An investor’s best friend… Google. We all use it, we all love it. Google processes approximately 70,000 search queries per second, meaning 5.8 billion searches per day. So we had to wonder, what are the most googled ASX stocks?

Here, Ben Clark from TMS Capital and Roger Montgomery from Montgomery Investment Management discuss the six most googled Australian stocks. Join them as they talk about: 1) A household name with a very uncertain future; 2) One of Australia's most successful global stars; 3) A business spitting out cash amid high commodity prices; 4) A conglomerate riding the Work From Home boom; 5) A company that's fallen ~75% in 22 years; 6) A much-loved national icon facing the wrath of COVID-19.

They may be the most popular on Google, but will they get the tick of approval from these fundies?

Notes: Watch, read or listen to the discussion below. This episode was filmed on 1 July 2020.

 

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Edited Transcript  

Vishal Teckchandani: Welcome to Buy, Hold, Sell, brought to you by Livewire Markets. My name's Vishal Teckchandani. And today, we're talking about the six most Googled stocks in Australia. Joining me on the show today is Ben Clark from TMS Capital, and Roger Montgomery from Montgomery Investment Management. Roger, let's start with you. CBA, the most Googled stock in the country. Buy, hold, sell?

Commonwealth Bank of Australia (ASX:CBA)

Roger Montgomery: I didn't know that.

Vishal Teckchandani: There you go.

Roger Montgomery (Hold): I would put a hold on it. Look, the outlook for that business is obviously tough. We thought it was tough years ago. Net interest margin is under pressure as rates approach zero. You've got long-term cost increases as a result of compliance after the Royal Commission. And then of course, you've got the lowest level of bad and doubtful debt provisions, just at the wrong time of the cycle. Then we had COVID-19. Arrears are going to go up, nonperforming loans are going to go up. It all sounds really, really tough, but it got really, really close to its NTA. And so, it became quite cheap, so we added it to our portfolio. Given that it's now bounced, I'll put a hold on it, but at lower prices, I'll be buying it again.

Vishal Teckchandani: Okay. Ben, it always does seem to trade at a premium to its competitors, but does that make it worth owning? Buy, hold, sell?

Ben Clark (Hold): I think it's just a hold for me. The earnings headwinds that the banks are going to face over the next two to three years are going to be fairly dramatic. These businesses used to earn return on equity in 15 to 20%, and it's now getting back into single digits. And from what the CEOs are saying, that's probably a permanent shift. But CBA does look reasonably priced, given the outlook. But as Roger said, I think the band doubtful debt cycle, it's anyone's guess how this plays out, and that's probably the biggest risk to their earnings.

CSL Limited (ASX:CSL)

Vishal Teckchandani: Okay. Next stock, CSL. Recently announced a $655 million investment to expand its gene therapy portfolio. Buy, hold, sell?

Ben Clark (Buy): I've got to buy on this. This is a stock that has been sold off a bit by some fund managers to get back into a risk on trade. And I think that's created a more attractive opportunity to get into it. CSL should have real earnings resilience throughout this period, regardless of what the economy does. And it's got a couple of real blockbuster drugs in its R&D pipeline, which are getting closer and closer to potential market approvals. So there's quite a lot of optionality in that side of the business. Buy for me.

Vishal Teckchandani: Okay. Roger, interesting story about CSL. I once knew a farmer who thought he was going to lose his farm because of the drought. He then realised he inherited 10,000 CSL shares from the float. Saving lives in more ways than one. Buy, hold, sell?

Roger Montgomery (Buy): Look, we've also got a buy on it, we own it. I think it's one of the best quality companies that Australia has ever produced. Having said that, that's a fairly obvious statement, I do think though, that the large level of unemployment in the United States means that collections are going to start going up. There's going to be a lot more people donating blood, there's going to be a lot more plasma collected. And this is a business that has underperformed the market significantly for the reasons being articulated. And so it's a buy.

BHP Group (ASX:BHP)

Vishal Teckchandani: Okay. Next stock, BHP, which actually poached CSL's CFO. Old blood, you could say. Buy, hold, sell?

Roger Montgomery (Hold): Look, I've got a hold on it at the moment. Obviously it's benefited from a rising iron ore price as a consequence of what's going on in Brazil. But when we look at data on ports in China, and we look at import data and export data, we think that there's pressure on the iron ore price. So for the moment it's a hold.

Vishal Teckchandani: Ben, BHP is on a PE of 14, it's got a dividend of circa 5%, fully franked, it's riding the commodities boom. What's not to lie. Buy, hold, sell?

