In this article, we look at the 10 Best Australian Stocks To Buy According to Hedge Funds.
A Look at Australia’s Economic Performance in 2024
According to a report by KPMG, the global economy has shown remarkable resilience during monetary policy tightening and ongoing geopolitical tensions. In contrast, the Australian economy was close to entering a recession in 2024, with a mere 0.1% growth in the first quarter. Over the past year, the economy grew by only 1.1%. Household consumption increased by 0.4% during Q1, slightly better than Q4 of 2023. However, labor productivity, measured as GDP per hour worked, remained stagnant as the growth in hours worked matched GDP growth. The mining sector plays a crucial role in the economy of Australia making up 14.3% of the industry’s output, while finance contributes 7.4%, and manufacturing and construction add 7.1% and 5.7%, respectively. Australia’s export market is primarily driven by its mining resources, with China being the largest destination, accounting for 32.4% of exports, followed by Japan at 13.1%.
The March 2024 survey of private capital expenditure reveals strong actual investments in the first nine months of FY24, along with positive momentum for the remainder of the financial year and into FY25. Private new capital expenditure rose by 1% in the March quarter of 2024. Business investment in non-mining industries grew by 3.3%, partially offsetting a 4.7% decline in mining capital expenditure. This quarterly growth marks a slowdown from the robust levels seen in late 2022 and early 2023. The transport, postal, and warehousing sectors experienced the strongest growth, driven by increased vehicle investments and ongoing spending on large infrastructure projects. Similarly, capital expenditure on equipment and machinery in the information media and telecommunications sector rose significantly due to continued investment in data centers. However, the weakening demand for consumer goods and services impacted the retail sector and its upstream industries.
Australian Equities vs. U.S. Stocks
Chris Leithner, joint managing director at Leithner & Co. investment company, is bullish on Australian equities and expects the market to outperform the S&P 500’s returns in coming years. According to him, over the past decade and more, the total returns of the All Ordinaries and ASX 200 indexes, have underperformed the S&P 500 Index. Some analysts, such as Roger Montgomery, attribute this underperformance to Australian companies’ overly generous dividend payments, inadequate earnings retention, and restricted capital expenditure. However, Leithner disagrees and says that a significant factor of this underperformance is the difference in earnings growth between the two markets. American stocks have benefited from substantial earnings growth, partly driven by debt-financed share buybacks, leading to higher debt-to-equity and CAPE ratios. In contrast, Australian equities have experienced a decline in CPI-adjusted earnings per share (EPS), as share buybacks have not played the same role. As a result, Australian companies are more conservatively financed and offer superior medium and long-term prospects. This analysis suggests that while American equities have generated significant rewards since the Global Financial Crisis (GFC), they also pose considerable risks at current prices. Conversely, Australian equities, despite their recent underperformance, are better positioned for future growth due to their robust financial foundation and conservative pricing.
Share buybacks have dramatically increased over the years, with S&P 500 companies repurchasing a staggering $825 billion worth of stock in the 12 months leading up to January 2024. This is part of a broader trend that has seen buybacks rise from an average of around $200 billion per year in the early 1990s to over $1 trillion per year before the COVID-19 pandemic. While buybacks can boost earnings per share (EPS) by reducing the number of shares outstanding, they also artificially inflate the growth of earnings. For instance, a company that repurchases shares can show a much higher EPS growth rate than its net profit after tax growth rate. While this inflation of earnings through buybacks is significant, research suggests that buybacks have contributed between 30-40% of the long-term EPS growth of the S&P 500, with some estimates as high as 71%. The cumulative effect of these repurchases is immense, with S&P 500 companies buying back a CPI-adjusted total of $17.7 trillion worth of shares since 1990, an amount equivalent to nearly 45% of the current U.S. GDP.
The leverage used to finance these buybacks is also noteworthy. In contrast to Australian companies, which have a relatively low debt-to-equity ratio and conduct minimal buybacks, U.S. companies have significantly increased their leverage over the past two decades, with the debt-to-equity ratio surpassing above 80% in recent years. This increased leverage, coupled with the substantial buybacks, has led to a higher cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 compared to the All Ordinaries Index in Australia. As a result, while the S&P 500 has outperformed the All Ords in recent years, the high CAPE ratio suggests that future returns for the S&P 500 may be lower, while the Australian shares may offer better medium- to long-term prospects.
