# 'Quality' ASX Stocks



## systematic (3 July 2018)

Just for a fun thread.

New financial year and a recent comment in the 'SMSF Returns' thread that mentioned craft, made me want to have a look at what I would short-list as the current crop of 'quality' stocks on the ASX.

I've focused on larger (well, by ASX standards) stocks here, avoiding microcaps (or 'small' by some people's definitions).  They're all basically liquid (KSC seems to be the only exception).

The 'universe' was culled down to 208 stocks...and these are the 56 stocks that made the final cut.  I could've made it less...but it seemed broad enough without being TOO broad.

I'm not going into my interpretation of 'quality' (at least, not in this thread), as that's not the point.  Suffice to say that (unsurprisingly, for anyone who reads my posts) it basically falls largely under the umbrella of 'academic' definitions of quality - but selectively so.
What I can also add, is that 'quality' doesn't consider price.

I've said before, I don't actually use quality in my own investing plan, at least not currently...hence the comment that this is a fun thread, in that sense.  But if I _did_ - these would be the picks amongst the mid-large cap ASX stocks for me (although if I did use quality, it would be more for use as a negative screen than to find the best stocks - but anyway).

So the point of the thread?

Well, due to quality not considering price, it makes it an interesting candidate for a thread where contributors can add their own price considerations.  @tech/a recently posed the question to me in a thread about doing some tech analysis on a list of fundamentally picked stocks.  I didn't mean to ignore you tech, I simply couldn't get my head around what type of list to provide...because any list that considers price (e.g. cheap stocks) didn't really provide a suitable base for the project, in my opinion.

So the cool thing here is, I'd like to see:
- Value investors let us know which on the list you 'like' (below intrinsic or relative value)
- Chartists...go for your life (short or longer term)
- Income equity investors...which do you like for the dividends?

Or feel free to just post in the individual stocks thread and reference this post.

Or tell us which on the list you do or don't consider quality in the first place.

Or whatever!

The only potential downside I see is that many here probably focus on smaller stocks, so it might be a bit of a 'boring' list to begin with.  Let me know and I can potentially do a smaller cap version.


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## greggles (4 July 2018)

Hi Systematic, I'm just posting an image of your list of stocks so that others can see them more easily.




It's an interesting thread idea. Let me give it some thought and I will come back to you soon.


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## systematic (4 July 2018)

Apologies, Spotless (SPO) was meant to be removed prior to uploading - but no biggie, only due to the DOW takeover, not the business


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## systematic (4 July 2018)

greggles said:


> Hi Systematic, I'm just posting an image of your list of stocks so that others can see them more easily




Thanks, greggles!


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## greggles (4 July 2018)

It's a big list systematic so I'm not sure where to begin. You could have your own index, the ASX Systematic 56 Index.  There are a lot of sectors covered but I am drawn to the mining stocks as I pay attention to that sector more than others (probably to my detriment).

I've posted on Silver Lake Resources (SLR) quite a bit and think that they are still undervalued. They should have $120 million in cash by now and no debt. They have plenty of gold in the ground and good drilling results continue to come in indicating that there is a lot more under there. The gold price is holding up, especially in AUD, and I think it is about to take another bullish turn.


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## luutzu (4 July 2018)

systematic said:


> Just for a fun thread.
> 
> New financial year and a recent comment in the 'SMSF Returns' thread that mentioned craft, made me want to have a look at what I would short-list as the current crop of 'quality' stocks on the ASX.
> 
> ...




How did you come up with that list? How do you define quality there Systematic?


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## peter2 (4 July 2018)

What's fascinating is that I could post my 50 fav stocks and it would be quite different to systematic's list. I don't trade media, retail, airlines, biotech, internet startups, micro cap oil/gas/mineral explorers.
That doesn't leave many in the ASX.


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## luutzu (4 July 2018)

peter2 said:


> What's fascinating is that I could post my 50 fav stocks and it would be quite different to systematic's list. I don't trade media, retail, airlines, biotech, internet startups, micro cap oil/gas/mineral explorers.
> That doesn't leave many in the ASX.




No it doesn't leave much. What do you trade in?


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## systematic (4 July 2018)

greggles said:


> It's a big list systematic so I'm not sure where to begin. You could have your own index, the ASX Systematic 56 Index.  There are a lot of sectors covered but I am drawn to the mining stocks as I pay attention to that sector more than others (probably to my detriment).




It’s pretty varied by index coverage also, with everything from ASX20 stocks through to All Ords only. 

Actually that’s not a bad idea. I might just throw the lot in and track them as a group. If I do that I might rebalance 6 monthly, probably end of Sept and March though, to capture recent results. 

