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The August reporting season came amid a rather stressful environment for ASX shares.
Interest rates have risen at a speed rarely seen, rising 175 basis points in just three months. And there could be another walk on Tuesday.
So, in the midst of the chaos, where would Wilsons put their customers’ money?
The shares that Wilsons would buy right now
With consumers poised to close their wallets, Wilson’s chief investment strategist David Cassidy isn’t favoring one sector in particular.
Rather it is the motivation behind the spending that counts.
“We prefer service companies like Aristocrat Leisure Limited (ASX: ALL), Lotteries Corporation Ltd (ASX:TLC) and qantas airways limited (ASX: QAN), which should benefit from pent-up demand for these services after COVID restrictions,” it said in a memo to clients.
Morgans also likes gaming technology provider Aristocrat, which has a buy rating with a $43 price target. That’s a neat 20% premium from current levels.
The stock is down 21.4% since the start of the year.
The Lotteries Corporation only went public in its own right in May after its separation from Tabcorp Holdings Limited (ASX:TAH).
The stock actually fell after the release of full-year results, despite rising revenues and earnings.
Qantas has been making headlines for struggling to maintain service levels this year amid huge post-COVID travel demand.
Despite this, the company offered a $400 million share buyback last month, sending the share price skyrocketing.
It is quite beloved among professional investors at the moment. According to CMC Markets, 12 out of 15 analysts rate Qantas as a strong buy.
Stocks Wilsons would avoid right now
Unlike those three ASX stocks, Cassidy knows what kinds of stocks to avoid like the plague.
“As we said when the RBA started raising interest rates, we want to avoid sectors that are likely to see an erosion in demand due to cost of living pressures,” he said.
Consumer goods like electronics remain areas of the market that we try to avoid in the short term.
In fact, despite the positive annual results presented last month, JB Hi-Fi Limited (ASX: JBH) is currently rated a sell by seven of 16 analysts surveyed at CMC Markets.
The result of fiscal year 2022 is now very irrelevant, since such companies will operate in a very different environment in the next 12 months.
“We believe there is evidence in earnings reports of management concern about the economic outlook thus far.”