Which ASX stocks would win the Melbourne Cup?

Whether you like to take a punt or not, the 163-year-old Melbourne Cup grabs attention. But why leave all the fun to the gee-gees when across the ASX-listed landscape, there could be equal racing quality?

It’s not hard to think of those companies with legendary status, the equivalent of a Black Caviar or Phar Lap. But, is there a Long shot in there, or a king-maker like Gai Waterhouse across the listed universe?

In this wire, I’ll suggest my thoughts on who makes the cut, as well as the company that so typifies the Cup that it too has the power to “stop a nation”. Will you agree with the nominations? Read on…

Note: These nominations are for fun and are my own personal thoughts. I’m not a financial adviser nor an analyst so please do your own research before choosing to invest. I'd also like to disclose that of the below, I personally have holdings in Macquarie Group, Wisetech and CSL which would influence my views of them.

The Birdcage Award for the life of the party

“Race? What race? We’re all for the social scene dahling!”

I’m not sure it would be easy to calculate the cost of all the bubbly drunk on Melbourne Cup day, but it’s certainly a day that pubs and beverage companies should be pretty happy about. It’s a good day for the likes of Endeavour Group (ASX: EDV), Treasury Wine Estates (ASX: TWE)  and Australian Vintage (ASX: AVG).

However, I think this one should go to Endeavour Group, Australia’s largest retail drinks network and portfolio of licensed hotels. You can guarantee that staff at its hotels will be earning a break today! Besides, most Aussies are well acquainted with heading to ‘Uncle Dan’s’ (Dan Murphy’s) for a few bevvies to liven up a party.

According to Market Index’s Broker Consensus Tool, it’s a BUY. Having said this, back in a July episode of Buy Hold Sell, both Wilson Asset Management’s Hailey Kim and Alphinity Investment Management’s Jacob Barnes ranked it as a HOLD.

The 'Stayer' Award for a company that can hold out in a tough race

To even have a shot at winning the Melbourne Cup, a horse needs to be a stayer – it’s not a sprint, after all. Many, many ASX-listed companies have been around for the long haul. But for many investors, a "stayer" in their eyes, is a company that demonstrates earnings resilience across cycles. As a result, that’s going to write out most cyclical companies.

If we need solid and reliable, infrastructure tends to stand firm, which is why Transurban (ASX: TCL) takes out this one. People still need to use roads regardless of economic cycle – and inflation is simply a great excuse to bump up tolls – which sets Transurban in good stead.

Market Index Broker Consensus positions it as a HOLD. Martin Currie’s Andrew Chambers recently pointed to it as being poised for continued benefit from population growth and inflation, while Montgomery Investment Management’s Roger Montgomery reflected in the last reporting season that it was positioned well for future expansion.

The Bookies Award

In an age where school children can list the odds of their favourite sports teams winning, gambling is ubiquitous to daily life. However, it’s not the likes of a Tabcorp (ASX: TAH) or Pointsbet (ASX: PBH) that I think are most interesting here. 

Who’s really making solid money out of the Aussie desire to have a punt?

It’s The Lottery Corporation (ASX: TLC), recently nominated by IML’s Daniel Moore as offering resilient earnings and high-quality state-based lottery licenses. Similarly, Elston Asset Management’s Andrew McKie holds a high conviction position in it, arguing it has “strong potential for operational efficiency and revenue growth.” Market Index’s Broker Consensus Tool ranks it as a Strong Buy.

The Black Caviar/Phar Lap Award for a company with legendary status

What does it take to be a legend on the ASX? Is it stellar dividends, longevity, or strong management?

If you want to go the path of all three of the above, it seems a no-brainer to select Soul Patts (ASX: SOL), Australia’s first dividend aristocrat and one of the longest-running LICs in Australia.

You can watch CEO Todd Barlow discuss his strategy at Livewire Live here.

The Gai Waterhouse Award for top-tier management

It’s hard to go past Gai Waterhouse when you think of an exceptional trainer in the racing industry. But is there an equivalent in the business world?

