The best stocks to buy in a sell-off

It is a truth universally acknowledged that a decent investor in possession of a good sense of opportunity is in want of one great stock pick. Well, maybe not. But we all have at least one perfect stock we would bend over backwards to own at the right price, one worth waiting for, worth obsessing over - one worth writing a song about! - until the perfect moment to pounce. 

Turns out some of Australia's best stock-pickers are no different. They too have a list of stocks they would snap up at the right price. 

In this year's Outlook Series, we've gathered 10 of the country's leading fundies to share their pick - with a few stocks catching more than one fundie's eye. 

Our featured experts include:

• Ben Clark, TMS Capital 
• David Allingham, Eley Griffiths Group
• Vihari Ross, Magellan
• Kelli Meagher, Sage Capital 
• Chris Demasi, Montaka Global Investments 
• Julia Weng, Paradice Investment Management 
• Matthew Booker, Spheria Asset Management 
• Olivia Salmon, Lennox Capital 
• Dr Bianca Ogden, Platinum Asset Management 
• Matthew Kidman, Centennial Asset Management 

Watch the video by clicking the player or read an edited transcript below.

Access all of Livewire's Outlook Series videos:

• The #1 picks for 2021 
• Awful calls from 2020 

Edited transcript

James Marlay: G'day folks. Do you remember what happened in March? That massive sell-off? I bet you wish you had a list of stocks to dive on in and top up that portfolio. Well to get you started for 2021 ready for that next sell-off, we've got nine fundies coming in to tell us the stocks that they're going to own when the market gets the wobbles.

Matthew Kidman: Get rid of that headache, put on your pyjamas and dream a little about a stock that if it was the right price, you'd just back up the truck and fill up.

Airbnb (NASDAQ:ABNB)

Chris Demasi, Montaka Global Investments

Dream a little about where we're sleeping tonight, Airbnb. So, we would have loved to get some Airbnb at US$68 a share, which was its IPO price last week. On the first day of trading it more than doubled and it's still sitting around US$140 a share. So if that stock traded lower, we'd absolutely love to own that. And it's because Airbnb is a leader in alternative accommodation and that is a trillion-dollar market that's only just getting going.

MK: And they own it. 

CD: They own that space and it's because they have the leading platform connecting hosts with guests and they all write reviews and it encourages them to come back. More hosts beget more guests and they just keep building and the flywheel keeps turning; it's a wonderful growth profile. It's a very high-quality business that just can't be replicated. It's just that its price is a little out of our reach at the moment at $140 a share.

Amazon (NASDAQ:AMZN)

Vihari Ross, Magellan 

It's the same as last year for me. Amazon is one of the highest quality businesses within our universe. And frankly, this year, a lot of those accelerants have come into play; the shift to e-commerce, their AWS cloud business is dominant in that space and it still continues to be a huge market opportunity for them, and things that they were really just starting to get into, like online grocery, has again been accelerated. 

So you've got this business that is wonderfully well-positioned to show its resilience in a post-pandemic world, but nonetheless, you still have this issue around what is this business worth? You have a business that's remarkably well positioned, but still, losing money in places like India. It's a really difficult one to really pin down in terms of justifying those sky-high multiples that it trades on.

HUB24 (ASX:HUB)

Ben Clark, TMS Capital

You asked me this question a year ago and I said IDP, and ... I didn't buy it, which I'm still kicking myself about. But this time around it'd be HUB24. I work in the wealth industry; I can see the structural changes happening in front of my eyes and I think it's actually happening a lot faster than everyone thought it was going to. 

I think Netwealth and HUB24 are going to be two dominant players in this industry for many years to come and they're going to have strong revenue growth for many years. But they're about to hit the operating leverage part of the cycle, which is the sweet spot when you want to own those companies. I should have stepped in and done something about it and now they're quite pricey again.

MK: So $20, what is the right price? 

BC: They're trading on about 50x next year's earnings. I reckon if you could pay a multiple of 35x to 40x, which is still up there but given the growth outlook I think it's warranted, $15 to $16 would be a good price. 

IDP Education (ASX:IEL)

Julia Weng, Paradice Investment Management

I think IDP is a really interesting company; it is a global leader in the placement of international students and also does the IELTS English testing distribution. It has obviously been impacted by COVID, but prior to COVID, volumes were growing at 30% a year and even now there's strong pet-up demand with a lot of students choosing to study online. 