According to IG’s biannual Client Sentiment Survey, Australian traders are bullish towards the S&P/ASX 200, with 65% expecting a rise in the next six months. Despite this confidence, there is a noticeable shift towards international markets, particularly in the United States, where many traders believe the Nasdaq will outperform the ASX 200. Australian traders have nearly doubled their focus on US markets over the past six months. International markets provide exposure to a broader range of industries, especially in technology and growth stocks, and offer opportunities for risk management and enhanced returns. Australia’s market lacks diversity, by fostering innovation and supporting emerging industries the market could attract more local investment.
While the global economy demonstrates resilience, Australia’s economic performance in 2024 has been less robust. The mining sector continues to be a key driver, alongside finance and infrastructure investments, but the broader economy faces challenges, particularly in retail and upstream industries. However, the outlook for the remainder of FY24 and into FY25 remains cautiously optimistic, with private capital expenditure showing some positive momentum. With that in context, let’s take a look at the 10 best Australian stocks to buy according to hedge funds.
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Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 30 largest companies in Australia by market cap. From that list, we narrowed our choices to the 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. We also included the market cap of these companies as of August 30. The list is sorted in ascending order of their hedge fund sentiment, as of June 30.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Australian Stocks To Buy According to Hedge Funds
10. NOVONIX (NASDAQ:NVX)
Number of Hedge Fund Holders: 3
Market Capitalization as of August 30: $194.27 Million
NOVONIX (NASDAQ:NVX) is a leading company operating in the battery technology sector. The company is driving innovation in the global lithium-ion battery industry with cutting-edge, sustainable technologies, high-performance materials, and enhanced production methods. The company produces battery cell testing equipment and high-performance synthetic graphite anode materials. The company has established itself as a key player in the battery industry for electric vehicles and energy storage solutions. NOVONIX (NASDAQ:NVX) has operations in Australia, Canada, and the United States. The company has evolved from its early focus on Ultra-High Precision Coulometry (UHPC) systems and aims to become a leading supplier of advanced battery technologies.
For the quarter ending June 30, NOVONIX (NASDAQ:NVX) reported several key developments across its divisions. In the Anode Materials segment, the company was selected to receive $103 million in advanced energy project tax credits from the U.S. government and entered into a testing and development agreement with Volkswagen Group’s battery cell manufacturing company, PowerCo SE. The company also won the Reuters Global Energy Transition Award in the R&D Achievement category for its cathode synthesis technology. In the Battery Technology Solutions division, on June 27, NOVONIX (NASDAQ:NVX) was granted a patent in Japan for its all-dry, zero-waste cathode synthesis technology and secured patents in Europe for its graphite/silicon alloy composite material. These patents strengthen NOVONIX’s (NASDAQ:NVX) position in the battery materials and technology sector, particularly in the electric vehicle and energy storage markets. The patented process allows for the production of high-quality single-crystal NMC powders, a cathode powder to develop batteries for power tools such as e-bikes and other electric powertrains, in a more economical and environmentally sustainable manner. According to Hatch, NOVONIX’s (NASDAQ:NVX) cathode synthesis process, can potentially reduce power consumption by almost 25% and can eliminate approximately all of the waste byproduct compared to the conventional process. These factors can reduce costs by an estimated 50% and potentially lower capital costs by an estimated 30%
On August 7, NOVONIX (NASDAQ:NVX) entered into a joint development agreement with CBMM, a Brazilian company specializing in niobium products, to produce nickel-based cathode materials for lithium-ion batteries. Under the agreement, NOVONIX (NASDAQ:NVX) will use its patented all-dry, zero-waste synthesis process to incorporate CBMM’s niobium products into cathode active materials (CAM) to improve performance and reduce costs. The collaboration leverages NOVONIX’s (NASDAQ:NVX) cathode pilot line and testing capabilities, as well as CBMM’s expertise in niobium products, which are known to enhance the stability and durability of cathode materials. The partnership is positioned as a significant step forward in commercializing NOVONIX’s (NASDAQ:NVX)innovative cathode technology and advancing the use of niobium in battery applications.
