Companies Under Coverage
Explore the stocks under coverage of our award-winning in-house research team.
Companies under coverage
Australia
ALS Ltd (ALQ)
APA Group Stapled (APA)
ARB Corporation (ARB)
Accent Group Ltd (AX1)
Acrow Limited (ACF)
Adairs Limited (ADH)
Adrad Hldings (AHL)
Alliance Aviation (AQZ)
Ama Group Limited (AMA)
Amcor Plc Cdi 1:1 (AMC)
Amotiv (AOV)
Articore Group Ltd (ATG)
Atlas Arteria Sforus (ALX)
Aurizon Holdings Ltd (AZJ)
Avada Group Limited (AVD)
Baby Bunting Grp Ltd (BBN)
Bapcor Limited (BAP)
Beacon Lighting Grp (BLX)
Bega Cheese Ltd (BGA)
Brambles Limited (BXB)
Breville Group Ltd (BRG)
Brickworks Limited (BKW)
Camplifyholdings (CHL)
Civmec Limited (CVL)
Cleanaway Waste Ltd (CWY)
Coles Group (COL)
Collins Foods Ltd (CKF)
Corp Travel Limited (CTD)
DGL Group Limited (DGL)
Dalrymple Bay Stapled (DBI)
Domino Pizza Enterpr (DMP)
Eagers Automotive (APE)
Elders Limited (ELD)
Endeavour (EDV)
Experience Co Ltd (EXP)
Flight Centre Travel (FLT)
Graincorp Limited (GNC)
Guzman Y Gomez Ltd (GYG)
Hancock & Gore Ltd (HNG)
Helloworld Travl Ltd (HLO)
Idp Education Ltd (IEL)
Incitec Pivot (IPL)
Inghams Group (ING)
Iph Limited (IPH)
JB Hi-Fi Limited (JBH)
James Hardie Indust Cdi 1:1 (JHX)
Johns Lyng Group (JLG)
Kelly Partners Group (KPG)
LGI Limited (LGI)
Lindsay Australia (LAU)
Lovisa Holdings Ltd (LOV)
MAAS Group Holdings (MGH)
Monadelphous Group (MND)
Motorcycle Holdings (MTO)
Myer Holdings Ltd (MYR)
Nrw Holdings Limited (NWH)
Ntaw Holdings Ltd (NTD)
Nufarm Limited (NUF)
Orica Limited (ORI)
Orora Limited (ORA)
PWR Holdings Limited (PWH)
Peoplein Limited (PPE)
Peter Warren (PWR)
Qantas Airways (QAN)
Reece Limited (REH)
Regal Partners Ltd (RPL)
Reliance Worldwide (RWC)
Shine Justice Ltd (SHJ)
Silk Logistics (SLH)
Sks Tech Group Ltd (SKS)
Smartgroup
Soul Pattinson (Wh) (SOL)
Step One Limited (STP)
Super Ret Rep Ltd (SUL)
Tasmea Limited (TEA)
The A2 Milk Company Nz (A2M)
The Reject Shop (TRS)
Tourismholdings Nzx (THL)
Transurban Group Stapled (TCL)
Treasury Wine Estate (TWE)
Universal Store (UNI)
Veem Ltd (VEE)
Ventiaservicesgroup (VNT)
Vulcan Steel (VSL)
Wagners Hld Company (WGN)
Web Travel Group Ltd (WEB)
Webjet Group Limited (WJL)
Wesfarmers Limited (WES)
Woolworths Group Ltd (WOW)
Worley Limited (WOR)
ANZ Group Holdings (ANZ)
ASX Limited (ASX)
Bank Of Queensland (BOQ)
COG Financial Services (COG)
Cedar Woods Prop (CWP)
Centuria I Reit Ord Unit (CIP)
Centuria Office Reit Ord Unit (COF)
Chalice Mining Ltd (CHN)
Challenger Limited (CGF)
Clearview Wealth Ltd (CVW)
Commonwealth Bank (CBA)
Computershare Ltd (CPU)
Credit Corp Group (CCP)
Cromwell Prop Stapled (CMW)
Dexus Conv Ret Reit Stapled (DXC)
Dexus Industria Reit Stapled (DXI)
Earlypay Ltd (EPY)
Eureka Group Ltd (EGH)
GQG Partners (GQG)
Garda Prpty Group Stapled (GDF)
Generation Dev Group (GDG)
Goodman Group (GMG)
HMC Capital Limited (HMC)
HUB24 Ltd (HUB)
Healthco Healthcare and Wellness REIT (HCW)
Homeco Daily Needs Units (HDN)
Hotel Property Stapled (HPI)
Insurance Australia (IAG)
Judo Cap Holdings (JDO)
Kina Securities Ltd (KSL)
MA Financial Group (MAF)
Macquarie Group Ltd (MQG)
Magellan Fin Grp Ltd (MFG)
Medibank Private Ltd (MPL)
Moneyme Limited (MME)
NIB Holdings Limited (NHF)
National Aust Bank (NAB)
National Storage Stapled (NSR)
Netwealth Group (NWL)
Pexagroup (PXA)
Pinnacle Investment (PNI)
