This month, Australian research firm Morningstar has 13 companies in its Best Stock Ideas list.
It has added Brambles, Commonwealth Bank of Australia and CSL and removed National Australia Bank. Business editor Dene Mackenzie reviews the list.
Morningstar has removed National Australia Bank from its Best Stock Ideas list for November after the owner of the BNZ, in New Zealand, reported cash earnings below expectations, equity research director Carolyn Holmes says.
The 4% fall in cash earnings was driven by higher-than-expected United Kingdom conduct provisions and softer net interest margins.
''Earnings uncertainty in the short term remains high as the bank continues to de-risk and divest legacy and low-returning assets.''
The long-awaited UK exit was delayed two months to February next year, she said.
The initiatives were seen as positive for shareholders in the long term, but there would be further short-term uncertainty.
Morningstar this month added Brambles, Commonwealth Bank of Australia (the owner of ASB) and CSL to the list.
The companies in the list are:
Ainsworth Games Technology
Short-term concerns were weighing on AGT, whose earnings were held back by weakness in Australia during the past year.
However, synchronised earnings growth in all the company's operating markets were expected in the 2016 financial year.
In Australia, the company had finally released a new cabinet and a promising suite of new games after the recent lull in new product releases.
Brambles
Brambles was still trading at an attractive 13% discount to the Morningstar fair value estimate. The market was not recognising the upside from additional growth investment in its core pallets business.
Commonwealth Bank
The Commonwealth Bank was the least risky of the four major banks, it was conservatively managed, it was focused on Australia and New Zealand, it benefited from larger market shares and it had a comparatively lower-risk loan book.
CSL
CSL was the largest healthcare stock on the ASX and the world's largest blood plasma fractionator by market capitalisation. The stock was trading at a 12% discount to fair value, reflecting the market's overreaction to the relatively subdued immunoglobulin year-on-year growth.
Crown Resorts
Crown Resorts was regarded as a unique company offering both defensive earnings quality through its two dominant Australian casinos and an attractive growth profile through the 34.3%-owned Crown Melco in Macau, as well as new casinos planned for Sydney and Las Vegas.
Goodman Group
Goodman Group was taking advantage of elevated prices for industrial property by selling assets and redeploying the capital to build new, higher-quality properties in locations with stronger demand fundamentals.
Platinum Asset Management
The company's income was predominantly derived from base management fees on funds with specific mandates - specifically by geography, although performance fees could be meaningful in good years. Earnings growth was primarily driven by growth in funds under management, a function of performance and inflow.
Qube
The port and logistics operator's strategy to consolidate the fragmented logistics chain should deliver above-market rates of growth and scale benefits.
ResMed
The company had been affected by negative sentiment in recent months, generated by the results of a trial. That led to its shares trading at an attractive discount. The obstructive sleep apnoea business remained robust and progress in the adjacent medical areas of chronic obstructive pulmonary disease was positive for growth.
Woolworths
Woolworths' dominant position in the Australian supermarket sector in recent years allowed its retail prices and profit margins to rise above those of its competitors. The supermarket operator was now trading at a 27% discount to the fair value of A33c a share.
Alumina
Alumina was a low-cost producer with cash costs in the bottom quartile of the cost curve. The move from long-term contracts to spot alumina pricing, together with more balanced supply, should see improved prices and returns.
BHP Billiton
Better-than-industry average margins allowed BHP to either return capital to shareholders and/or invest through the cycle. The market underestimated the resilience of earnings and growth options that came from long-life, low-cost expandable assets.
Santos
Production at Santos should near double during the next two years and earnings rise threefold as new lng plants at Port Moresby, in Papua New Guinea, and Gladstone, in Queensland, were commissioned. Santos also faced the enjoyable prospect of higher domestic gas prices on its existing domestic infrastructure.