NOVONIX (NASDAQ:NVX) is strategically well-positioned in the battery technology revolution and is driving critical advancements in the electric vehicle and energy storage sectors. With its pioneering all-dry, zero-waste cathode synthesis technology, strong intellectual property portfolio, and strategic partnerships, NOVONIX (NASDAQ:NVX) is poised to capitalize on the rapidly growing demand for sustainable and high-performance battery materials. The company’s recent achievements, including securing substantial U.S. government tax credits, expanding its global patent protections, and collaborating with industry leaders like Volkswagen and CBMM, underscore its potential for long-term growth and innovation in a market that is essential for a cleaner energy future. In the second quarter, NOVONIX (NASDAQ:NVX) stock was held by 3 hedge funds with stakes worth $1.27 million.
9. Opthea (NASDAQ:OPT)
Number of Hedge Fund Holders: 3
Market Capitalization as of August 30: $251.04 Million
Opthea (NASDAQ:OPT) is a biopharmaceutical company focused on developing new treatments for eye diseases, particularly conditions such as wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME). These diseases can lead to vision loss and Opthea’s (NASDAQ:OPT) product, called Sozinibercept, is currently being tested in advanced clinical trials to see if it can work better when combined with existing treatments to improve vision more effectively than the standard treatments alone.
Sozinibercept is a novel, first-in-class VEGF-C/D agent designed to enhance the effectiveness of standard anti-VEGF-A therapies in treating wet age-related macular degeneration (AMD). Many wet AMD patients develop resistance to existing treatments. VEGF-C and VEGF-D independently contribute to retinal angiogenesis and vascular leakage, and their inhibition by sozinibercept can prevent these processes, addressing the underlying causes of retinal diseases. As the first potential therapy in 20 years to improve visual outcomes for wet AMD patients, sozinibercept could significantly enhance their quality of life and independence. For the fiscal year ending June 30, Opthea’s (NASDAQ:OPT) operating expenses, which include research and development and administrative costs, rose to $192.1 million, up from $150.4 million. This increase was largely due to the ongoing global Phase 3 clinical trials and CMC activities for its Sozinibercept.
The scientific journal “Ophthalmology and Therapy” also supports the potential of sozinibercept, as a treatment for wet AMD. The journal points out that VEGF-C and VEGF-D play important roles in the development of retinal diseases. Whereas, existing treatments mainly focus on inhibiting VEGF-A, sozinibercept targets VEGF-C and VEGF-D, which could potentially improve treatment outcomes. Wet AMD is affecting millions in the U.S. and Europe. Despite existing treatments, many patients do not achieve optimal vision improvement, underscoring the need for new therapies such as sozinibercept.
Opthea (NASDAQ:OPT) presents a compelling investment opportunity, as the company’s Sozinibercept could overcome the limitations of current treatments, particularly for patients who have developed resistance. With millions of patients affected by these debilitating conditions and the potential to significantly improve their quality of life, sozinibercept could be the first breakthrough therapy in two decades to enhance visual outcomes. In the second quarter, Harmony Gold Mining’s (NYSE:HMY) stock was held by 3 hedge funds with stakes worth $9.94 million. VGI Partners is the largest shareholder in the company with a stake worth $5.61 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $14.26, which represents a 128.84% upside potential from its current level.
8. Mesoblast (NASDAQ:MESO)
Number of Hedge Fund Holders: 3
Market Capitalization as of August 30: $656.93 Million
Mesoblast (NASDAQ:MESO) is a Melbourne-based biotechnology company specializing in regenerative medicine and cell-based therapies. The company’s two leading products, rexlemestrocel-L (Revascor) and remestemcel-L (Ryoncil), both of which represent massive markets with significant unmet medical needs are in advanced stages of development and have the potential to revolutionize treatments for several life-threatening conditions including inflammatory and cardiovascular diseases.