QBE Insurance Group (QBE)
Qualitas Limited (QAL)
Solvar Limited (SVR)
Suncorp Group Ltd (SUN)
Tyro Payments (TYR)
Waypoint Reit Stapled (WPR)
Westpac Banking Corp (WBC)
Ansell Limited (ANN)
Aroa Biosurgery (ARX)
Audeara (AUA)
Avita Medical Cdi 5:1 (AVH)
CSL Limited (CSL)
Clarity Pharma (CU6)
Clinuvel Pharmaceut (CUV)
Cochlear Limited (COH)
Control Bionics (CBL)
EBR Systems (EBR)
Ebos Group Ltd Nz (EBO)
Healius (HLS)
Imexhs Limited (IME)
Impedimed Limited (IPD)
Imricor Med Sys Cdi Forus (IMR)
Mach7 Tech Limited (M7T)
Medadvisor Limited (MDR)
Micro-X Limited (MX1)
Microba Life Sciences (MAP)
Monash IVF Group Ltd (MVF)
Nanosonics Limited (NAN)
Neurizon Therapeutic (NUZ)
Percheron (PER)
Polynovo Limited (PNV)
Pro Medicus Limited (PME)
Proteomics Int Lab (PIQ)
Ramsay Health Care (RHC)
Resmed Inc Cdi 10:1 (RMD)
Sigma Health Ltd (SIG)
Sonic Healthcare (SHL)
Syntara Limited (SNT)
Tissue Repair (TRP)
Adriatic Metals Cdi 1:1 (ADT)
Arcadium Lithium Plc Cdi 1:1 (LTM)
Ausgold Limited (AUC)
BHP Group Limited (BHP)
Beach Energy Limited (BPT)
Bowen Coal Limited (BCB)
Catalyst Metals (CYL)
Comet Ridge Limited (COI)
Cooper Energy Ltd (COE)
Coronado Global Res Cdi 10:1 (CRN)
Deep Yellow Limited (DYL)
EQ Resources (EQR)
Elementos Limited (ELT)
Empire Energy Ltd (EEG)
Fortescue Ltd (FMG)
Genmin (GEN)
Gold Hydrogen (GHY)
Imdex Limited (IMD)
KGL Resources Ltd (KGL)
Karoon Energy Ltd (KAR)
Liontown Resources (LTR)
MLG Oz Ltd (MLG)
Matrix Composites & Engineering (MCE)
Medallion Metals (MM8)
Meeka Metals Limited (MEK)
Mineral Resources (MIN)
Mitchell Services (MSV)
New Hope Corporation (NHC)
Northern Star (NST)
Novonix Limited (NVX)
Pilbara Min Ltd (PLS)
Ramelius Resources (RMS)
Regis Resources (RRL)
Rio Tinto Limited (RIO)
Sandfire Resources (SFR)
Santos Ltd (STO)
Siren Gold (SNG)
South32 Limited (S32)
Stanmore Resources (SMR)
Sunstone Metals Ltd (STM)
True North Copper (TNC)
Vault Minerals Ltd (VAU)
Whitehaven Coal (WHC)
Woodside Energy (WDS)
Ai-Media Technologie (AIM)
Airtasker Limited (ART)
Aristocrat Leisure (ALL)
Attura (ATA)
Bluebet Holdings Ltd (BBT)
Car Group Limited (CAR)
Data#3 Limited (DTL)
Firstwave Cloud Tech (FCT)
Frontier Digital Ltd (FDV)
Intelligent Monitoring Group (IMG)
Iress Limited (IRE)
Jumbo Interactive (JIN)
Light & Wonder Inc Cdi 1:1 (LNW)
Megaport Limited (MP1)
Nextdc Limited (NXT)
Objective Corp (OCL)
Rea Group (REA)
Seek Limited (SEK)
Siteminder (SDR)
Superloop Limited (SLC)
Swoop Holdings Ltd (SWP)
Tabcorp Holdings Ltd (TAH)
Technology One (TNE)
Telstra Group (TLS)
The Lottery Corp (TLC)
The Star Ent Grp (SGR)
Tpg Telecom Limited (TPG)
Wisetech Global Ltd (WTC)
Xero Ltd (XRO)
Adobe Systems Inc (ADBE.NAS)
Alphabet Inc (GOOGL.NAS)
Amazon Inc (AMZN.NAS)
Apple Inc (AAPL.NAS)
Berkshire Hathaway Inc (BRK.B.NYS)
Chipotle Mexican Grill Inc (CMG.NYS)
Cisco Systems Inc (CSCO.NAS)
Constellation Software Inc/Canada (CSU.TSX)
Eli Lilly & Co (LLY.NYS)
Freeport-Mcmoran Inc (FCX.NYS)
General Motors Co (GM.NYS)
Global Business Travel Group I (GBTG.NYS)
Honeywell International Inc (HON.NAS)
Johnson & Johnson (JNJ.NYS)
Linde Plc (LIN.NAS)
Mastercard Inc (MA.NYS)
Mcdonald'S Corp (MCD.NYS)
Meta Platforms Inc A (META.NAS)
Microsoft Corp (MSFT.NAS)
Netflix Inc (NFLX.NAS)
Nike Inc (NKE.NYS)
Nvidia Corp (NVDA.NAS)
Paypal Holdings Inc (Usa) (PAYPAL)
Pfizer Inc (PFE.NYS)