Honestly, there are loads of companies with excellent management. Eley Griffiths Group’s Ben Griffiths recently hailed Breville Group (ASX: BRG) as an example, while, despite the news scandals attached to its founder, WiseTech Global (ASX: WTC) would be another well-managed business. Macquarie Group (ASX: MQG), under the stellar leadership of Shemara Wikramanayake, is a personal favourite of mine (though I'm biased as a long-term shareholder.)

So, which business should take the title?

In this case, I've decided to give it to Premier Investments (ASX: PMV) under the leadership of Solomon Lew. It's a notable choice too given some of his brands have no doubt benefitted from trackside fashion purchases. Hayborough’s Ben Rundle notes that Lew’s track record speaks for itself. 

PMV has also just signed a deal with Myer transferring Premier’s Apparel Brands to Myer (pending shareholder agreement) and giving him 27% ownership of Myer Group.

Market Index’s Broker Consensus Tool positions it as a BUY.

The Michelle Payne Award for a ground-breaking business

The celebrated jockey is the first (and only) woman to win the Melbourne Cup. If we pick an ASX equivalent, you are surely looking for qualities like tenacity and being first-in-class.

It’s hard to go past CSL (ASX: CSL), with its world-leading plasma collection business. It is also a leader in rare and serious diseases and has an ongoing pipeline of development. There is a reason this business is an investor darling and the top biotech business in the ASX.

It ranks as a STRONG BUY on Market Index’s Broker Consensus Tool, and Wilsons Advisory’s David Cassidy agrees, noting “it looks to offer reasonable valuation with strong growth” recently. It was also a popular mention at this year’s Livewire Live.

The Glue Factory Award for a flagging business

In a bygone era, this unkind joke was that a flagging horse was either off to the knackers (a person whose business is the disposal of dead or unwanted animals), or more colloquially speaking, to the glue factory. So, are there any flagging horses that investors should be cutting from their portfolios?

In tough economic climates, there are plenty of options. Developers and real estate businesses have had a particularly challenging few years. Names like LendLease or Dexus come to mind – and were referenced in Buy Hold Sell recently.

It’s also been a hard year for lithium – though there has been some recovery in prices of late, which has meant tougher times for companies like Mineral Resources (which is also facing other issues in addition to troughing commodity prices.)

Earlier this year, Booktopia declared bankruptcy but has since been rescued. However, if we are looking at the pointy end, Star Entertainment (ASX: SGR) is having a bad run, with Perpetual having sold 129.7 million shares on Monday and had a one-month trading suspension at the end of August.

It ranks as a HOLD on the Market Index Broker Consensus Tool. So, while it isn’t ringing huge alarm bells for brokers, it’s certainly one to think very carefully about if you intend to buy.

The 'Long Shot' Award for a solid player that could still take out the title

More often than not, it’s not the favourites that win the Melbourne Cup. Rather, there’s a quiet achiever in the mix that could take out the race.

There’s one company that instantly sprang to mind here – Telstra (ASX: TLS).

After years of stagnant growth and simply being held for its dividends, Telstra has come up more frequently and positively amongst fund managers. Wilson Asset Management’s Matthew Haupt nominated it as a value option that is growing again at Livewire Live, while IML’s Daniel Moore pointed to it as being “well positioned for consistent earnings growth through the cycle.”

Market Index’s Broker Consensus Tool positions it as a STRONG BUY – and if we’re talking about the potential to stop a nation, well, watch how quickly we panic when communication networks fail.

And finally, the Melbourne Cup for the [company] that stops a nation

Who is Australia’s foremost champion? One of the banks we are so dependent on or perhaps a big miner like BHP?

None of the above.

In a year where we’ve complained about the hit to our wallets at the checkout, the winner must surely be Woolworths (ASX: WOW). After all, consumer staples are relatively recession-resistant, and while Woolworths and Coles are currently being sued by the ACCC, there’s no question that this is a solid business.

Merlon Capital’s Julian McCormack pointed to it as his pick for resilient earnings, but Alphinity’s Bruce Smith is concerned it is facing a challenging environment and he is still monitoring the new management team.

Market Index’s Broker Consensus Tool positions it as a BUY.

And over to you…

What racing categories would you add to the mix – and do you agree with the nominations above? Let me know in the comments – and happy Melbourne Cup day.