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Coronavirus effect: 11 Aussie stocks to watch

Lex Hall  |  04 Mar 2020Text size  Decrease  Increase  |  
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The covid-19 virus was first declared a public health emergency by the Centre for Disease Control on 30 January. Since then, the ASX has fallen 8.8 per cent.

However, a spike in cases and news the disease had spread to other countries prompted a sell-off on 20 February, during which time the ASX200 fell 10 per cent.

A Morningstar screener shows 11 Australian stocks currently in five-star territory. But a word of warning. This is a snapshot of how these stocks stand at the time of writing: Wednesday at 11am. Given the current market volatility the valuations could jump around.

11 Aussie stocks in five-star territory

Source: Morningstar. Price data as at 3 Mar 2020

Which of the 11 offer the biggest discount to fair value?

Based on current prices, four of the 11 names carry a discount of 50 per cent or more:

  • Seven West Media (ASX: SWM) – 64pc discount
  • Ardent Leisure Group (ASX: AAD) – 55pc discount
  • Sky Network Television (ASX: SKT) – 54pc discount
  • Myer Holdings (ASX: MYR) – 51pc discount
  • G8 Education (ASX: GEM) – 50pc discount

Which of the 11 carry lower risk?

The Morningstar uncertainty rating demonstrates our assessment of a firm’s cash-flow predictability, or valuation risk. From this rating, Morningstar determines appropriate margins of safety: the higher the uncertainty, the wider the margin of safety around the fair value estimate before the recommendations are triggered.

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At the time of writing, Australian Pharmaceutical Industries (ASX: API), a wholesaler and distributor, which owns the Priceline Pharmacy network, is the only stock with a low uncertainty rating.

Specialist packaging company Pact Group (ASX: PBH) and Link Administration (ASX: LNK), which provides admin services here and the in the UK, carry medium uncertainty ratings. Pact and Link are also the only two names on the list that carry narrow moat ratings, meaning they have a competitive advantage of about ten years.

Dividend yield

The top five stocks in terms of trailing 12-month dividend yield are:

  • Sky Network Television:13.6pc
  • Z Energy (ASX: ZEL): 11.5pc
  • Southern Cross Media Group (ASX: SXL): 10.5pc
  • G8 Education: 6.8pc
  • Australian Pharmaceutical Industries: 6.65pc

On Tuesday, the RBA cut rates to a new low of 0.50 per cent. Only one stock in the financial services sector is in five-star territory: Link Administration.

The big four banks are rated as follows:

  • Westpac (ASX: WBC) – 4 stars or 20pc discount
  • ANZ Bank (ASX: ANZ) – 4 stars or 17pc discount
  • National Australia Bank (ASX: NAB) – 4 stars or 17pc discount
  • Commonwealth Bank (ASX: CBA) – 3 stars or fairly valued

Visit Morningstar.com.au and look for the Stock Screener tool to discover more investment ideas. At the time of writing there are 54 stocks rated four or five stars.

 

 

is senior editor for Morningstar Australia

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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