We recently compiled a list of the 10 Best Long Term ASX Stocks to Buy Now. In this article, we are going to take a look at where Woodside Energy Group Ltd (NYSE:WDS) stands against the other long term ASX stocks.
Vanguard believes that Australia’s economy remains well-placed to recover gradually in 2025 after the broader economy witnessed its slowest growth in 32 years in 2024 amid sticky inflation and higher interest rates. The investment firm expects modest improvement in economic momentum, courtesy of higher real household incomes as inflation subsides. Furthermore, a rebounding housing market and expectations of rate cuts might also provide some support.
Key Indicators Likely to Shape Australia’s Economy in 2025
The Reserve Bank of Australia (RBA) kept the policy rate target unchanged at 4.35% on December 10. However, the bank noted that it continues to see signs of inflation moving sustainably towards the target. That being said, Vanguard expects that RBA will remain patient and that a tight labor market is expected to keep RBA from initiating rate cuts until Q2 2025. Furthermore, stagnant labor productivity has been contributing to higher inflation.
The employment-to-population ratio of 64.5%, and the labor force participation rate of 67.1% both were at record levels in December 2024. With the broader economy remaining close to full capacity, businesses are required to hire, which can keep the labor market tight and unit labor costs at elevated levels, opines Vanguard. Notably, the unemployment rate increased to a seasonally adjusted 4.0% in December, reflecting a rise from 3.9% in November. The investment firm anticipates that the unemployment rate can rise to ~4.6% in 2025 due to tightened financial conditions amidst higher interest rates.
Outlook on Australian Equities
As per Paul Taylor, Portfolio Manager at Fidelity International, the long-term prospects for Australian equities are promising thanks to numerous structural tailwinds. Notably, population growth fueled by immigration and the associated increase in consumption offer a robust foundation for economic expansion. The persistent service sector inflation is expected to be a critical indicator for RBA to monitor. If the service inflation begins to ease, it can hint at the potential for rate cuts, providing relief for younger Australians witnessing higher mortgage costs and higher living costs.
Furthermore, Taylor believes that the relationship between China and the Trump administration is expected to be critical. If China responds through fiscal stimulus measures to aid the domestic economy, Australian materials companies might benefit. This is due to strong linkages between China’s economy and the broader Australian materials sector.
Our Methodology
To list the 10 Best Long Term ASX Stocks to Buy Now, we used a screener to shortlist the stocks that are trading on ASX and the US exchanges. Next, we chose the ones which were popular among hedge funds. Finally, the shortlisted stocks were arranged in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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).
A worker in safety gear with a drill rig in a sprawling oilfield.
Woodside Energy Group Ltd (NYSE:WDS)
Number of Hedge Fund Holders: 8
Woodside Energy Group Ltd (NYSE:WDS) is engaged in the exploration, evaluation, development, production, and marketing of hydrocarbons. BofA Securities analyst Matt Chalmers upgraded the company’s stock from “Neutral” to “Buy.” The upgrade stemmed from revised oil price forecasts by BofA’s Commodity Strategy team, which anticipates Brent crude oil to average $75 per barrel in 2025 and $73 per barrel in 2026. The team’s outlook has changed as a result of delays in OPEC+ production increases and new US Treasury sanctions on Russia.
Therefore, the anticipations shifted from an expected market surplus in 2025 to a tighter market. Notably, the West Texas Intermediate (WTI) crude oil prices are also expected to be around $71 per barrel this year and $69 per barrel in 2026. Therefore, the upgrade of Woodside Energy Group Ltd (NYSE:WDS)’s stock showcased higher oil price assumptions. The company and Chevron have decided to do an asset swap under which Woodside Energy Group Ltd (NYSE:WDS) will acquire Chevron’s interest in the North West Shelf (NWS) Project, the NWS Oil Project, and the Angel Carbon Capture and Storage (CCS) Project, and transfer all of its interest in both the Wheatstone and Julimar-Brunello Projects to Chevron.
Notably, the transaction simplifies Woodside Energy Group Ltd (NYSE:WDS)’s portfolio and improves its focus and efficiency by consolidating its position in the operated LNG assets. Furthermore, the transaction is immediately cash flow accretive and consists of a cash payment upon execution and completion.
Overall WDS ranks 2nd on our list of the long term ASX stocks to buy. While we acknowledge the potential of WDS as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than WDS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