Rtx Corp (RTX.NYS)
Salesforcecom Inc (CRM.NYS)
Sharkninja Inc (SN.NYS)
Starbucks Corp (Us) (STARBU)
Tesla Inc (TSLA.NAS)
Visa Inc (Usa) (VISAIN)
Walt Disney Co/The (DIS.NYS)
Alibaba Group Holding Ltd (9988.HKE)
Tencent Holdings Ltd (0700.HKE)
Astrazeneca Plc (AZN.LSE)
Diageo Plc (DGE.LSE)
Glencore Plc (GLEN.LSE)
Hennes & Mauritz Ab (HM-B.STO)
Hermes International (Eur) (HERMES)
Industria De Diseno Textil Sa (ITX.MAD)
LVMH Moet Hennessy Louis Vuitton Se (LVMH.MTA)
Nestle Sa (Switz) (NESTLE)
Novo Nordisk A/S (NOVO-B.CSE)
Roche Holding Ag (ROG.SWX)
Shell Plc (SHEL.LSE)
Siemens Ag (SIE.ETR)
News & Insights
Well, I’ve spoken before about the Reserve Bank of Australia and the Federal Reserve. The easiest way to understand what central banks are doing is to look at employment growth. When employment growth is higher than the long-term median, central banks tend to either hold rates where they are or to tighten. When employment growth is lower than the long-term median, central banks tend to cut rates.
So, today we’ll look at where things are and explain what’s been happening this week and why the Reserve Bank of Australia held rates where they were, and why the Fed cut rates by 25 basis points. In the first slide, what you see is the rate of growth of employment in Australia. The long-term median is 2.3%, but the current rate of employment growth is 2.97%. So, it’s above the long-term median, and that’s strong. This is largely due to support from the federal government employing people in the public sector. But as the Deputy Governor of the Reserve Bank says, these are still real jobs. For that reason, the RBA is holding rates steady until inflation falls or unemployment rises. This means that if unemployment rises, we can expect inflation to fall in the future.
The Federal Reserve, on the other hand, has a different story. When we look at the rate of growth of employment in the US, the level of actual employment year-on-year is 1.3%. Employment growth has been slowing as we go through the year, and that’s lower than the long-term median of 1.6%. At the previous meeting, the Fed cut by 50 basis points. I had forecast at that time that it would continue cutting rates in November and December, and we just saw a 25 basis point cut today. At the Fed Reserve press conference after the Fed statement was released, Jay Powell said that geopolitical risks to the US economy are elevated. Still, he said that when we look at the US economy, it is still very sound, with strong growth, a strong labour market, and inflation coming down.
When he was asked about the US national debt, Powell said the national debt is not unsustainable, but the path of the growth of that debt is. In other words, the size of the US deficit is too large. If the growth in US Debt continues, Powell warned, it will ultimately be a threat to the economy.
Since the election of Donald Trump, we’ve seen that there is a significant number of supporters in the House of Representatives of proposals to cut spending. Also, suggestions for cuts could come from figures like Elon Musk, while Robert F. Kennedy Jr. has advocated closing whole sections of the Food and Drug Administration. These budgetary savings could help reduce the size of the budget deficit, but we’ll have to wait and see how it plays out.