Rexlemestrocel-L (Revascor) is being developed for chronic heart failure and chronic low back pain, Despite some inconsistency in efficacy data, the company has received an Orphan Drug Designation from the FDA for rexlemestrocel-L’s (Revascor) potential in treating pediatric congenital heart disease. After two prior FDA rejections, on July 24, the FDA accepted the resubmitted biologics license application (BLA) to treat pediatric patients with steroid-refractory acute graft-vs-host disease (SR-aGVHD). If approved, remestemcel-L (Ryoncil) would become the first treatment available for SR-aGVHD in patients under the age of 12. The FDA has set a Prescription Drug User Fee Act (PDUFA) target action date of January 7, 2025, for their decision. The drug has already received a Rare Pediatric Disease Designation.
The company’s ongoing dialogue with the FDA has led to progress in refining the potency assays for remestemcel-L (Ryoncil). Remestemcel-L (Ryoncil) is being developed for steroid-refractory acute graft versus host disease (SR-aGVHD). Mesoblast (NASDAQ:MESO) is advancing remestemcel-L (Ryoncil) into a Phase 3 trial for adults with SR-aGVHD who have failed ruxolitinib treatment. The market for SR-aGVHD, although small presents a critical niche where remestemcel-L (Ryoncil) could become a leading treatment option. With a market penetration strategy that includes both pediatrics and adults, the company could capture a substantial share of this specialized market. If the ongoing trials for rexlemestrocel-L in chronic back pain and heart failure yield positive results, the potential market is vast, with millions of patients suffering from these conditions. The approval for remestemcel-L (Ryoncil) in SR-aGVHD could significantly boost Mesoblast’s (NASDAQ:MESO) valuation.
Mesoblast (NASDAQ:MESO) approach to regenerative medicine, focuses on mesenchymal lineage cells, positions it at the forefront of cellular therapies. These therapies have the potential to address a wide range of conditions, from heart failure to autoimmune diseases, making Mesoblast (NASDAQ:MESO) a key player in the future of medicine. Mesoblast (NASDAQ:MESO) presents a compelling investment opportunity for those with a high-risk tolerance, given the potential for its advanced cellular therapies to address unmet medical needs in large markets. While the road to regulatory approval has been challenging, the company’s perseverance makes it an attractive stock in the biotechnology sector. In the second quarter, Mesoblast’s (NASDAQ:MESO) stock was held by 3 hedge funds with stakes worth $656.93 million. Citadel Investment Group is the largest shareholder in the company with a stake worth $682,703 as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $11, which represents a 48% upside potential from its current level.
7. Australian Oilseeds (NASDAQ:COOT)
Number of Hedge Fund Holders: 4
Market Capitalization as of August 30: $20.90 Million
Australian Oilseeds (NASDAQ:COOT) is an Australian company incorporated in the Cayman Islands and specializes in the sustainable production and sale of high-quality oilseeds and related products. The company aims to eliminate chemicals from the food supply chain and focuses on processing and manufacturing non-GMO and organic food-grade oils to meet the demands of the rapidly expanding oilseeds market. Australian Oilseeds (NASDAQ:COOT) operates the largest cold-pressing oil plant in Australia and the Asia-Pacific region and is expanding its operations by developing a new, larger multi-seed crushing plant in Queensland.
Through its subsidiary, Good Earth Oils, Australian Oilseeds (NASDAQ:COOT) has secured a new contract with Woolworths, Australia’s largest supermarket chain, to supply non-GMO cold pressed extra virgin canola oils across all 960 stores, with an estimated contract value of approximately $3.5 million over the next eight months. In addition, Good Earth Oils has also secured a contract with Costco Australia, valued at approximately $3 million, to provide its non-GMO cold-pressed extra virgin canola oil to Costco stores nationwide. Australian Oilseeds (NASDAQ:COOT) is actively engaged in discussions with other retail chains in both Australia and the United States to expand the supply of its unique range of non-GMO cold-pressed extra virgin vegetable oils, which are processed without harmful chemicals.
Australian Oilseeds (NASDAQ:COOT) recently announced its first shipment of sustainable canola oil to Neste, a global leader in biofuel and sustainable aviation fuel. Australian Oilseeds (NASDAQ:COOT) has been collaborating closely with Neste and Australian farmers to produce low-carbon intensity canola seeds and canola oil that meet new sustainability standards, achieving a reduction in farming emissions by more than 50%.
