The top 10 companies for Investment Desirability, according to MarketMeter

To quote the great Howard Marks of Oaktree Capital, there is nothing riskier than the widespread perception that there is no risk. After all, while the fundamentals are crucial and the technicals in the charts are helpful to those in the know, any investment thesis can be gazumped if other investors don't share your point of view. 

That's where investment desirability comes in. It's not just about the company or the concept you're investing in, but how that idea is perceived by other investors in the market.

So, how can you measure the attraction of a company, given sentiment is not a quantitative metric? That's where the team at MarketMeter step in. The data it collects is highly valued by equity market participants. ASX management teams, leading super funds, fund managers, and many brokers use the data to assess the performance of their strategies and corporate efforts.

In this wire, we'll look at the Top 10 Australian listed companies based on MarketMeter's definition of Investment Desirability, both in the ASX 100, and ASX 101-200. Then, we'll get the perspective of Marcus Bogdan, CIO at Blackmore Capital, one of the many funds that took part in the research. 

What is MarketMeter?

MarketMeter is an interactive market insights platform that measures and benchmarks institutional investor perceptions of Australian listed companies, who find it is a reliable risk management tool to understand their performance in the eyes of institutional investors.

Put simply, MarketMeter conducts research twice a year to measure the perception of listed companies in the eyes of fund managers. The fund managers score companies from 1-10 on a range of factors and are then able to see how their views compare to those of other professional investors.

“With the benefit of super fund data partnerships, MarketMeter has a deep, high-quality data pool which can help fund managers understand how their stock perceptions differ from their peers, category by category, and by how much”, says Nicholas Coles, Managing Director and co-founder at MarketMeter. 

Note: This piece is the second in our six-part series looking at and evaluating MarketMeter's exclusive data. If you missed the first piece, you can click this link which will take you to a wire authored by my colleague Chris Conway.

What makes an investment desirable anyway?

Investment desirability is defined by the MarketMeter team as:

"...the perceived value of a company’s stock with respect to earnings potential, earnings quality, integrity and quality of management amongst other criteria specific to the investment selection process of individual institutional investors..."

Top 10 ASX 100 Companies for Investment Desirability

The list appears in order based on the results of the most recent MarketMeter research.

1. REA Group (ASX: REA)
2. Xero Limited (ASX: XRO)
3. Aristocrat Leisure (ASX: ALL)
4. Macquarie Group (ASX: MQG)
5. Carsales (ASX: CAR)
6. JB Hi-Fi (ASX: JBH)
7. BHP Group (ASX: BHP)
8. CSL (ASX: CSL)
9. Transurban Group (ASX: TCL)
10. Qube Holdings (ASX: QUB)

Top 10 ASX 101-200 Companies for Investment Desirability

The list appears in order based on the results of the most recent MarketMeter research.

1. Chorus Limited (ASX: CNU) 
2. Domain Holdings (ASX: DHG) 
3. Deterra Royalties (ASX: DRR)  
4. West African Resources (ASX: WAF) 
5. Lovisa Holdings (ASX: LOV) 
6. Brainchip Holdings (ASX: BRN) 
7. Telix Pharmaceuticals (ASX: TLX) 
8. Capricorn Metals (ASX: CMM) 
9. Bapcor (ASX: BAP) 
10. Breville Group (ASX: BRG) 

Bogdan's Take

LW: What did you think of the list generally? 

Bogdan: The list encapsulates a good cross-section of the market of what companies/sectors have performed strongly in 2022 and those companies/sectors that have underperformed as inflation and rising interest rates have impacted valuations. 

The sectors of technology and digital property are good illustrations of the de-rating that has occurred due to higher discount rates. Healthcare is underrepresented on the list.

LW: Given your feelings about healthcare in particular, what companies should have made the list?

Bogdan: I thought Ramsay Health Care (ASX: RHC) would have been on the list given the sequential improvement in activity levels for each business. Margins are slowly improving but shortages in nurses continue to impede a full recovery and costs have remained elevated.

I would also consider Endeavour Group (ASX: EDV). Endeavour delivered a better-than-expected 1Q23 result, driven by strength in its hotel business. Also, consumer demand and preference for premium products remain robust heading into the Christmas period.

LW: How important is "investment desirability" to your overall investment process?

Bogdan: The company’s “desirability” factor plays an important part in stock selection for our portfolios’. The combination of earnings quality and management execution is central to creating shareholder value through the investment cycle.

Investment Theme

The top 10 companies for Sustainability Reporting, according to MarketMeter

View

Never miss an insight

If you're not an existing Livewire subscriber you can sign up to get free access to investment ideas and strategies from Australia's leading investors.

I'll be in charge of asking the questions to Australia's best strategists, economists, and fixed-income fund managers. If you have questions of your own, flick us an email: content@livewiremarkets.com