Share tips: Bank shares beaten down but there are other options

Big bank shares have fallen sharply in the past month despite their historically strong performance as defensive stocks in times of market turbulence.

While the S&P ASX/200 index is down 7.3 per cent since mid-February, bank stocks have generally fared much worse.

Commonwealth Bank shares have dropped 12 per cent, NAB is down 19.5 per cent, Westpac has weakened by 11.5 per cent and ANZ shares are 6.4 per cent lower.

This week our Share Tips columnists have offered up a couple of buy recommendations for financial sector stocks – and neither has “bank” in their name.

Securities exchange provider ASX and business lender Judo Capital are among their top picks.

BHP also gets a mention as copper becomes a more valuable global commodity thanks to the global electrification megatrend.

Copper sheets at BHP’s Olympic Dam mine in South Australia. Picture: Brett Hartwig

Catapult Wealth general manager Dylan Evans:

BUY

ASX (ASX)

An attractive alternative to banks, it offers a similar yield but with a more defensive profile supported by a monopoly market position.

Brambles (BXB)

The company continues to deliver on efficiency and productivity measures, allowing recent results to include a 27 per cent dividend increase and a $500m share buyback.

HOLD

BHP Group (BHP)

Undergoing a significant shift in strategy, copper now makes up 38 per cent of BHP’s earnings. As iron ore demand in China matures, copper provides an attractive path for future growth.

Sonic Healthcare (SHL)

Sonic scaled up to meet Covid testing, but this revenue fell off faster than expected. Sonic is returning to a period of growth and higher margins as it successfully rolls off this increased cost base.

SELL

Nine Entertainment Co (NEC)

Nine is a market leader in Australian free-to-air television, which unfortunately is in long-term structural decline.

Fortescue (FMG)

Fortescue is heavily exposed to Chinese economic conditions, particularly as it produces a lower-quality ore that is often discounted during times of poor demand.

ASX pays a similar dividend to banks. Picture: Lisa Maree Williams/Getty Images

Morgans Financial senior investment adviser Andrew Eddy:

BUY

Judo Capital (JDO)

Recent share price weakness is a buying opportunity in this SME lender that has significant loan growth aspirations.

DigiCo Infrastructure (DGT)

A recent addition to the ASX, DigiCo provides exposure to the data centre thematic which will continue to see significant demand and investment tailwinds over the next few years.

HOLD

Nanosonics (NAN)

This global leader in infection prevention solutions for hospitals has just received FDA clearance for its CORIS product, which is used for flexible endoscopes and provides a significant market opportunity.

Pinnacle Investment Management (PNI)

Providing a best-of-breed exposure to the funds management sector of the market, it has delivered strong earnings growth over the past years which should continue.

SELL

Evolution Mining (EVN)

It’s one of the highest-quality gold producers on the ASX with strong share price performance recently. We are now happy to take profits.

A2 Milk (A2M)

With a great brand and strong balance sheet, A2M is generating good cashflows, but with the stock now trading on a 25x earnings multiple we see limited upside.

This article first appeared in The Australian.