Let's face it, the stock market can feel like a round of golf – exciting opportunities for birdies (big wins) mixed with the occasional frustrating bogey (losses). As an investor, it's crucial to identify companies with strong potential for growth ("birdies") while also recognising those headed for the rough ("bogies").
Here's a look at what's on my radar.
Birdies on the Green
Resmed (RMD)
While weight loss drugs have grabbed headlines and investor attention, I see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers. Although quarters are likely to remain volatile, nothing changes my view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.
Woodside Energy (WDS)
A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS’s share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, it looks like a good time to add.
NEXTDC (NXT)
NXT is well placed to benefit from significant and ongoing structural growth which is accelerating the demand for data centres. These tailwinds include: business digitisation (colocation), cloud computing, and Generative Artificial Intelligence (Gen AI). NXT’s hybrid colocation business model brings together all three and this creates significant barriers to entry. Existing facilities are contracted and slowly filling up over the next 5 years with new ones coming online. Expect NXT to continue to expand its footprint substantially and win new business.
Bogies on the Back Nine
Commonwealth Bank (CBA)
As well as being Australia’s largest bank, compared to its peers CBA has the highest ROE, lowest cost of capital, leading technology, largest position in the residential mortgage market (with the lowest risk portfolio in this low risk market segment) and largest low cost deposit base (with a greater skew to households and transaction accounts than its peers), and a loyal retail investor and customer base. However, investors pay for this quality via the highest earnings and asset-based multiples and lowest dividend yield amongst its peer group. Looking very expensive!
Telstra (TLS)
Previously management was looking to unlock the value of mis-priced assets from inside the conglomerate, justifying a higher valuation. However, management has since reversed its decision and, based on a 12-month view, it looks like the higher valuation is no longer justified. Expect healthy earnings growth over the next few years but this is already priced in.
Investing always has risks, and there's no guaranteed win. But by doing your research, you can increase your chances of a birdie (or two) on the investment course!
Jahanne is a Senior Investment Adviser who specialises in providing a holistic approach to wealth advice. Contact Jahanne today to discuss your investment strategy via [email protected] or 03 9947 4156.
