We've been asking our Foolish writers to give us their top monthly share picks for some time now. The list is generally pretty diverse (or 'motley'!) in terms of sector, type of investment, and company size.
But this month, all the shares recommended by our writers have at least two things in common. They all have market caps over $2 billion and are all constituents of the S&P/ASX 200 Index (ASX: XJO).
Could it be a sign of the times that our Foolish writers are favouring the top end of town this month, or is it merely a coincidence?
Either way, they reckon these ASX heavy-weights have what it takes to deliver some serious profit punches over the long term.
Let's take a look at the potential of these ASX 200 prizefighters:
7 best ASX shares for February 2023 (smallest to largest)
- Pinnacle Investment Management Group Ltd (ASX: PNI), $2.12 billion
- Super Retail Group Ltd (ASX: SUL), $2.87 billion
- Premier Investments Limited (ASX: PMV), $4.39 billion
- Lottery Corporation Ltd (ASX: TLC), $10.42 billion
- Xero Limited (ASX: XRO), $11.67 billion
- Resmed Inc (ASX: RMD), $13.02 billion
- Transurban Group (ASX: TCL), $42.31 billion
(Market capitalisations as of 31 January 2023)
Why our Foolish writers love these ASX 200 shares
Pinnacle Investment Management Group Ltd
What it does: Pinnacle is an investment management company. It enables leading fund managers to set up their own fund management businesses, and Pinnacle takes a stake in those businesses. The ASX 200 share also helps with areas like finance, legal, seed funds under management (FUM), compliance, and so on, allowing the fund managers to focus on the investing side of things.
By Tristan Harrison: The Pinnacle share price has plunged by more than 40% since early November 2021. I think growing, profitable businesses can look very compelling after a fall of that magnitude.
The drop in asset prices has been a headwind for Pinnacle's FUM and earnings, but when regular asset price growth returns, this could be a tailwind for FUM again. Plus, I think good FUM inflows are more likely for the fund managers when the prospect of further interest rate hikes is less likely.
I also like that this ASX 200 company is looking to expand its portfolio of investments, including a start in Canadian funds management. I believe this will diversify and help grow its earnings.
Motley Fool contributor Tristan Harrison does not own shares of Pinnacle Investment Management Group Ltd.
Super Retail Group Ltd
What it does: Super Retail owns four well-known retail brands. They are Supercheap Auto, Rebel Sport, BCF (cue that catchy advertising tune, "boating, camping, fishing – it's BCFing fun!"), and New Zealand sporting goods label, Macpac.
By Bronwyn Allen: Super Retail recently reported a record first half for FY23, with increased sales and margins. This was despite rising inflation and interest rates, which were expected to dampen consumer spending. They probably will at some point, but I think Super Retail's brands may have more resilience than many others.
People always need new car stuff, activewear is incredibly popular, and plenty of people are still holidaying locally. Because of this, I like the ASX 200 company as a long-term buy and hold.
Right now, Super Retail shares are trading pretty close to their 52-week high of $13.03. But three brokers, Citi, Goldman Sachs, and Morgans reckon there is still around 10% to 12% upside potential over the next 12 months. Their share price targets are $14, $14.20, and $14 respectively.
Earlier this month, Goldman noted the business was trading on a 12-months forward price-to-earnings (P/E) ratio of 13.2.
Super Retail also pays fully-franked dividends, with the next one to be announced on 16 February. Goldman and Morgans estimate a 5.1% dividend yield for FY23.
Motley Fool contributor Bronwyn Allen does not own shares of Super Retail Group Ltd.
Premier Investments Limited
What it does: Premier owns and operates speciality retail brands, consumer products, and wholesale businesses. Its Just Group operates seven iconic Australian brands and employs more than 9,000 people. Premier is active in Australia, New Zealand, Asia, and Europe.
By Bernd Struben: 2023 is forecast to be a tough year for retailers, which are expected to face headwinds from high inflation and interest rates, and diminishing household savings.
But Morgan Stanley tips Premier to outperform.