In addition to its achievements in Australia, Australian Oilseeds (NASDAQ:COOT) is expanding its operations to the United States, through Good Earth Oils, the company will distribute Australian cold-pressed non-GMO canola oil and olive oil to retailers and wholesalers across the U.S. Australian Oilseeds’ (NASDAQ:COOT) commitment to regenerative farming methods is reflected in its partnerships with farmers who are actively reducing their use of chemicals. Furthermore, Australian Oilseeds (NASDAQ:COOT) is investing in renewable energy initiatives, such as solar and biodiesel, and is dedicated to implementing low-impact packaging solutions. Australian Oilseeds’ (NASDAQ:COOT) cold pressing process, which does not use any chemicals has higher quality and healthier oils that retain natural vitamins, antioxidants, and healthy omega fatty acids. Notably, Australian Oilseeds’ (NASDAQ:COOT) carbon footprint is 40-50% lower than that of conventional canola oil processors, underscoring its leadership in sustainable practices.
Australian Oilseeds (NASDAQ:COOT) is strategically positioned to capitalize on the growing global demand for sustainable, non-GMO, and organic food-grade oils, with its commitment to eliminating harmful chemicals from the food supply chain setting it apart in the industry. The company’s robust supply agreements with major retailers like Woolworths and Costco, along with its expansion into the U.S. market, makes it well-positioned for long-term growth and is an attractive investment opportunity. In the second quarter, Australian Oilseeds’ (NASDAQ:COOT) stock was held by 4 hedge funds with stakes worth $267,000.
6. Woodside Energy (NYSE:WDS)
Number of Hedge Fund Holders: 12
Market Capitalization as of August 30: $34.76 Billion
Woodside Energy (NYSE:WDS) is a leading oil and gas company that focuses on hydrocarbon exploration, development, and production. The company is known for its significant contributions to the energy sector in Australia. Woodside Energy (NYSE:WDS) is poised to significantly expand its LNG business. In July 2024, Woodside Energy (NYSE:WDS) acquired Tellurian, a natural gas company headquartered in Houston, Texas, and aims to position itself as a key player in the liquefied natural gas (LNG) market.
The acquisition of Tellurian and Driftwood LNG project, which is an approximately 27.6 mtpa LNG export facility presents a massive growth opportunity. Although Tellurian struggled with capital constraints, Woodside Energy’s (NYSE:WDS) robust financial position and proven expertise in LNG development make it well-suited to bring Driftwood to full fruition. Once operational, Driftwood is expected to generate up to $11 billion in annual operating cash flows, positioning Woodside Energy (NYSE:WDS) as one of the largest LNG producers globally.
Woodside Energy’s (NYSE:WDS) existing LNG portfolio, including its flagship projects like the North West Shelf and Pluto LNG in Australia, underscores the company’s leadership in the LNG sector. The addition of Driftwood could push Woodside Energy’s (NYSE:WDS) LNG capacity to over 40 Mtpa, putting it on par with sovereign energy giants like Qatar and Russia. This expanded capacity aligns with global trends favoring LNG as a cleaner alternative to coal, particularly in high-demand regions such as Asia-Pacific.
Woodside Energy (NYSE:WDS) is not only expanding its LNG operations but is also investing in the future of clean energy. The company is advancing projects in hydrogen and ammonia which positions it to benefit from the global energy transition. Woodside Energy’s (NYSE:WDS) Scarborough LNG project, which is 67% complete and on track for first cargo in 2026, and the Trion oil project in the Gulf of Mexico, on schedule for first oil in 2028, are also key drivers of future revenue. The successful execution of these projects will further solidify Woodside Energy’s (NYSE:WDS)position as a global energy leader.
Woodside Energy’s (NYSE:WDS) expansive global LNG portfolio and clean energy projects will contribute to its growth strategy and position the company to capitalize on the global shift towards cleaner energy sources. In the second quarter, Woodside Energy (NYSE:WDS) stock was held by 12 hedge funds with stakes worth $99.19 million.