Ben Clark (Hold): The cashflow generation at the moment in this iron ore division is extraordinary. But I just wonder, what's going to be the catalyst to push the iron ore price even higher? I think Vale will start to get some production back into the market toward the end of this year. There's not much they can do on the cost side of the business, they're already producing at incredibly low level. So, I just wonder where the growth comes from this point, but it's a pretty easy hold for me. I think it's a business that's going to pay a nice dividend and the balance sheet is in stellar shape.

Wesfarmers (ASX:WES)

Vishal Teckchandani: Okay. Next stock, Wesfarmers. Buy, hold, sell?

Ben Clark (Hold): Wesfarmers is a hold. I think for similar reasons to BHP, where I think they've had this incredible period of earnings through the Bunnings and Officeworks chain, which are really the predominant business that Wesfarmers own these days. But I just wonder whether that growth can be maintained as people hopefully start to get back to more normal lives? Wesfarmers has got an extraordinarily good balance sheet after selling out of Coles. So I think it's probably a hold for me.

Vishal Teckchandani: Okay. Roger, I've had to queue outside Bunnings, I've had to queue outside Officeworks during the pandemic-

Roger Montgomery: You really like their sausages, don't you?

Vishal Teckchandani: Should we be queuing to buy Wesfarmers shares? Buy, hold, sell?

Roger Montgomery (Hold): Look, I'm tempted to say buy, but I'd also put a hold on it as well. We don't see any slow down in their growth. We actually think they're just going from strength to strength. And I think this $25,000 grant that people are being given to go and build a house. I actually think that's going to help them as well. It's been a great stay at home trade, but I think there's going to be more growth to come.

AMP Limited (ASX:AMP)

Vishal Teckchandani: Okay. Staying with you, AMP finally managed to sell its life business. Can it now get on with life?

Roger Montgomery (Sell): I can't believe we have to talk about this. For the last 15 years, I've used that as precisely the sort of business that you don't want to own. Its share prices are down about 75 or 78% over 22 years. There's a little bit of excitement now that they've sold that life business and they've got some cash, they may pay a special dividend. But I actually think as planners start moving towards individual licencing, it's going to put huge pressure on the distribution of their product.

Vishal Teckchandani: So it's a sell then?

Roger Montgomery: It's a sell.

Vishal Teckchandani: Okay. Ben, do you agree with that? Buy, hold, sell on AMP?

Ben Clark (Sell): I do. I think, yes, the balance sheet is in much better shape now, it probably gives them a bit of optionality to keep carving up the business. We know AMP Capital's very well regarded, and maybe it's worth a lot more if it was to be demerged, or something like that. But the core business, it's still struggling. And I just think there's going to be an exodus of any good quality planners want to get out of AMP. The platforms that they run and operate have been underinvested in, they've been over earning, versus the Netwealth and HUB24 et cetera. I just can't see what an earning catalyst is going to look like.

Qantas (ASX:QAN)

Vishal Teckchandani: Okay. Finishing off with the stock that's actually been the most Googled just in this week, Qantas. Monster week for the company, cap raising, borders reopening, except for the poor Victorians of course. Buy, hold, sell?

Ben Clark (Hold): I'd probably put a hold on it, although it's never been a business we've owned. I do think the Qantas rewards business is actually a really good quality business. And I think management have done a great job to hold on to that business. It's given them earning stability. There's been a lot of pressure over the years from bankers to spin it off. The question is, when do these planes get going again? What does utilisation look like when they do get going? What do the prices look like? What does the competition out there look like? There's just so many question marks. For me, it's too hard to buy.

Vishal Teckchandani: Okay. Roger, I'm sure we're all excited about jumping on a plane again, going for a holiday. But should we be jumping on Qantas' shares?

Roger Montgomery (Sell): No one will be excited about my answer. It'll be the same as I've given for the last 20 years, and that is they're horrible businesses. They're capital intensive, they're relying on a commodity, they're labour-intensive, there's irrational competition. If you have a long enough time horizon, you just see that they just don't generate great returns. Having said that, Alan Joyce is probably the most amazing operator of airlines that anyone's ever seen. If people want to buy as a leverage to a recovery, I think you're better off in the airports. I think you're better off owning Auckland International Airport, or owning Sydney Airport than you are taking exposure to the operating leverage of an airline.

Vishal Teckchandani: Okay. As the economy opens up, we may all be Googling some stock ideas, but some of these share prices may just fly off the handle.

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Matthew Flett

High value commentary today - thanks Roger, Ben and Vishal

Adrian Bird

Another great video Vishal. Sounds like two guests who are on the money - ignore Roger at your peril.

Vishal Teckchandani

Thanks Matthew and Adrian, glad you enjoyed it!

Emery Go

Thanks for the insight. Always looking forward to this article every time a new one comes out.

Brett Coleman

Vishal, You are the master of the segue!

Pasan Perera

Wesfarmers & CSL are the safe companies in that list :)

Habib Khan

Can't agree more than that, thanks