Five of the top ASX stocks to consider in February

Uncertainty surrounding both the Australian economy as well as ASX-listed stocks has continued well into 2023. Concerns about inflation remain ongoing, and the Reserve Bank of Australia (RBA) has signalled its commitment to hawkish monetary this year.

On 7 February the RBA board announced that it would increase the cash rate target by 25 basis points to 3.35%, for a record ninth consecutive increase.

RBA governor Philip Lowe said that untamed inflation continued to be a key concern, with CPI growth over the year to the December quarter hitting 7.8%, its highest level since 1990.

Lowe flagged further hikes ahead, stating that the RBA Board "expects that further increases in interest rates will be needed over the months ahead, to ensure that inflation returns to target and that this period of high inflation is only temporary."

In addition to the RBA's commitment to hawkish monetary policy, the Australian economy could also face headwinds from heightened geopolitical tensions between the United States and China.

If Australia lets itself be drawn further into the stoush between Washington and Beijing, this could negatively affect relations between its biggest trading partner, and lead to a renewed round of import restrictions from China.

On the bright side, however, the annulment of Covid-related movement restrictions around the globe could provide a boost to the Australian economy. This will lead to a rapid recovery in Australia's inbound migration levels, which play a critical role in buoying the Australian economy by increasing the size of the labour force and alongside volumes of domestic demand.

For this reason, investors should be on the watch for both risks and opportunities in 2023 – the opportunities created by the global end of Covid restrictions in tandem with the monetary policy risks created by ongoing reflection.

Those investors seeking to capitalise upon the opportunities that may be on offer in 2023 would do well to consider the Australian equity market, particularly given the economic boost that the recovery of inbound migration could create.

Here is a list of five of the top ASX-listed stocks that investors should consider in the month of February.

1. Wesfarmers

2. Westpac

3. Dominos Pizza

4. Lovisa Holdings

5. Santos

1. Wesfarmers (ASX: WES)

First founded over a century ago in 1914 as a farmers' cooperative in Western Australia, Wesfarmers has since evolved into one of the biggest listed companies in Australia with diversified operations covering a broad range of sectors.

Wesfarmers has an especially strong portfolio of key retail operations, with its major brands including Kmart, Target, Bunnings, Officeworks, Priceline and Beaumont Tiles.

Morgans holds a favourable view of Wesfarmers on the basis of this retail portfolio, as well as the strength of its current management team. It's given the company an add rating with a share price target of $55.60.

2. Westpac Banking Corp (ASX: WBC)

As one of Australia's big four banks, Westpac could potentially benefit from the RBA's hawkish monetary stance if it can use rate hikes to expand the interest rate spread for its lending operations.

Leading brokerages are upbeat about Westpac, which has embarked upon an ambitious cost-cutting campaign and has provided shareholders with a generous 5.22% trailing dividend yield.

Goldman Sachs recently referred to Westpac as 'the best big bank to buy right now', giving it a buy rating with a $27.60 share price target.

Morgans is also upbeat on Westpac, giving it an add rating with a $25.80 price target.

3. Domino’s Pizza Enterprises (ASX: DMP)

This ASX-listed pizza operator is the largest pizza chain in Australia in terms of store numbers and sales. It’s also the world’s largest franchisee for the original American Domino’s Pizza brand that was first founded in 1960 in Michigan.

Morgans continues to favour the pizza chain operator on the grounds of the strength of its operations and considers recent weakness in its share price to be transitory.

'DMP is, in our opinion, a high quality operator with significant brand strength, first class executive management and a global platform for long-term network expansion,' Morgans recently said.

'In our opinion, now is the best time to consider an investment in a quality business like DMP that is facing headwinds that will reverse in time. The recent equity raise will fund DMP’s acquisition of the remaining stake in its German joint venture and keep gearing low enough to allow for future M&A optionality.'

Domino's share price currently sits just north of $70.00, as compared to a $90.00 price target from Morgans.

4. Lovisa Holdings Ltd (ASX:LOV)

Founded in 2010, Lovisa has since rapidly grown into one of Australia's biggest specialist retailers of fast fashion jewellery, with 700 stores across more than 30 countries.

The company operates a vertically integrated business model, responsible for the development, design, sourcing and merchandising of its self-branded products.

Analysts point out that Lovisa's products cater to a neglected market segment of fast fashion jewellery at prices that are more affordable for everyday consumers.

Lovisa's share price could see a strong performance in 2023 on the back of plans for accelerated international expansion from an ambitious new leadership team.

The company is accelerating the growth of its operations in the US and has recently expanded into new markets including Canada, Mexico, Poland and Hong Kong, with plans to enter Italy this year.

5. Santos Ltd (ASX: STO)

Santos bills itself as one of the leading independent oil and gas suppliers in the Asia-Pacific, with operations spread across Australia, Papua New Guinea, Timor-Leste and North America.

According to Santos, it is one of Australia's biggest domestic gas suppliers and a leading LNG supplier for the Asia-Pacific region.

Morgans holds a favourable view of Santos right now, on the back of its diversified sources of earnings and its growth potential, as well as a broader sector-wide recovery.

"The resilience of STO’s growth profile and diversified earnings base see it well placed to outperform against the backdrop of a broader sector recovery," Morgans said.

Morgans has given Santos an 'add' rating with a price target of $8.75.

The share price for Santos is down more than 8% over the past year but has seen negligible movement since the start of 2023 and currently sits at just north of $7.00.

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