Powell currently holds his appointment until May 2026. He was asked twice during the press conference whether he would resign. He replied with a simple "no" when asked if he would resign if President Trump asked him to resign. When asked again if he or other board members could be fired by the President, he said, "No, it is not permitted by law." So, unless Powell is impeached by both houses of Congress—which is incredibly unlikely—he will certainly serve his term through 2026.
When a reporter asked Powell about the neutral rate, or the natural rate of interest, he said that it’s difficult to pinpoint. The natural rate was defined in the 19th century by Swedish economist Knut Wicksell. Powell acknowledged that we’ll eventually know the neutral rate “by its works”. Based on our models, we believe the neutral Fed funds rate is 3.85% right now, considering where US employment, inflation, and inflation expectations stand in the US. We think the Fed funds rate will continue to fall until it reaches that level of 3.85%.
As I predicted, the Fed cut rates by 25 basis points in November, bringing the effective funds rate down to 4.6%. We believe there will be another rate cut in December, bringing the effective Fed funds rate to 4.35%, which will be equal to the Australian cash rate.
We don’t think rates will stop there. We expect another rate cut on January 28th, bringing the Fed funds rate to 4.1%. Following that, there will be a Fed meeting on Saint Patrick’s Day, where we expect another rate cut, bringing the Fed Funds rate to 3.85% This is where our model suggests the neutral Fed funds rate should be.
Any changes to that forecast will depend on the direction of inflation, unemployment, and inflation expectations in the US. If inflation goes down, unemployment rises, or inflation expectations decrease, rates could be cut further.
Still for now, we think the bottom of the Fed funds rate will be 3.85% by March next year.
Interestingly, the Fed is not just cutting rates; it’s also doing quantitative tightening at a rate of $25 billion per month. That means the size of the Fed’s balance sheet is falling by $25 billion each month.
However, at that rate, it will take nearly 10 years for the Fed’s balance sheet to fall back to the $4 trillion it was at in 2019. So, while the Fed may continue cutting rates next year, quantitative tightening is likely to continue for many years to come.
A roadmap of possible US election outcomes and their context versus market fundamentals.
Key points:
- A benign US election process with a quick and clean result would be the least disruptive outcome for capital market but this appears to be a relatively low probably scenario.
- Given that parts of the market look abnormally stretched, we think it’s prudent that investors should have a plan should market uncertainty and/or volatility escalate.
History shows that US equities in the very short term tend to trade flat into elections but then rally out the other side as investors have more certainty on forward policy and leadership. US equity markets appear to be in a mood to do the same in 2024, with typical seasonal strength into Christmas likely to become the market narrative should the election go smoothly. However, the current circumstances look less than typical.
History shows that US equities in the very short term tend to trade flat into elections but then rally out the other side as investors have more certainty on forward policy and leadership. US equity markets appear to be in a mood to do the same in 2024, with typical seasonal strength into Christmas likely to become the market narrative should the election go smoothly. However, the current circumstances look less than typical.
First let’s consider what a win might look like on either side. There is a mountain of opinion about what election outcomes might mean for the US. The reality is that no matter who becomes President, investors will face ongoing uncertainties about policies which have potential to mould the US economy. Should Harris prevail, it looks unlikely the Democrats would control the US senate, making the passage of reformative legislation more difficult. The “status quo” might actually be the most benign outcome. Should Trump prevail, there is greater uncertainty about whether pre-election policy rhetoric – particularly on high potential impact policies around trade tariffs – are actually enacted.
At this point it does look like the policies of both parties though would entail more Government spending than capital markets currently expect. This could re-assert upward pressure on US inflation and might mean that the pace of US rate cuts could be slower than markets currently hope.
It’s quite notable that the pricing of US Treasuries have reflected this very potential in recent weeks, with yields trending higher. It’s equally notable that equity market behaviour looks to be in disagreement with bonds, arguably disregarding risks around the US rates trajectory. Other market valuation metrics also look somewhat dislocated.
US credit spreads have narrowed to levels not seen since June 2007. This decline mirrors the strength in equities but also reflects expensive valuations and can indicate some complacency in the market's assessment of credit risk. Absolute US equity valuations are at decade highs. Equity valuations relative to bonds as measured by the equity risk premium look the most stretched, with the ERP at multi-decade lows below 1%. Stretched valuations does increase the market’s vulnerability to unforeseen events or uncertainty.
It's prudent to be prepared
The US is among the biggest success stories in the global economy. To achieve disinflation without much disruption to growth or employment is no mean feat. US corporate earnings have also been strong and resilient, projecting compound growth of 12-15%, which is really important here. However, several measures of capital market strength are looking stretched and/or abnormal with the disagreement reflected in bond yields the most notable. Getting US elections out of the way is typically good for markets. However, several various potential scenarios around the election could easily lift uncertainty and spike market volatility at current levels. Confirmation of the election process itself could include material delay, challenge, dispute and/or unrest. We think investors should prepare accordingly.
