In Brief: Equity Portfolio, Aristocrat & US Copper

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Weekly Broker Wrap: How to position for a volatile 2025 with all the tariff challenges, and much more copper for big miners in the pipeline under Trump’s America.

-How to structure your portfolio for uncertainty
-Gaming giant receives an upgrade
-Resolution Copper, part of America’s re-shoring

By Danielle Ecuyer

Quote of the week comes from Adam Parker from Trivariate Research,

“The US markets have been performing worse than every major market so far this year. After the fact, many investors are now saying this is the beginning of a new long-term trend. We disagree, and our view is that this dynamic of US underperformance likely lasts less than one year.”

Diversification, the theme for 2025

The Trump tariff tumult and associated market volatility has left many of us investors asking where to now?

Wilsons answered the question this week, proposing a “barbell” portfolio approach for investors.

Australia faces limited US tariff imposts, alongside economically stimulative spending promises from both major parties in the lead-up to the 3 May federal election and the likelihood of multiple interest rate cuts in 2025.

The share market will likely remain subject to the “ebbs and flows” of the global backdrop and US-China trade disputes specifically.

For investors seeking equity exposure at this stage, the broker proposes a mix of stocks with defensive qualities as well as high-growth companies that have sold off heavily. The Wilsons Focus Portfolio maintains a quality/growth bias but is well diversified across sectors and styles.

This month, exposure to consumer staples has increased to neutral from zero weighting, introducing Woolworths Group ((WOW)). Retail and consumer goods have been reduced to zero, an increased underweight, with the removal of Breville Group ((BRG)).

Exposure to Evolution Mining ((EVN)) has been increased to boost the gold sector weighting to Overweight.

The energy sector weighting has been reduced to neutral with Santos ((STO)) trimmed, and consumer services reduced with Webjet Travel ((WEB)) removed.

Oversold opportunities across companies that have experienced substantial valuation de-ratings and may encounter cyclical headwinds include WiseTech Global ((WTC)), Xero ((XRO)), and Goodman Group ((GMG)).

Companies Wilsons likes for their defensive characteristics include Brambles ((BXB)), CSL ((CSL)), ResMed ((RMD)), The Lottery Corp ((TLC)), and Woolworths.

As always for more in depth coverage from FNArena daily monitored brokers, check out Stock Analysis at 

https://fnarena.com/index.php/analysis-data/consensus-forecasts/stock-analysis/

Is Aristocrat’s sell off an opportunity?

A fall in Aristocrat Leisure’s ((ALL)) share price of around -21% after reaching a 12-month high of $78.51 on 19 February has opened a more positive risk/reward entry point for investors, according to Jarden.

The company is viewed as a high-quality defensive growth stock with strong recurring revenues and robust cash flow growth, reinvested into R&D, share buybacks, and strategic acquisitions or “modest M&A (tuck-ins),” the analyst explains.

A fair value of $68 is estimated, with scope to deliver ongoing high to low double-digit earnings growth. This prompted an upgrade to Overweight (Buy-equivalent) from Neutral post-AGM.

Management, at the time of the annual meeting, hosed down enthusiasm with more conservative commentary around the outlook, which combined with heightened uncertainty about the US economy and the new administration.

Jarden stresses the gaming industry has demonstrated durable earnings resilience through economic cycles. Aristocrat has a proven track record of market share gains, partly due to its major investment in Design and Development, omnichannel distribution, and a slant toward advancing fixed fee per day models and longer-dated customer retention, Jarden explains.

Although there is a valuation preference for Light & Wonder ((LNW)), both Aristocrat and The Lottery Corp are considered offering strong “defensive” qualities at reasonable price levels.

Jarden’s target price is set at $68, compared to the FNArena daily monitored brokers’ consensus target of $77.071, with six Buy-equivalent ratings and one Hold rating.

Mining majors in the slip stream of Trump’s resource push

Both Rio Tinto ((RIO)) and BHP Group ((BHP)) are betting big and investing heavily in the 21st century’s metal,copper.

This week, as part of President Trump’s re-shoring and industrialisation agenda, Morgan Stanley noted Reuters reporting the Resolution Copper project, owned 55% by Rio and 45% by BHP, has been granted Fast-41 status by the US Government. A land swap approval critical for the project’s progression is expected soon.

This forms part of a renewed push to accelerate domestic production of critical minerals like copper.

Both companies have spent over -US$2bn on the project to date. Wood Mackenzie estimates Resolution could become the largest copper mine in North America.

The consultants suggest it will be developed using an underground block-caving method suited for ore bodies too deep or costly for open-pit mining. The resource is estimated to produce around 500kt per annum of copper, plus gold and by-products, potentially supplying circa 25% of annual US copper demand.

Resolution is estimated to contain 1.9bn tonnes of ore with a copper grade of 1.5%. Capex requirements were forecast at over -US$10bn a decade ago, and Morgan Stanley anticipates a substantial increase due to inflationary cost pressures.

Fast-41 is a legislative process designed to accelerate environmental approvals, aiming to reduce approval times by around 18 months compared to non-participating projects.

Since the process began in 2013, Resolution has encountered several legal challenges. A case brought by local Indigenous groups claiming the mine would “violate their religious freedoms” is with the US Supreme Court, with a ruling expected by the end of 2025.

On 17 April, the US Forest Service stated it would republish an environmental report required for the land swap.

Morgan Stanley does not currently attribute any value from Resolution to Rio Tinto’s portfolio. However, if this project progresses, it could meaningfully lift attributable copper production from the current estimate of 750kt for 2025.

The stock is rated Overweight (Buy-equivalent) with a target price of $115.50.

The consensus target price from FNArena daily monitored brokers sits at $121.75, with two Buy-equivalent ratings and four Hold-equivalent ratings.

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