The Australian stock market this year has experienced a lot more volatility than in 2017. However, with volatility, comes opportunity.
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.
The Three Main Market Drivers
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.
Bapcor (ASX BAP) – Bapcor shares have gone from strength to strength and have found a way to grow strongly whilst keeping debt under control. In a mature and possibly declining industry, as electric vehicles become more popular, Bapcor shares has found a way to gain double-digit growth whilst their competitors remain stagnant.
Costa Group (CGC) – As the leading grower, packer and marketer of premium quality fresh fruit and vegetables in Australia, Costa is seeking further expansion in berries and acquisitions to develop a national avocado footprint. Given its technological advantage over other conventional farming companies in protected cropping, computer screening and its early action on changing consumer taste to avocado, Costa shares is well positioned to outperform the market in the long run despite short-term headwinds.
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.
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.
We go into more detail about why the banks are still a great buy in our May monthly newsletter – How the royal commission will affect the banks. On top of this, CBA is easily the best bank out of the major four on a number of qualitative and quantitative factors.
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.
Henry Fung is a Partner Managing Director and co-founder of MF & Co. Asset Management. He is a highly experienced equities, derivatives and financial markets professional with over 12 years of experience. Henry specialises in building trading algorithms & systems, quantitative & qualitative analytics across macroeconomic, fundamental and technical disciplines and currently runs the MFAM VPAC AU/US models portfolios. The management Partners and Adviser team have decades of experience between them, with experience from major Investment Banks and Brokers. Their Advisers are highly experienced, having dealt with some of the wealthiest clients in Australia.