Mining stocks: nothing wrong with that, they’ve been a significant sector for me for ages.


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## So_Cynical (5 July 2018)

Its a real mixed bag of stocks, i hold a few of them or at least used to, noticed very little exposure to Ag and the rural sector in general, no GNC, RIC, WBA, SHV or RHL and no Gaming/gambling stocks.

My portfolio is heavy Ag, im looking forward to the soft commodity boom.


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## mcgrath111 (5 July 2018)

Interesting list / idea. 
It would be cool if one of the brokers had an option to create your own personalised ETF.

No love for the banking sector I see.


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## RIP1 (19 July 2018)

peter2 said:


> What's fascinating is that I could post my 50 fav stocks and it would be quite different to systematic's list. I don't trade media, retail, airlines, biotech, internet startups, micro cap oil/gas/mineral explorers.
> That doesn't leave many in the ASX.



This guys list of what to avoid looks very smart to me!! Only thing I would say is that Internet stocks that win (realestate.com apx pps will out perform all else but I agree don't toss money at start ups)


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## tech/a (19 July 2018)

Thanks for the effort systematic.
I've wanted to work with a fundi on this idea for ages.

My idea from here was to apply my technical scans on the universe to look for opportunities.
Matching some technical with fundamental.

So the list becomes a universe
We could also have anyone's universe eg Peters and my own list of favourites.

The coming together of both techniques.
I'm presuming long only.

I don't think I'm going to get much time on this in the next 2 weeks
But if I do ill post here.


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## peter2 (19 July 2018)

luutzu said:


> No it doesn't leave much. What do you trade in?



It's worth replying to this question because it makes me think about what I'm trading and the reasons for doing it. 

Trading ASX. I'm a short term swing trader and a medium term trend trader. You've seen how I operate and compound profits over three years of trading. We all have our fav types of stocks to trade or invest in. These fav's are generally selected by our personal biases. Have a few ugly surprises in the same sector and you develop a bias against it. Have a few good surprises and you love the sector. Biases like these aren't helpful and it's worth trying to keep an open mind for any opportunities that you identify. 

I love trading tight consolidations in an up trend. However when I see one in a sector that I dislike I'll groan because I know it's an opportunity and I know it could be short term. This means I'll have to be more attentive to the daily price fluctuations as they can change quickly.  If I have to be more attentive to price fluctuations then I'd rather be trading something that trades 24hrs rather than something that trades 6hrs and could gap up or down on the next open. 

My personal biases: 
_Media_: newspapers free to air TV are dying businesses 
If I want to trade/invest in digital service providers I have to trade US companies. 
_Retail:_ The Aust economy is small. Retail companies are very well understood by the analysts and these stocks only trend with the general market. Kogan trended nicely while it was new, now it's just another "value" stock rather than a growth stock. I can say the same thing about JBH. This sector does provide short term swing opportunities (WOW, WES currently).
_Airlines:_ Don't want to own one when a plane crashes. 
This sector in the US provides great intraday trading opportunities (LUV, UAL, AAL, ALK).
_Micro cap oil/gas/mineral explorers (and I'm lumping bio-tech in also):_ Not producing anything. Price moves with flow of info but mainly hope and pumped expectations. Provides short term opps only that require more attention. I'd rather trade indices, commodity or forex markets that are open 24hrs.
_ASX Gold/oil stocks:_ I'd rather trade the futures markets that trade 24hrs. 
When oil or gold falls it's easier to short the futures markets and easier to intraday short US companies. I've already made my money before OSH, WPL, STO open with a gap down. 
_Internet start ups:_  I treat them like flies on a hot day and give them the Aussie wave.


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## greggles (19 July 2018)

tech/a said:


> My idea from here was to apply my technical scans on the universe to look for opportunities.
> Matching some technical with fundamental.




I really like this idea and it's a fantastic idea for a thread and not something I've seen on here.

Using TA as a way of determining when to enter and exit a trade but using fundamentals as a way of filtering potential trading opportunities, specifically finding stocks that are oversold based on a reasonable fundamental valuation. I think this can limit downside risk and perhaps improve on success rate.

People argue about technical vs. fundamental analysis, but I have always thought that the two can be used together as they are different but complementary approaches that both aim to achieve the same thing: buying low and selling higher.


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## peter2 (19 July 2018)

OK, so what do I like to trade. Companies that are producing something or providing services for profit. 
Mining service companies are a fav sector of mine. I've been involved with many take-overs/mergers and they provide good profits (UGL, TOL etc).

I also prefer new companies that are growing; by entering new markets, producing new products, providing more services (SVW, BAL, BKL, A2M, SM1, JIN, etc). I'll usually get out of great trends too early because all trends have pull-backs due to minor corporate setbacks (or China yanking the supply chain). My experience as a profitable chart trader will get me in when these strong trends resume. 

