The falls on the Australian stock market, sparked by a global turmoil over fears about China’s economy, have created new opportunities to pick up good income-producing stocks.
“The pull-back provides an opportunity for Aussie investors to buy cash generative and growing companies at a reasonable price,” write Credit Suisse research analysts Hasan Tevfik and Damien Boey in a note to clients.
These companies include Resmed, Aristocrat, Tabcorp and Oil Search. Credit Suisse has added Oil Search to its long portfolio at the expense of Sydney Airport.
Here’s the full list of what the analysts call Aussie “diamonds in the dust” of market turmoil.:
“Aussie equities have endured a 16% pull-back since April highs,” the analysts say. “Valuations have de-rated and undershot long-term averages. Despite the global market turmoil, the Australian cost of debt remains accommodative. Meanwhile, the current reporting period continues to highlight a recovery in corporate free cash flow.”
The analysts say investors should encourage companies to do buybacks as well.
“A buyback is even more accretive now than say a week ago,” they say.
“So in today’s note we screen for Aussie companies that are reasonably valued post the sell-off, are cash generative and growing.
“These could be the Aussie diamonds in the dust of market turmoil.”