In a prior article I covered to what extent retail investors should follow broker research. If we assume it provides some interesting guidance for investors backed up by the views of experienced analysts it's worth taking a look at.
After all expert analysts and powerful fund managers are the valuation experts. So it's their views on valuations and companies' outlooks that tend to control the level of share prices over the short term anyway.
Over the long term only the companies themselves will drive their share prices higher or lower.
So let's take a look at three companies currently rated 'strong buys' on analysts' consensus estimates.
Bapcor Limited (ASX: BAP). Is the second-hand car parts distributor that has an organic and acquisitive growth strategy it has a decent track record of delivering on. Organic growth comes by gaining market share, bumping up parts prices, or increased customer demand. It can also grow by selectively acquiring smaller auto parts players and then extracting costs by integrating them into its network.
Dividends have gone from 8.7 cents per share in FY 2015 to 17 cents per share in FY 2019. It's also forecasting up to high-single-digit profit growth in FY 2020. I'd have to agree this looks a good business to own.
Aristrocrat Leisure Limited (ASX: ALL). Is the pokie machine manufacturer that grew net profit 15% to $365.5 million for the six months ending September 30 2019. Operating revenue climbed an impressive 30% to just over $2 billion. Just today the stock hit a record high of $32.11 and sells for around 28xc annualised earnings per share of $1.12. Its forecast for more growth over the second half of its financial year is another reason for its popularity with investors.
NextDc Ltd (ASX: NXT). Is popular with some brokers thanks to the data centre operator's leverage to the ever growing enterprise demand for data storage capacity. It's also investing heavily to build new data centres in Sydney and Melbourne for additional long-term growth. However, it already trades on a high valuation and the heavy capital expenditure for uncertain returns brings more risk. So it's a broker favourite on the one hand, but a popular target of short sellers on the other.
This is a nice Segway into how everybody has an opinion in the share market, but the only thing that really counts is returns. Any way you can achieve market-beating is worth following and different investors will have different ways.