5. Vast Renewables (NASDAQ:VSTE)
Number of Hedge Fund Holders: 13
Market Capitalization as of August 30: $36.91 Million
Vast Renewables (NASDAQ:VSTE) focuses on developing renewable energy projects and technologies. The company specializes in concentrated solar thermal power (CSP) technology and is used for large-scale power generation, producing green fuels, and supplying heat for industrial processes. Vast Renewables’s (NASDAQ:VSTE) CSP systems are designed to overcome issues with energy intermittency, making them a competitive solution for providing consistent, renewable energy. The technology has been used in demonstration plants and is being deployed in projects worldwide to reduce energy costs and contribute to the global energy transition.
On June 13, Vast Renewables (NASDAQ:VSTE) entered a Joint Development Agreement with global energy company Mabanaft to advance the Solar Methanol 1 (SM1) project in Port Augusta, South Australia. This project is designed to produce 7,500 tonnes of green methanol annually, using Vast Renewables’ (NASDAQ:VSTE) concentrated solar thermal power (CSP) energy systems. Green methanol can decarbonize industries such as shipping and aviation when produced from renewable energy. According to a report by Fichtner, SM1 project, which will be powered by Vast Renewables’ (NASDAQ:VSTE) 30 MW CSP plant, can potentially reduce green fuel production costs by up to 40%, The success of this project could pave the way for broader green fuels production in Australia, with the possibility of exporting to other markets such as Germany. Vast Renewables (NASDAQ:VSTE) and Mabanaft have secured funding agreements, totaling about $27.06 million for SM1, Vast Renewables (NASDAQ:VSTE) will receive approximately $13.16 million from the Australian Renewable Energy Agency (ARENA), and Mabanaft will receive up to $8.38 million from Projektträger Jülich (PtJ) on behalf of the German government, pending a final investment decision. This funding is part of HyGATE, a collaboration between the Australian and German governments to support hydrogen supply chain projects.
Vast Renewables (NASDAQ:VSTE) is strategically well-positioned to lead in the global renewable energy market, with its advanced concentrated solar thermal power (CSP) technology. By potentially reducing green fuel production costs by up to 40%, Vast Renewables (NASDAQ:VSTE) is set to revolutionize the green methanol market, with significant implications for decarbonizing hard-to-abate industries like shipping and aviation. Vast Renewables (NASDAQ:VSTE) stands out as a compelling investment opportunity poised for long-term growth and significant impact in the renewable energy sector. Vast Renewables’ (NASDAQ:VSTE) stock was held by 13 hedge funds with stakes worth $321,000. As of August 20, Vast Renewables (NASDAQ:VSTE) has a market cap of $36.91 million.
4. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 22
Market Capitalization as of August 30: $139.76 Billion
BHP Group (NYSE:BHP) is a multinational mining, metals, and petroleum company. It is one of the world’s largest resource companies, with operations spanning various sectors, including iron ore, copper, coal, and oil.
Despite subdued iron ore prices and rising costs, BHP Group (NYSE:BHP) has maintained solid production performance. For the year ended 30 June, BHP Group (NYSE:BHP) achieved several production records, including record copper output at the Spence mine and strong iron ore production. The company’s copper production increased 9% year over year with an EBITDA margin of 51% and Iron ore production totaled 259.7 Mt. The company’s potash projects are also progressing well, with Jansen Stage 1 ahead of schedule at 52% completion and Jansen Stage 2 just beginning at 2% completion. For the year 2025, BHP Group (NYSE:BHP) expects a further 4% increase in copper production.
On August 30, BHP Group (NYSE:BHP) announced its plan to expand its smelter and refinery operations at Olympic Dam in South Australia. The South Australian Government has initiated an application and assessment process for this expansion. BHP Group (NYSE:BHP) aims to increase its copper production in South Australia from approximately 322,000 tonnes last financial year to 500,000 tonnes of refined copper cathode by the early 2030s, with potential growth to 650,000 tonnes by the mid-2030s. Additionally, BHP Group (NYSE:BHP) has announced an Inferred Mineral Resource at Oak Dam of 1.34 billion tonnes at 0.66% copper grade and 0.33 grams per tonne gold grade, within which is an area that contains 220 million tonnes at 1.96% copper grade and 0.68 grams per tonne gold.
