We recently compiled a list of the 10 Best Australian Stocks to Buy Now. In this article, we are going to take a look at where Woodside Energy Group Ltd (NYSE:WDS) stands against other best Australian stocks to buy now.
According to a report by Vanguard published on January 24, Australia’s economy is expected to experience a gradual recovery in 2025, following its slowest growth in 32 years in 2024. The report forecasts an economic growth of 2% year over year by the end of 2025, with trimmed mean inflation, a core measure that excludes items at the extremes, expected to reach 2.5% year over year. However, the report notes that low productivity growth and higher unit labor costs will keep core inflation from falling sustainably to the midpoint of the Reserve Bank of Australia’s (RBA) 2%–3% target range until later in 2025.
The RBA has left its policy rate target unchanged at 4.35% since December 10, but has softened its language around future policy decisions, noting that it is “gaining some confidence that inflation is moving sustainably toward the target.” Despite this, Vanguard expects the RBA to remain patient and not initiate rate cuts until the second quarter of 2025, due to a tight labor market.
READ ALSO: 12 Most Promising Green Stocks According to Hedge Funds and 10 Worst Performing Energy Stocks in 2024.
In an interview on January 19, Lochlan Halloway, Market Strategist at Morningstar Australia, pointed out that the premium to fair value of large-cap stocks in the Australian market is abnormally high, trading at around 20% above fair value. According to Halloway, this is a concern as 20 companies account for about 60% of the ASX 100.
In terms of value opportunities, Halloway identified the energy sector, particularly companies that are trading at significant discounts to their fair value. He also noted that small-cap companies, which were largely left behind in the market rally may offer value, although investors need to be judicious in selecting quality companies. Additionally, sectors such as consumer defensives appear close to fair value or even cheap.
As the Australian economy gradually recovers in 2025, opportunities lie in undervalued sectors such as energy and consumer defensives, as well as among small-cap companies that have yet to catch up with the broader market rally.
A worker in safety gear with a drill rig in a sprawling oilfield.
Our Methodology
To compile our list of the 10 best Australian stocks to buy now, we used Finviz and Yahoo stock screeners to identify Australian companies. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
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).
Woodside Energy Group Ltd (NYSE:WDS)
Number of Hedge Fund Holdings: 8
Woodside Energy Group Ltd (NYSE:WDS), formerly known as Woodside Petroleum Ltd, is a leading energy company headquartered in Perth, Australia, with operations spanning the Asia Pacific, Africa, the Americas, and Europe. The company specializes in the exploration, development, production, and marketing of hydrocarbons, including liquefied natural gas (LNG), pipeline gas, crude oil, condensate, and natural gas liquids. Woodside Energy Group Ltd (NYSE:WDS) holds significant interests in major projects such as Pluto LNG, North West Shelf, Wheatstone, and Scarborough, among others.
Woodside Energy Group Ltd’s (NYSE:WDS) growth strategy has seen a significant milestone with the Louisiana LNG project, a major liquefied natural gas export facility located on the U.S. Gulf Coast. Following a $1.2 billion acquisition of Tellurian, Woodside Energy Group Ltd (NYSE:WDS) now holds full ownership of this project, which boasts a potential production capacity of 27.6 million metric tons per year (MTPA). Woodside Energy Group Ltd (NYSE:WDS) is now targeting a final investment decision (FID) for the Louisiana LNG project by the end of Q1 2025. If approved, construction is slated to begin soon after, with production expected to commence in 2028.
To progress the project, Woodside Energy Group Ltd (NYSE:WDS) has entered into a revised engineering, procurement, and construction (EPC) contract with Bechtel, a globally renowned engineering firm. The contract focuses on the foundational development of the project’s three production trains, with an estimated forward cost ranging from $900 to $960 per ton of LNG.
Overall WDS ranks 4th on our list of the best Australian stocks to buy now. While we acknowledge the potential of WDS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an 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.
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Disclosure: None. This article is originally published at Insider Monkey.