This reporting season has provided a number of opportunities for the nimble investor as August tends to usher in a period of heightened volatility for the share market.
If you are looking for short-term buying ideas among the large caps, Morgan Stanley is recommending three stocks you should jump onto now.
The first is electronics retailer JB Hi-Fi Limited (ASX JBH), which is scheduled to release its full year results on August 14. Morgan Stanley believes management will beat net profit guidance of $200 million to $206 million. Consensus has pencilled in a figure at the top end of guidance, but Morgan Stanley thinks the number is likely to be around $213 million instead.
What's more, a strong result is likely to trigger a short squeeze where short sellers will be forced to buy the stock to close out their bearish bet on JB Hi-Fi, which has been under a cloud due to the impending arrival of US online retailer Amazon.com. Around 13.8% of JB Hi-Fi's stock is short sold.
So, if Morgan Stanley's prediction comes to pass, the stock should outperform its peer group in the next 14 days and the broker thinks there is about an 80% probability of this happening, although investors may not want to hang on to the stock for the longer term given that Morgan Stanley only rates JB Hi-Fi "equal-weight" with a price target of $27 a share due in part to its cautious view on the industry.
Property company Charter Hall Group (ASX: CHC) is another that is tipped to outrun its peers too after trending down over the last month. Morgan Stanley thinks the catalyst will come from its full year earnings release with the broker expecting management to deliver robust FY17 figures and a positive outlook for FY18.
Charter Hall is well positioned to deliver one of the highest funds from operations (FFO) growth rates in the sector in the current financial year and that is likely to keep the stock racing ahead for the next 60 days, according to Morgan Stanley – who has an "outperform" recommendation on the stock and a price target of $5.65 a share.
Another property stock that has an 80%+ chance of outperforming in the next 60 days is Goodman Group (ASX: GMG).
"GMG has outperformed year-to-date, but we expect that it will continue to deliver superior FFO and net tangible asset (NTA) growth in FY18, helped by strong development returns, ongoing assets under management (AUM) growth and a reduction in interest expense," said the broker.
Morgan Stanley also rates Goodman "outperform" with a price target of $8.20 a share.
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