The August reporting season came along amid a pretty stressful environment for ASX shares.
Interest rates have risen at a speed rarely seen, increasing 175 basis points over just three months. And there could be another hike coming on Tuesday.
So amid the chaos, where would Wilsons put its clients' money?
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The stocks that Wilsons would buy right now
With consumers about to close their wallets, Wilsons head of investment strategy David Cassidy isn't favouring a particular sector.
Rather it's the motivation behind the spending that counts.
"We prefer service companies like Aristocrat Leisure Limited (ASX: ALL), Lottery Corporation Ltd (ASX: TLC) and Qantas Airways Limited (ASX: QAN), which should benefit from pent-up demand for these services after COVID restrictions," he said in a memo to clients.
Morgans also likes the gaming technology provider Aristocrat, having a buy rating with a price target of $43. That's a tidy 20% premium from current levels.
The stock has discounted 21.4% since the start of the year.
The Lotteries Corporation only listed in its own right in May after its split from Tabcorp Holdings Limited (ASX: TAH).
The shares actually fell after the release of its full-year results, despite revenue and earnings rising.
Qantas has been in the headlines for struggling to maintain service levels this year amid huge post-COVID demand for travel.
Despite this, the company offered a $400 million share buyback last month, which sent the stock price rocketing upwards.
It's quite the darling among professional investors at the moment. According to CMC Markets, 12 out of 15 analysts rate Qantas as a strong buy.
The stocks that Wilsons would avoid right now
As opposed to those three ASX shares, Cassidy knows what type of stocks to avoid like the plague.
"As we stated when the RBA started to raise interest rates, we want to avoid sectors that will likely see demand erosion due to cost-of-living pressures," he said.
Consumer goods like electronics are still areas of the market we are trying to avoid over the short term.
Indeed, despite positive annual results presented last month, JB Hi-Fi Limited (ASX: JBH) is currently rated as a sell by seven out of 16 analysts surveyed on CMC Markets.
The 2022 financial year result is now very much irrelevant as such businesses will be trading in a vastly different environment in the coming 12 months.
"We think there is evidence in earnings reports of management concern on the economic outlook so far."
