Top fund manager says Qantas shares still show compelling upside

720
ASX:QAN

The Firetrail Australian High Conviction Fund named Qantas Airways Limited (ASX:QAN) shares as one of the top contributors to fund performance in the month of May.

The Qantas share price rose 10 per cent in May, and has been one of the top performers in the ASX 200 index over the past four years.

Despite the strong historical gains for the Qantas Airways share price, Firetrail say the company still shows “compelling upside.”

In early May Qantas shares jumped higher after the airline said it expects to post a record pre-tax profit of between $1.55 billion and $1.60 billion. That would beat the record $1.5 billion it made in 2016 and comfortably exceed last year’s $1.4 billion.

Firetrail said one of the most important factors they watch in their research on Qantas is airline industry capacity growth.

They noted over the past four years capacity in the domestic industry has reduced, enabling Qantas to both increase its capacity utilisation of aircraft, as well as the ability to increase ticket prices.

Firetrail is not overly concerned about the rising oil price, given fuel represents approximately 30 per cent of the Qantas cost base, saying the airline has been able to offset the significant oil headwind with both price and cost initiatives.

The fund remains confident about the outlook for Qantas due to the sustainability of current earnings.

Cheapest stock in the ASX 100

Last month Philip King of Regal Funds Management named Qantas as his top stock pick, saying Qantas shares were “the cheapest stock in the ASX 100.”

Qantas is a member of The Capital Club 10, a basket of ASX 200 companies I believe have a good chance of out-performing the S&P/ASX 200 Index over the next 3 years.

In a lengthy AFR interview last month, the team at Firetrail highlighted plumbing group Reliance Worldwide (ASX:RWC) and chicken processor Inghams Group (ASX:ING) as companies that have good earnings potential over the next three years.

Reliance Worldwide recently bought UK plumbing company John Guest, sending the Reliance Worldwide share price flying higher.

The Inghams Group share price took a beating last week after news that chief executive Mick McMahon will step down after four years at the helm. 

Here’s how you can strike it rich in the share market

The best way to strike it rich in the share market is to buy shares that are not only cheap, but growing quickly.

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Best of all, the report is absolutely free, exclusively for readers of The Capital Club.

In this comprehensive free report, you’ll find the name of one ASX gold stock that’s not only profitable, but trading at less than 4 times forecast profits.

You’ll also discover the name of a company one fund manager has called the cheapest stock in the ASX 100, and you’ll read about the three catalysts that could push the share price higher in the next six months.

Finally, the report names one of the cheapest retailers trading on the ASX, a company that just picked up the assets of a distressed competitor on the cheap, paying just 2 times earnings. No wonder one top fund manager thinks its share price could at least double.

With the share prices of each of these 3 companies having the potential to double or more, you’ll want to act now. Simply click here or the button below, enter your email address, and this free report will be instantly sent to you.

See the 3 stocks

Read Next

Here are 6 of the best dividend stocks on the ASX for 2018 and beyond

Here are 10 ASX 200 shares to beat the traditional blue chips over the next 3 years

5 ASX blue chip shares for 2018 and beyond

Top fund manager names this iconic company as “the cheapest stock in the ASX 100”

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au