"It is best positioned among retailers in our coverage to navigate the tough conditions with a strong balance sheet and high-quality leadership team," Morgan Stanley analysts said.
The broker likes Premier's global expansion opportunities and lengthy history of beating consensus expectations. The analysts also noted, "We see scope for more dividends/buybacks or highly accretive M&A."
With the January 2023 payout now in shareholders' bank accounts, Premier pays a 12-month trailing dividend yield of 4.5%.
Morgan Stanley has a price target of $30.50 for Premier's shares. That's around 10% above the current share price of $27.74.
Motley Fool contributor Bernd Struben does not own shares of Premier Investments Limited.
Lottery Corporation Ltd
What it does: Lotto Corp was recently spun out of Tabcorp Holdings Limited (ASX: TAH). It houses most of the country's top lottery and gaming brands, including The Lott and Keno.
By Sebastian Bowen: Lottery Corp is one of the newest ASX 200 shares on the market. But despite this, I believe it's a stock that could be worth considering this February.
The company has close to a monopoly in the Australian lottery industry, with the exception of Western Australia.
Furthermore, customers who buy lotto tickets or play Keno tend to be repeat users, which makes this company a very consistent cash flow generator. Lottery Corp's bottom line is also helped further by the fact the company has a fairly light capital base.
So if you're in the mood for what I believe is a consistent, sturdy, dividend-paying share this February, then Lottery Corp could well be worth a look.
Motley Fool contributor Sebastian Bowen does not own shares of Lottery Corporation Ltd.
Xero Limited
What it does: Xero is an online accounting and business services platform provider to small businesses across the globe. At the last count, the company had 3.5 million subscribers.
By James Mickleboro: I think Xero could be a quality option for ASX investors in February. With its shares down materially over the last 12 months, and the tech sector showing signs that the worst is now behind it, I believe the risk/reward on offer with Xeros shares is compelling.
Particularly given the company's very positive long-term outlook. This is being underpinned by its high-quality platform, the structural shift to the cloud, and its estimated total addressable market of 45 million subscribers.
Goldman Sachs is bullish and recently named Xero as its top pick in the tech sector. The broker has a buy rating and a $109.00 price target on its shares. This represents a possible 40% upside to the current Xero share price of $76.80.
Motley Fool contributor James Mickleboro owns shares of Xero Limited.
Resmed Inc
What it does: Resmed manufactures and sells medical devices assisting with breathing-related issues, separated into its sleep and respiratory care divisions. Its products are found in over 120 countries, helping improve the quality of life of its customers.
By Mitchell Lawler: Resmed shares have been a huge success story since listing in 1999, soaring by around 3,500% in the years since.
Some investors might baulk at the exceptional 160% 5-year capital appreciation and 43 times price-to-earnings (P/E) ratio of this ASX 200 healthcare share. However, the company's recent second-quarter update gives me confidence there's a good reason for this premium valuation.
According to the report, Resmed achieved a 16% and 13% increase in revenue and income from operations, respectively. Yet, it's the company's software-as-a-service (SaaS) segment that I'm excited about due to its high-margin potential.
Motley Fool contributor Mitchell Lawler does not own shares of Resmed Inc.
Transurban Group
What it does: Transurban operates 21 toll roads across Australia and North America, including major tollways in Melbourne, Sydney, and Brisbane.
By Brooke Cooper: I believe Transurban shares could be a buy right now due to their built-in inflation hedge and growth potential.
The company's earnings are derived from toll revenues, the majority of which are regularly adjusted for inflation. That means they'll grow alongside the cash-creating measure.
Additionally, as Citi points out, Transurban's earnings are also recession-resistant. While Australia could avoid a recession this year, experts at ANZ Group Holdings Ltd (ASX: ANZ) warn of recessionary impacts.
Finally, Citi expects Transurban to grow its dividends and has slapped a $15.70 price target on its shares, representing a potential 14% upside at the time of writing.
Motley Fool contributor Brooke Cooper does not own shares of Transurban Group.
