In this article, we look at the 7 Best ASX Stocks To Invest In Right Now.
Overview of the Australian Economy
According to a report by the Australian Bureau of Statistics, Australia’s economy is growing at a sluggish pace as GDP for the June quarter increased by just 0.2%, bringing the annual growth rate to 1% for the year to June however, Australia continues to narrowly avoid a recession. According to Katherine Keenan, head of national accounts at the Australian Bureau of Statistics, the annual financial year economic growth was the lowest since 1991-92 excluding the Covid-19 pandemic period.
For the year to July, the Consumer Price Index (CPI) fell to 3.5%, from 3.8% in June which signals that inflation may be starting to ease. This reduction was largely attributed to energy rebates introduced by state and federal governments. In response, three of Australia’s big four banks have slashed interest rates on term deposits by as much as 80 basis points, signaling expectations of a significant rate cut in 2025. However, experts warn that inflation for the year to June remains “stubbornly high.” The Reserve Bank of Australia (RBA) has an inflation target of 2%-3%, and economists predict that rate cuts will likely not occur before 2025 due to inflationary pressures. Jim Chalmers, Treasurer of Australia acknowledged the economic stagnation and attributed the slow growth to a combination of global economic uncertainty, and the burden of higher interest rates.
Despite the economic challenges, wages in Australia continue to rise steadily, with a 4.1% increase for the year to June, slightly lower than the 4.2% growth recorded at the end of 2023. Private sector wages grew by 0.7% during the June quarter, down from 0.9% in the March quarter, while public sector wages saw a 0.9% increase, up from 0.6%.
Australian Equities Amid Inflation and Rising Rates
According to Schroders’ head of Australian equity, Martin Conlon, Investor sentiment toward investing in Australia reflects a cautious yet strategically optimistic approach, over the past decade, Australian equities, particularly in technology, growth, and green energy sectors, have enjoyed significant growth driven by speculative investment and aggressive financial leverage due to low borrowing costs. However, with the recent return of inflation and the necessity of higher interest rates, this sentiment has tempered.
However, real economy sectors such as resources, energy, and materials have gained traction due to more favorable investment opportunities. The mining sector, which represents a significant portion of Australia’s economic output, remains particularly attractive. Australia’s iron ore exports have long been a cornerstone of the economy, and global demand remains robust. Some of the largest mining companies in Australia maintain competitive advantages due to their low-cost operations, especially in iron ore production, which continues to generate strong cash flows even as global commodity demand fluctuates. Furthermore, Australia’s reserves of critical minerals like lithium and rare earths, essential for renewable energy technologies, position the country at the forefront of this transformation.
Investors are now prioritizing sectors with reasonable valuation levels and sound fundamentals, particularly those with exposure to the real economy. Resource stocks stand to benefit from global deglobalization trends as Western economies reduce their reliance on Chinese manufacturing. This shift is expected to result in higher costs for goods, further supporting the case for investing in resource-heavy sectors.
Despite the economic slowdown and inflationary pressures, the country continues to narrowly avoid recession. However, Australia’s unique position as a major commodities exporter and its exposure to the energy transition present compelling opportunities. With that in context let’s look at the 7 best ASX stocks to invest in right now.
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Our Methodology
For this article, we used the Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 20 largest companies in Australia by market cap. From that list, we narrowed our choices to the 7 stocks with the most hedge fund holders, as of Q2 of 2024. The list is sorted in ascending order of the number of hedge funds.
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).
7 Best ASX Stocks To Invest In Right Now
7. Novonix (NASDAQ:NVX)
Number of Hedge Fund Investors in Q2 2024: 1
Novonix (NASDAQ:NVX) is a leading innovator in the battery technology sector and specializes in advanced solutions for the lithium-ion battery industry. The company focuses on producing high-performance synthetic graphite anode materials and battery cell testing equipment. Novonix (NASDAQ:NVX) has operations spanning Australia, Canada, and the United States and has positioned itself as a significant player in the electric vehicle and energy storage markets.
On June 27, Novonix (NASDAQ:NVX) was granted a patent in Japan for its all-dry, zero-waste cathode synthesis technology and received patents in Europe for its graphite/silicon alloy composite material. According to Hatch, Novonix (NASDAQ:NVX) cathode synthesis process could cut power consumption by nearly 25%, eliminate almost all waste byproducts, reduce costs by about 50%, and potentially lower capital expenses by 30% compared to conventional methods.
Novonix (NASDAQ:NVX) has collaborations with industry leaders such as Volkswagen and CBMM, which positions for long-term growth. As of the second quarter, Novonix’s (NASDAQ:NVX) stock was held by 1 hedge fund with a combined stake of $1.27 million.
6. Opthea (NASDAQ:OPT)
Number of Hedge Fund Investors in Q2 2024: 3
Opthea (NASDAQ:OPT) is a biopharmaceutical company dedicated to developing new treatments for eye diseases, with a particular focus on wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME). These conditions can lead to significant vision loss, and Opthea’s (NASDAQ:OPT) leading product, Sozinibercept, is undergoing advanced clinical trials to determine if it can enhance the effectiveness of existing treatments by offering better visual outcomes than standard therapies alone.