The company’s diversified commodity portfolio provides a balanced exposure to different markets and reduces reliance on any single commodity. Copper, which contributed significantly to the company’s EBITDA, continues to show potential for more growth. According to a report by the World Bank, copper prices are forecasted to increase by 4% next year. According to Forbes, the demand for Copper is forecasted to increase by 75% by 2050. BHP Group’s (NYSE:BHP) strategic initiatives, market positioning, and growth in copper production support its long-term growth prospects.
In the second quarter, BHP Group’s (NYSE:BHP) stock was held by 22 hedge funds with stakes worth $1.25 billion. Fisher Asset Management is the largest shareholder in the company with a stake worth $1.21 billion as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $61.38, which represents a 10.7% upside potential from its current level.
3. Rio Tinto (NYSE:RIO)
Number of Hedge Fund Holders: 29
Market Capitalization as of August 30: $79.31 Billion
Rio Tinto (NYSE:RIO) is a global mining group specializing in the extraction and production of minerals and metals. The company business model is well-diversified across various segments, reducing dependency on any single commodity. Rio Tinto (NYSE:RIO) operates in over 35 countries and produces iron ore, copper, aluminum, critical minerals, and other materials essential for the global energy transition.
In the first half of 2024, iron ore was the major revenue driver for Rio Tinto (NYSE:RIO) and accounted for 53% of its total revenue, the company’s diversification into aluminum and copper represents 37% of its revenue. This diversification mitigates risks associated with iron ore price fluctuations and allows the company to leverage growth opportunities in other metals, particularly as demand for aluminum and copper is set to increase significantly. According to a report by the World Bank, aluminum and copper prices are forecasted to increase modestly by 2% and 4%, respectively by 2025.
According to Forbes, the demand for aluminum is expected to grow by 50% by 2050 driven by the rise of electric vehicles (EVs) and renewable energy infrastructure. Copper demand is forecasted to increase by 75% by 2050. The company’s Resolution project in Arizona can produce as much as 40 billion pounds of copper over 40 years. Rio Tinto’s (NYSE:RIO) key projects, such as the Oyu Tolgoi underground copper mine in Mongolia, the La Granja copper project in Peru, and the AP60 aluminum smelter expansion in Canada, are expected to enhance the company’s production capabilities and positions it well to capitalize on the growing demand and offers reliable revenue streams in the coming years. Economic growth in regions such as India is also expected to contribute to iron ore demand.
Despite short-term challenges, including declining iron ore prices, Rio Tinto’s (NYSE:RIO) strategic diversification and favorable long-term demand for metals, make it a compelling investment opportunity for those looking to capitalize on future growth in the mining sector. Rio Tinto (NYSE:RIO) is trading 8.59 times its earnings, which is a 46% discount compared to the sector median of 15.91. In the second quarter, Rio Tinto’s (NYSE:RIO) stock was held by 29 hedge funds with stakes worth $1.29 billion. Fisher Asset Management is the largest shareholder in the company with a stake worth $1.12 billion as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $81.88, which represents a 25.64% upside potential from its current level.
2. Iris Energy (NASDAQ:IREN)
Number of Hedge Fund Holders: 38
Market Capitalization as of August 30: $571.61 Million
Iris Energy (NASDAQ:IREN) is a cryptocurrency mining company that focuses on sustainable and efficient mining operations. The company aims to leverage renewable energy sources to power its mining activities.
For the year ending June 30, 2024, Iris Energy (NASDAQ:IREN) achieved an EBITDA of $108 million up from $53.3 million in the previous year. The price of Bitcoin has increased by 116.89%% over the last 12 months which allowed the company to capitalize on favorable market conditions. The company’s Bitcoin mining revenue has increased from $75 million to $184 million year-on-year. This growth was fueled by a significant expansion in its average operating cash rate, which increased from 5.6 EH/s to 9.4 EH/s, resulting in the mining of 4,191 Bitcoins at an average realized price of $44,000. In addition to Bitcoin mining, Iris Energy (NASDAQ:IREN) has strategically expanded into the AI Cloud Services sector. This new business line generated $3.1 million in revenue during its first year and highlights the potential for future growth as the demand for AI solutions continues to grow.
