
Secondly, markets and stocks are driven by macroeconomic forces in the medium-term. Factors include but are not limited to changes in interest rates, consumer sentiment, government policies and so forth. Understanding the nuances and how the different countries interact with each other in terms of trade and politics is key to understanding the forces that drive the markets as a whole.
Finally, stocks in the long-term are driven by fundamentals. Factors include but are not limited to quantitative factors such as earnings growth, profit margin and return on equity. Qualitative factors include factors such as competition, operating environment, political and policy environment.
To be able to pick the best shares to buy now, it is essential to combine market timing, macroeconomic and fundamental analytics.
Research Is Key To Finding The Best Shares To Buy Now
The hardest part about investing is the ability to process a large amount of information and factors to be able to navigate the macroeconomic and fundamental environment. Our Research team has been hard at work uncovering the best shares to buy on the ASX from small to large cap, on a macroeconomic and fundamental basis.
On a short-term, market timing basis, this is more tricky and is something that requires patience, skill and experience. Talk to one of our Advisers for more information about how to time entries.
I’ve outlined 5 stocks that we have found to either has growth potential or are undervalued and these represent some of the best value the ASX has to offer.
Volpara Health Technologies (ASX VHT) – Volpara Health Technologies Ltd (ASX VHT) is a New Zealand-based healthcare research, and development company with global scalability. The company provides medical software, specialising in managing the breast screening detection and the flow of information between doctor clinic taking the screening mammogram x-ray. With strong growth and technology disrupting the health industry, Volpara has good growth prospects.
Afterpay (APT) – Afterpay Touch Group Limited (ASX APT) is an emerging payment company with huge potential in Australia. The group has shown strong growth over the past year and has substantial opportunities in the U.S market, which reflects a positive market expectation for future performance for the company.
Pioneer Credit (ASX PNC) – Pioneer Credit Limited (ASX PNC) acquires and services unsecured retail debt portfolios that are more than 180 days overdue in terms of repayments and defaulted by those who have no default history before. PNC shares experienced four consecutive year’s growth in EPS and revenue since the company went public in 2014. There are no signs that this is slowing down, with FY18 half-yearly results showing an impressive +93% growth in NPAT and 57% growth in EPS.
Zip (Z1P)– Zip is a digital point-of-sale & fast-growing payment solution, that operates in the buy-now-pay-later sector similar to Afterpay. From FY18 Results Investor Presentation, Zip added 6,000 new retailers including a number of bigger players such as Officeworks, Tigerair, Kogan, and soon Virgin. This means a greater exposure to new customers and more variety of products on offer. Zip also added 440,000 new customers.
Freedom Foods (FNP) – Freedom Foods Group Ltd (ASX FNP) sources, manufactures, sells and distributes specialty cereal and snacks, plant and dairy-based beverages and nutritional products. n FY18, FNP launched over 70 new products. Net sales increased 34.5% to A$353M, operating EBITDA increased 49.3% to A$39.2M and operating net profit increased by 96.9% to A$19.4M. Freedom Foods currently has quite a high PE, but this is due to the strong growth that they are experiencing versus their peers.
Make Your Money Work Harder For You
Picking the best shares to buy now, timing the entry and having an edge in the market is not easy. Our goal at MF & Co. is to make this process more accessible and easier for our clients. Download our special report below for another 5 best shares to buy now which comes with a special strategy that we use for our clients to make your money work harder for you.
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Henry is a co-founder of MF & Co. Asset Management with over 12 years experience as a trader, investor and asset manager. Henry’s focus is on High Net Worth Wealth Management and using algorithmic quantitative trading systems to invest for his clients. Henry also trains new Interns and Advisers on trading and risk management.