Sozinibercept is a groundbreaking, first-in-class VEGF-C/D inhibitor designed to boost the efficacy of anti-VEGF-A therapies used to treat wet AMD. Many patients with wet AMD become resistant to current treatments over time. By inhibiting VEGF-C and VEGF-D, both of which contribute to retinal angiogenesis and vascular leakage, Sozinibercept addresses the root causes of these retinal diseases. This novel mechanism could significantly improve visual outcomes for wet AMD patients, making it the first therapy in 20 years with the potential to enhance the quality of life and independence for those affected.
The journal “Ophthalmology and Therapy” has also highlighted the potential of Sozinibercept, noting the crucial roles that VEGF-C and VEGF-D play in retinal diseases. While current treatments mainly target VEGF-A, Sozinibercept’s approach could lead to improved treatment for broader outcomes. Wet AMD affects millions of individuals in the U.S. and Europe, and many patients do not experience optimal vision improvements with existing therapies, underscoring the need for innovative treatments like Sozinibercept.
With millions of patients affected by these debilitating conditions, the potential for Sozinibercept to improve their quality of life could be the first major breakthrough in two decades for wet AMD treatment. As of the second quarter, Opthea’s (NASDAQ:OPT) stock was held by 3 hedge funds with stakes totaling $9.94 million. VGI Partners is the largest shareholder, holding $5.61 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for Opthea, with an average price target of $14.27, indicating a 125% upside potential from its current price.
5. Mesoblast (NASDAQ:MESO)
Number of Hedge Fund Investors in Q2 2024: 3
Mesoblast (NASDAQ:MESO) is a biotechnology company based in Melbourne, specializing in regenerative medicine and cell-based therapies. The company is advancing two key products, rexlemestrocel-L (Revascor) and remestemcel-L (Ryoncil), which target significant unmet medical needs and are in advanced development stages which will transform treatments for severe inflammatory and cardiovascular diseases.
Rexlemestrocel-L (Revascor) is being developed to treat chronic heart failure and chronic low back pain, the FDA has granted an Orphan Drug Designation to rexlemestrocel-L for its use in treating pediatric congenital heart diseases. After two previous FDA rejections, the company resubmitted its biologics license application (BLA) for remestemcel-L (Ryoncil) as a treatment for pediatric patients with steroid-refractory acute graft-versus-host disease (SR-aGVHD).
The FDA accepted the resubmission on July 24 and set a Prescription Drug User Fee Act (PDUFA) decision date of January 7, 2025. If approved, remestemcel-L would be the first treatment available for SR-aGVHD for children under 12. The drug has also been designated for Rare Pediatric Diseases. Although the SR-aGVHD market is relatively small, remestemcel-L has the potential to become a leading treatment option in this critical niche. The approval for remestemcel-L in SR-aGVHD could also significantly enhance Mesoblast’s valuation.
In the second quarter, 3 hedge funds held shares in Mesoblast (NASDAQ:MESO), with total stakes worth $1.18 million. Marshall Wace LLP is the largest shareholder, holding $562,343 worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for Mesoblast, with an average price target of $11, representing a 56% upside potential from its current levels.
4. Tamboran Resources (NYSE:TBN)
Number of Hedge Fund Investors in Q2 2024: 4
Tamboran Resources (NYSE:TBN) is a natural gas company operating in Australia and the broader Asia-Pacific region. As the largest landholder and operator in the Beetaloo Sub-basin, the company controls around 1.9 million acres in the Beetaloo/McArthur basin, located 500 km southeast of Darwin which spans 28,000 square kilometers and is estimated to have 500 trillion cubic feet of gas. The company plays a key role in delivering cleaner energy solutions and has extensive experience in assessing unconventional gas fields.
In July, Tamboran Resources (NYSE:TBN) secured an Interim Agreement for a 420-acre site at the Middle Arm Sustainable Development Precinct. This agreement gives the company exclusive rights to the Wirraway North site until the end of 2027, with the option to extend twice for one year. Moreover, in April 2024, Tamboran Resources (NYSE:TBN), along with its Beetaloo Joint Venture (BJV) partner, signed a major gas supply agreement with the Northern Territory Government to supply 40 terajoules (TJ) of gas per day from their Shenandoah South Pilot Project. The supply will last for an initial nine years, starting in the first half of 2026, delivering a total of 131.4 petajoules (PJ) of gas. Tamboran Resources (NYSE:TBN) share amounts to around 62.4 PJ. The Northern Territory Government also has the option to extend the contract for an additional six-and-a-half years until mid-2041.
The gas will be transported via the Amadeus Gas Pipeline on a take-or-pay basis. This means that the Northern Territory Government will either take the gas or pay for it and the price of gas will follow the Consumer Price Index (CPI), meaning it will adjust with inflation. If the Northern Territory Government chooses to extend the contract, they will receive the gas at a slightly discounted rate.
The binding gas supply agreement with the Northern Territory Government ensures a steady revenue stream for the company, starting in 2026, with an option for extension until 2041 which offers robust growth and long-term shareholder returns. As of the second quarter, Tamboran Resources’ (NYSE:TBN) stock is held by 4hedge funds, with a total stake valued at $95.04 million.