So I think that will come back as soon as we get mobility. I think IDP is well-placed to take market share during this period; it's got a very well capitalised balance sheet, as well as high-profit margins to start off with. So I think at this moment it doesn't look that cheap, but we think that it's still a structural grower with much more to go when mobility comes back.

REA Group (ASX:REA)

Matthew Kidman, Centennial Asset Management 

I know this isn't a lightbulb moment because I'm going to tell you something that will make you say: "Oh, yeah. That's pretty boring," but there's no doubt that REA was that stock. And yes we did buy it, but we didn't get it at the bottom. 

The problem we had was we rode it into the recovery and we sold it when we thought that it was back to reasonable multiples. But what we should have been doing is analysing the underlying market; lower rates, the consumer was okay, the residential real estate market didn't go as bad as anyone thought, and who's the best leveraged to that? It's REA. 

And guess what - their revenue's higher or about to be higher this year than it was two years ago and their cost-base is $40 million to $50 million less. Unbelievable performance for a business ... and it goes back to, in recoveries, how much better companies can do. REA is it.

IDP Education (ASX:IEL)

Olivia Salmon, Lennox Capital 

IDP Education; love the business, love that tertiary education sector, don't love the share price at the moment given the worries that you have with the China-Australia relationship... and even China's relationship with the rest of the world. And I think that there's also a question around when international borders open up will international students feel safe to travel and are they actually willing to pay what is a fortune for tertiary education overseas when potentially a lot of these classes might actually be partly or completely online from now on? So it's a stock I'd love to own, just at a lower price.

Pro Medicus (ASX:PME)

David Allingham, Eley Griffiths Group 

I think Pro Medicus, ticker code PME. It's a healthcare technology company operating in the radiology business. It's got genuinely disruptive technology and is winning major clients and major market share in the US. 

We've followed it for a number of years, the management team have done an exceptional job on an execution standpoint, but it's just always been too expensive for us. The valuation is astronomical; whether it's revenue multiple, P/E ratio, or EBITDA multiple. 

This business has 20% revenue growth for as far as you can see, 50% EBIT margins, I mean that is the sweet spot. If you can find a business doing that, you buy it until your nose bleeds, but unfortunately, this one's just always been too expensive for us.

Fisher & Paykel Healthcare (ASX:FPH)

Kelli Meagher, Sage Capital 

Fisher & Paykel Healthcare; it's a bottom drawer steady grower with lots of global growth, but it's trading at a particularly high multiple at the moment given its earnings have been very elevated from COVID-

MK: Terrific year. 

KM: It's had a terrific year, but the thing with Fisher & Paykel is that COVID-19 has actually put a spotlight on just how useful and beneficial their products are and how quickly it helps people breathe again, get out of the hospital, and save the hospitals' money. So, I think their addressable market from here is going to be a lot bigger and their growth trajectory is going to be a lot higher than what it would have been if COVID-19 had never happened. 

MK: Well you might get lucky; there might be a COVID-cliff in the market's mind and it goes down to that lower price you are after. 

KM: Indeed. It's got excellent management, great returns on invested capital, good cash flow generation and a long-term global growth profile. So that's the sort of company I like.

REA Group (ASX:REA)

Matthew Booker, Spheria Asset Management

REA is a fantastic business. We own some in one of our strategies, but it's too expensive for us at the moment and we're cycling out of it and we're finding better relative opportunity outside of that. We think REA is a good business, but in a sell-off, I would probably pick it up at the right price.

Berkeley Lights (NASDAQ:BLI)

Dr Bianca Ogden, Platinum Asset Management 

There's a couple of them, but one company which I'm very excited about is called Berkeley Lights in the US. It's a biotech that essentially analyses single cells. So you want to always know what goes on in one cell rather than in different cells. For example, if you look at cancer, it is made of different cells and each of them is different, so you want to really know what is going on in each of them. This basically means you have to generate a lot of data, analyse this data and then really understand what's going on . I really want to own that company, but it has done very well since it's listing so I'll remain patient and hopefully I'll own it in the future.

Which stock would you love to own at a lower price?

We all have a handful of stocks that we wish we could have snapped up at a lower price, especially after the rollercoaster ride of 2020. So, what's the one stock you'd buy at the right price? Leave your pick in the comments section below this post.

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