These 10 ASX stocks rank highest on the MarketMeter research tables

In October this year, my colleague Hans Lee, with the help of MarketMeter, published a wire titled: How an information edge can improve your ASX portfolio (and the 10 stocks that stack up).

The premise of the wire was to see if there was any correlation between the Top 10 stocks that ranked highest in the five most important categories according to the research conducted by MarketMeter, and the share price performance of those stocks over the prior 12 months.

In this wire, we will look back on that data and the experiment's outcome, and also provide the latest Top 10 list based on the latest MarketMeter research. 

The Parameters

MarketMeter co-founder Nicholas Coles shared with us the 10 ASX 100 companies that recorded the highest average scores across five of the 28 factors in the MarketMeter research library.

The five factors in question were rated by the participating fund managers and analysts (around 150 participants, with many of the fund managers featured on Livewire taking part) as the most important factors in their investment process in the latest research (the top five factors can change from period to period). They are as follows:

• Execution of Strategy
• Effectiveness of CEO
• Credibility
• Clarity of Strategy
• Earnings Quality

Please note we have written about these factors (based on the latest data) in the following wires:

• It's a long time coming and can be gone instantly: Which ASX companies have 'credibility'?
• This ASX-listed “prop-tech” firm has become a case study in earnings quality
• How ProMedicus executes an earnings strategy worthy of market darling status
  

The Outcome

The stocks in question and the outcome of the exploration at the time were as follows:

Of the 10 stocks measured, only two displayed negative performance over the period, and only three underperformed the ASX 200 return of 5.49% over the specified period. Also, the collective performance of 17% significantly outperformed the index.

The experiment proved that "quality" companies, as defined by strong management, clear business strategy, and earnings growth, make quality returns - or at least they have over the past 12 months.

As noted above, while this is a limited data set and a very simplified experiment, it does prove (at least in principle) that the funds management consensus is capable of identifying winners.

The New Data

MarketMeter has just conducted its latest research and the following 10 stocks ranked highest across the five most important categories (as defined by the research participants) - Scroll right for full data:

The changes from last time are as follows:

Out:

• Transurban (ASX: TCL)
• BHP Group (ASX: BHP)
• Fisher and Paykal (ASX: FPH)
• Aristocrat Leisure (ASX: ALL)

In:

• WiseTech (ASX: WTC)
• Commonwealth Bank (ASX: CBA)
• Steadfast (ASX: SDF)
• The Lottery Corp (ASX: TLC)

Looking forward

Whereas the prior analysis was retrospective (i.e. looking back at what would have happened), the current analysis is forward-looking. That is, we will be checking in, in 12 months' time, to see how the 10 stocks in the table above have performed and whether there is any correlation with share price outperformance.

Please note: The stocks in the list are not intended as recommendations. This is nothing more than a thought experiment to see if there is any correlation between the stocks highlighted and the share price performance outcomes. Always do your own research. Past performance is not a reliable indicator of future return.

Comment from David Macri

David is the Chair of the MarketMeter advisory board, former CIO of Australian Ethical, and current Head of Asset Allocation at Mason Stevens. The following is a set of quotes that he has provided regarding Macquarie Group (ASX: MQG), the stock that received the most votes across most of the five major categories:

"Macquarie Group scored first in four of the five most important corporate performance categories according to institutional investors in MarketMeter’s H2 CY23 institutional investor sentiment research.

The most important corporate performance category, according to institutional respondents, was ‘Execution of Strategy’. Macquarie was the only company to score higher than 8 out of 10. 

When considered together with top scores in a host of other categories such as ‘Effectiveness of CEO, ‘Effectiveness of Board’, ‘Credibility’, ‘Leadership Depth’, ‘Quality of Strategy’ and ’Sustainable Competitive Advantage’, we get a good sense of what institutional investors think of Macquarie’s management and board of directors.

Clearly, the investment community holds management and the board in the highest regard/esteem.

They have demonstrated superior strategic acumen, clear and coherent communications around that strategy and an ability to execute efficiently and flawlessly, and institutional investors have scored them accordingly. Macquarie has accumulated a wealth of credibility with the country’s most elite investors and sits at the pinnacle of the Australian corporate world.

It is little wonder then that Macquarie also topped ‘Growth Prospects’. There is an aura around their top brass, which has been rightly earned and is being extrapolated into the future.

Corporate culture is often difficult to accurately measure from the outside looking in. Indeed, poor culture only comes to light when it’s too late, when the damage has already been done and shareholder value has often been destroyed. But the converse is also true. Here we have a clear signal that Macquarie has a corporate culture that is considered one of, if not, the best in town, and which is delivering results - results which include a total return of 49% vs the ASX200 total return of 32% over the last three years (15 Dec 2020 to 15 Dec 2023), and 98% v 70% over the five years".

Please note that more information is available in MarketMeter's Institutional Investment Report (H2 CY23)