3. Woodside Energy (NYSE:WDS)
Number of Hedge Fund Investors in Q2 2024: 12
Woodside Energy (NYSE:WDS) is a major player in the oil and gas sector and specializes in the exploration, development, and production of hydrocarbons. The company is a significant contributor to Australia’s energy industry and is set to expand its liquefied natural gas (LNG) business substantially. In July 2024, Woodside Energy (NYSE:WDS) acquired Tellurian, a Houston-based natural gas company to position itself as a key player in the LNG market.
The acquisition of Tellurian and its Driftwood LNG project, a 27.6 million tonnes per annum (mtpa) export facility which is expected to generate up to $11 billion in annual operating cash flow, along with the existing LNG portfolio, the company’s LNG capacity could exceed 40 mtpa, and will make Woodside Energy (NYSE:WDS) one of the largest LNG companies in the world.
Woodside Energy’s (NYSE:WDS) upcoming projects include the Scarborough LNG development, which is 67% complete and expected to deliver its first cargo by 2026, and the Trion oil project in the Gulf of Mexico which will start delivering oil in 2028, supports the company’s growth strategy and enables it to capitalize on the global transition to cleaner energy sources. In the second quarter, 12 hedge funds held positions in Woodside Energy (NYSE:WDS), with a total value of $99.19 million.
2. BHP Group (NYSE:BHP)
Number of Hedge Fund Investors in Q2 2024: 22
BHP Group (NYSE:BHP) is a leader in mining, metals, and petroleum. Its operations span multiple sectors, including iron ore, copper, coal, and oil.
For the year ending June 30, BHP Group (NYSE:BHP) hit several production records, including record copper output at the Spence mine and robust iron ore production. Copper production rose by 9% year-over-year, with an EBITDA margin of 51%, while iron ore production reached 259.7 Mt. Additionally, BHP Group’s (NYSE:BHP) potash projects are also progressing well, with Jansen Stage 1 ahead of schedule at 52% completion, and Jansen Stage 2 in its early phase at 2% completion. For 2025, BHP expects a further 4% increase in copper production.
On August 30, BHP Group (NYSE:BHP) announced plans to expand its smelter and refinery operations at Olympic Dam in South Australia. BHP Group (NYSE:BHP) aims to boost copper production in South Australia from 322,000 tonnes last year to 500,000 tonnes of refined copper cathode by the early 2030s, with potential growth to 650,000 tonnes by the mid-2030s. Furthermore, BHP Group (NYSE:BHP) has declared an Inferred Mineral Resource at Oak Dam, estimated at 1.34 billion tonnes with a copper grade of 0.66% and a gold grade of 0.33 grams per tonne. This includes a section with 220 million tonnes at 1.96% copper and 0.68 grams per tonne of gold.
The World Bank projects copper prices to rise by 4% next year, and Forbes estimates copper demand will increase by 75% by 2050. The company’s valuation is also appealing, as the stock is currently trading at 10.33 times earnings, a 34.87% discount compared to the sector median of 15.86. Analysts have a consensus Buy rating on the stock, with an average price target of $61.38 which indicates a potential a 13% upside from current levels. As of the second quarter, BHP Group’s (NYSE:BHP) stock is held by 22 hedge funds, with a total stake valued at $1.25 billion. Fisher Asset Management is the largest shareholder in the company and owns shares worth $1.21 billion as of June 30.
1. Rio Tinto (NYSE:RIO)
Number of Hedge Fund Investors in Q2 2024: 29
Rio Tinto (NYSE:RIO) is a global mining company that operates in over 35 countries and specializes in extracting and producing a wide range of minerals and metals including iron ore, copper, aluminum, and other materials that are crucial for the global energy transition.
Iron ore was the primary revenue generator for Rio Tinto, however, the company is diversifying its operations into aluminum and copper which accounted for 37% of revenue in the first half of 2024. Forbes predicts that aluminum demand will surge by 50% by 2050, driven by the growth of electric vehicles (EVs) and renewable energy infrastructure. Copper demand is expected to grow by 75% over the same period. The World Bank forecasts modest price increases of 2% for aluminum and 4% for copper by 2025.
Rio Tinto’s (NYSE:RIO) key projects including the Resolution project in Arizona have the potential to produce 40 billion pounds of copper over the next 40 years. Other 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 production capacity of its aluminum and copper products and position the company to benefit from increasing demand.
Rio Tinto’s (NYSE:RIO) stock is currently trading at 8.59 times earnings, the stock is at a 46% discount compared to the sector median of 15.86. In the second quarter, 29 hedge funds held positions in Rio Tinto (NYSE:RIO), with a total value of $1.29 billion. Fisher Asset Management is the largest shareholder, with a stake worth $1.12 billion as of June 30. Industry analysts maintain a consensus Buy rating for the stock, with an average price target of $81.88, indicating a potential upside of 25.64% from its current level.
While we acknowledge the potential of Rio Tinto (NYSE:RIO) 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 RIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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