Domestic stocks, themes and opportunities that we have recently be advocating for investors include: trimming banks exposure, rotating exposure into resources (BHP & RIO), value in energy (Woodside), US rates leverage via James Hardie and opportunities in stocks on weakness in Lovisa and Eagers Automotive.
International stocks currently on the Morgans US focus list include Meta Platforms, Nike, Coca Cola, Starbucks, Honeywell and Berkshire Hathaway.
Morgans clients receive exclusive insights such as access to the latest stock and sector coverage featured in the Month Ahead. Contact us today to begin your journey with Morgans.
Jensen Huang, the rockstar CEO of NVIDIA, recently described Artificial Intelligence (AI) as ‘the most transformative technology of the 21st Century’ which ‘will affect every industry and aspect of our lives’. The CEO of Alphabet, Sundar Pichai, went further, saying AI is ‘probably the most important thing humanity has ever worked on’. Amid all this hyperbole, it can be daunting to know where to start as an investor looking to get exposure to AI. We offer one framework for thinking about this in the Month Ahead for November. We recommend investors start making sense of AI by considering stock opportunities in these three distinct areas:
Artificial Intelligence Providers
It is no coincidence that the world’s leading Cloud Service Providers (Microsoft, Amazon, and Google) are leading the race to commercialise Artificial Intelligence and Large Language Models (LLMs), alongside that technological shapeshifter Meta Platforms. These companies are also known as ‘Hyperscalers’ due to their technical expertise in operating computing infrastructure at levels of complexity that would make your head spin.
The Hyperscalers are typically well funded and cash generative. Their ‘ownership’ of business and personal data puts them at the forefront of building, training, and ultimately monetising LLMs. Collectively, these companies are expected to spend a staggering US$700bn in capex over the next three years, the bulk of which relates to AI.
In many ways, Microsoft (NASDAQ: MSFT) is the most uniquely positioned. As the key supplier of business productivity tools in the world, it has the vast technical expertise, data and customer base best suited to benefit from the rise of AI. As more and more businesses embrace AI we expect they will embrace Microsoft’s AI offering and both parties should benefit. Microsoft reported its September quarterly result on Wednesday and indicated Microsoft AI is on track to be its fastest ever product to reach $10bn in annual recurring revenue (less than three years).
Digital Infrastructure
Digital infrastructure companies power the data centres, cloud computing and research activities that are integral to the digital ecosystem and the rise of AI. Internationally the best-known name in the space is AI chip supplier NVIDIA, which is widely held to be best in class and a unique value proposition.
Enjoying all the benefits of the AI growth opportunity with less volatility are the operators of data centres. Data centres are facilities that store, process, and manage the vast amounts of data foundational to AI, ensuring secure and efficient data flow, backup, and recovery. The largest operators in the world are Digital Realty and Equinix. Digital Realty recently reported a record sales quarter during which it sold double the data centre capacity of its previous high and about four times more capacity than it usually sells in a quarter. This reinforces our view that the significant demand for cloud computing and AI-related digital infrastructure is going to unpin attractive returns and long-term growth.
Here in Australia, the data centre space gathered recent attention following the recent $23bn purchase of private data centre operator AirTrunk. In the listed arena, NEXTDC and Goodman Group are the largest data centre operators on the ASX. Our preferred exposure is NEXTDC (ASX: NXT). It has 17 operational data centres in Australia and nearly a dozen under construction or about to be built across Australasia and Asia.
Data Networks
AI needs a combination of technical expertise, computing power, data centre space and data. An extremely large amount of data is needed to train an AI agent or LLM. Once the training is complete the AI agent also needs to be given regular up-to-date data in order to remain relevant and useful. This is where traditional data networks (such as telcos like Telstra, TPG Telecom, Superloop and Megaport) come into play.
Traditional telecommunications companies will benefit from the astronomical growth of data around AI. Telstra for instance is building a specialist inter-capital network with a A$1.5bn capital budget to fund this project. However, our preferred exposure is through the more specialised and capital-light Megaport (ASX: MP1). Megaport is a global cloud connection network and the leading Network as a Service provider. It operates the largest data centre connection business in the world, connecting to 850 data centres through a fully automated, on-demand telco network. We think it is uniquely placed to help business move data globally and benefit from the growth of data related to both cloud computing and AI.
Morgans clients receive exclusive insights such as access to the latest stock and sector coverage featured in the Month Ahead. Contact us today to begin your journey with Morgans.