The S&P/ASX 20 (ASX: XTL) is a rather exclusive index on the ASX. As its name implies, it only holds 20 ASX shares within it – the 20 largest shares on the market by market capitalisation. Thus, it's a lot more prestigious for a company to be on the ASX 20, as opposed to the S&P/ASX 200 Index (ASX: XJO). Let alone the open door that is the All Ordinaries Index (ASX: XAO).
The ASX 20's membership also fluctuates far less than the other ASX indexes. It's not uncommon for five or more companies to cycle in and out of the ASX 200 every quarterly rebalance. But, sometimes, the ASX 20 doesn't change at all.
But two fund managers are fairly certain about two ASX shares that they are predicting will soon be in the ASX 20. Hugh Dive from Atlas Funds Management and Hugh Giddy from Investors Mutual recently did an interview with Livewire Markets. They were asked to pick the ASX shares that they see joining the ASX 20 in the next 12 months.
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Which ASX shares will join the ASX 20?
Giddy's pick is Brambles Limited (ASX: BXB). It's the packaging and logistics company that has been on a bit of a rollercoaster over the past five years. Here's why Giddy thinks Brambles is heading to the upper echelons of the ASX:
I'm impressed with Brambles. The management is focused on generating good cash flow. They've been able to raise prices to their customers to cover the costs, like the very high costs of lumber going to building pallets and high transport costs.
They have a very, very strong position versus their competitors. They are usually number one in the countries in which they operate. And there is a natural advantage of being the number one. It's on the cusp of the top 20. And it could rise into the top 20.
One healthcare share to another…
Dive's pick for the ASX 20 is healthcare share Sonic Healthcare Limited (ASX: SHL). Sonic has had a rough time of it over the past year, with its share price down more than 14%. However, Dive reckons Sonic could have a shot at cracking the ASX's top 20. Here's what he said:
Sonic's been a great beneficiary of COVID, but it'll benefit in the long term from an older, sicker population, as well as increases in medical technology, allowing for more tests and doctors wanting to prescribe more tests to avoid malpractice.
It is a well-run company. Number one in pathology in Australia. Number one in Germany, number one in Switzerland, number two in the UK, and number three in the US. I think it is a great beneficiary in the future.
So those are the two ASX shares these experts have tipped for ASX 20 inclusion in the next 12 months. In their place, both experts have named Ramsay Health Care Limited (ASX: RHC) and Fortescue Metals Group Limited (ASX: FMG) as two of the ASX shares most likely to make way for Sonic and Brambles.
But we'll have to wait and see what happens.