Iris Energy (NASDAQ:IREN) is using 100% renewable energy in its operations. This not only aligns with global trends towards greener energy but also positions the company as a leader in sustainable practices within the industry. Iris Energy (NASDAQ:IREN) is also diversifying into High-Performance Computing (HPC) by leasing GPUs to AI companies such as Poolside.ai. This vertical integration offers a high-margin business model compared to competitors like Core Scientific, which only leases data center space and power.
Iris Energy’s (NASDAQ:IREN) future cash flows are highly sensitive to Bitcoin prices. Predicting Bitcoin’s exact price in the future is challenging due to market volatility and external factors. However, according to a report by Forbes, Bitcoin could reach anywhere between $100,000 and $150,000 by the end of 2025. Iris Energy’s (NASDAQ:IREN) expansion and HPC diversification present potential upsides and the company is well-positioned to benefit if Bitcoin prices rise.
Iris Energy (NASDAQ:IREN) is trading 13.88 times its earnings, which is a 42.3% discount compared to the sector median of 24.05. The company’s earnings are expected to grow by 100% this year. In the second quarter, Iris Energy’s (NASDAQ:IREN) stock was held by 38 hedge funds with stakes worth $420.41 million. Castle Hook Partners is the largest shareholder in the company with a stake worth $6.86 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $17.43, which represents a 75% upside potential from its current level.
1. Atlassian (NASDAQ:TEAM)
Number of Hedge Fund Holders: 47
Market Capitalization as of August 30: $43.54 Billion
Atlassian (NASDAQ:TEAM) is a prominent player in the enterprise software market. The company develops collaboration software designed to enhance productivity and teamwork. Atlassian (NASDAQ:TEAM) is known for products such as Jira and Confluence which serve over 300,000 customers globally across various industries.
While Atlassian (NASDAQ:TEAM) has a robust revenue, its ongoing investments in R&D, transition to cloud services, reliance on third-party partners, and strategic focus on growth contribute to its improving profitability. For the financial year 2024, Atlassian (NASDAQ:TEAM) reported that its revenue increased 23% to $4.4 billion compared to the previous year. The company experienced an operating loss of $117.1 million, a significant improvement compared to the $345.2 million loss in the previous year. The company is in the midst of a significant transition from its legacy server products to cloud-based offerings, which currently account for about 60% of its total revenue. During the financial year 2024, Atlassian (NASDAQ:TEAM) released new product innovations such as Rovo, a unified Jira, and the Guard security and achieved the FedRAMP (Federal Risk and Authorization Management Program) “In Process” designation, which is security assessment, authorization, and continuous monitoring program by the United States for cloud products and services. The number of customers who spend more than $10,000 in annual recurring revenue for cloud, increased by 18% year-over-year to 45,000 customers Additionally, the number of customers spending over $1 million annually grew by 48%. The company’s focus on cloud-based solutions and strategic investments in AI are expected to drive continued expansion and higher net expansion rates.
Looking ahead, Atlassian (NASDAQ:TEAM) announced its goal to surpass $10 billion in annual revenue within the next five years. For fiscal year 2025, Atlassian (NASDAQ:TEAM) expects total revenue growth of approximately 16% year-over-year, with cloud revenue growth of around 23%, data center revenue growth of 20%, and other revenue growth of 5%. The company also projects a gross margin of about 83.5%, with an operating margin of approximately 21.5%.
The company’s cloud-first strategy is paying off, with cloud revenue now constituting 61% of its total revenue. This transition not only enhances customer lifetime value but also positions Atlassian (NASDAQ:TEAM) to capitalize on the growing demand for cloud-based solutions. The company’s $67 billion serviceable addressable market is growing at a CAGR of 12% and provides substantial room for further expansion. Atlassian’s (NASDAQ:TEAM) strong market position, innovative product portfolio, and efficient business model, the company is well-positioned to capitalize on the growing demand for digital workplace solutions and achieve its ambitious revenue targets. Atlassian (NASDAQ:TEAM) earnings are expected to grow by 7.2% this year. In the second quarter, Atlassian’s (NASDAQ:TEAM) stock was held by 47 hedge funds with stakes worth $2.18 billion. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $207.38, which represents a 22.4% upside potential from its current level.
While we acknowledge the potential of Atlassian (NASDAQ:TEAM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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