There are a few strong trends that you just have to find a way to get in (safely, with small risk if your timing is wrong). eg (ALL, CSL, COH etc)

I like trading newly listed companies (like ACF currently). If the price falls after listing, ignore them, but if the price remains strong then they're worth a closer look. Expectations are bullish until the first setback and I'm comfortable trading the initial price rises. It took KGN one year after it listed before the trend broke out. IPH was another that I traded very soon after listing. After IPH's run up to $9 collapsed I'll never trade it again. There was a reversal break-out opp recently at 3.65. Not interested as I don't want to encourage lawyers. That's a real psycho bias.

I regularly scan the whole ASX looking for opportunities. I try to remain open to all but know that I'm not. I saw the setup in BID. The kid took it and made a good profit (0.06 to 0.095). I didn't trade it. This doesn't worry me anymore. It used to. I thought it was my job to trade every break-out that I saw. It's impossible. It took me many years to get comfortable with the fact that I'm going to overlook/ignore/pass lots of good trades. My job is to trade the ones that I start as well as I can. 

There's just enough companies for me to trade in the ASX, but as you've noticed my attention is more global as there's many more opportunities in the US and the large, open 24hrs commodity, currency markets.


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## RIP1 (19 July 2018)

This is a list of financially strong companies that have strong Earnings per share
My favorites are APX REA CSL (overpriced)
and PME CAR PPS RRL

any other suggestions ??

Code Name Industry Group
A2M The a2 Milk Company Limited Food Beverage & Tobacco
ABA Auswide Bank Ltd Banks
ADH Adairs Limited Retailing
ALQ ALS Limited Commercial & Professional Services
ALU Altium Limited Software & Services
AMI Aurelia Metals Limited Materials
APX Appen Limited Software & Services
ASL Ausdrill Limited Materials
BAP Bapcor Limited Retailing
BLX Beacon Lighting Group Limited Retailing
BRG Breville Group Limited Consumer Durables & Apparel
BSL BlueScope Steel Limited Materials
BWX BWX Limited Household & Personal Products
CAR Carsales.com Limited Software & Services
CCP Credit Corp Group Limited Diversified Financials
CGC Costa Group Holdings Limited Food Beverage & Tobacco
COH Cochlear Limited Health Care Equipment & Services
CSL CSL Limited Pharmaceuticals & Biotechnology
CTD Corporate Travel Management Limited Consumer Services
CUV Clinuvel Pharmaceuticals Limited Pharmaceuticals & Biotechnology
D2O Duxton Water Limited Utilities
DMP Domino's Pizza Enterprises Limited Consumer Services
ECX Eclipx Group Limited Diversified Financials
EGG Enero Group Limited Media
EPW ERM Power Limited Utilities
EXP Experience Co Limited Consumer Services
FLT Flight Centre Travel Group Limited Consumer Services
FPH Fisher & Paykel Healthcare Corporation Limited Health Care Equipment & Services
HIT HiTech Group Australia Limited Commercial & Professional Services
HLO Helloworld Travel Limited Consumer Services
HUB HUB24 Limited Diversified Financials
IEL IDP Education Limited Consumer Services
IPL Incitec Pivot Limited Materials
JIN Jumbo Interactive Limited Consumer Services
LNK Link Administration Holdings Limited Software & Services
LOV Lovisa Holdings Limited Retailing
MAI Mainstream Group Holdings Limited Diversified Financials
MFG Magellan Financial Group Limited Diversified Financials
MIN Mineral Resources Limited Materials
NCK Nick Scali Limited Retailing
NWS News Corporation Media
ORA Orora Limited Materials
OSH Oil Search Limited Energy
PME Pro Medicus Limited Health Care Equipment & Services
PNC Pioneer Credit Limited Diversified Financials
PPS Praemium Limited Software & Services
PRY Primary Health Care Limited Health Care Equipment & Services
QMS QMS Media Limited Media
RCR RCR Tomlinson Limited Capital Goods
REA REA Group Ltd Software & Services
RMS Ramelius Resources Limited Materials
RRL Regis Resources Limited Materials
RWC Reliance Worldwide Corporation Limited Capital Goods
SAR Saracen Mineral Holdings Limited Materials
SDA Speedcast International Limited Telecommunication Services
SDF Steadfast Group Limited Insurance
SFR Sandfire Resources NL Materials
SNL Supply Network Limited Retailing
SSM Service Stream Limited Capital Goods
TWE Treasury Wine Estates Limited Food Beverage & Tobacco
WHC Whitehaven Coal Limited Energy
WTC Wisetech Global Limited Software & Services


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