Rudi’s View: Rate Cut Winners & AI Beneficiaries

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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor

The RBA did cut this week, as widely anticipated, including by the local bond market, and more cuts, be they two or three, are widely forecast for the remainder of 2025.

Macquarie has dived into similar periods in history, compared today’s share prices with underlying valuations, and come up with the following list of ASX-listed stocks most likely to benefit from RBA rate cut tailwinds in the months ahead:

-Coles Group ((COL))
-Fisher & Paykel Healthcare ((FPH))
-Goodman Group ((GMG))
-Harvey Norman ((HVN))
-JB Hi-Fi ((JBH))
-Lovisa Holdings ((LOV))
-Megaport ((MP1))
-Mirvac Group ((MGR))
-News Corp ((NWS))
-NextDC ((NXT))
-ResMed ((RMD))
-Seek ((SEK))
-SGH Ltd ((SGH))
-Woolworths Group ((WOW))
-Xero ((XRO))

One sector to consider includes A-REITs and here Ord Minnett has communicated its sector favourites as follows:

-Waypoint REIT ((WPR))
-Dexus Convenience Retail REIT ((DXC))
-Vicinity Centres ((VCX))

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Portfolio managers at T Rowe Price have upgraded their allocation to the ASX to Neutral from Underweight. American equities are the ones to be cautious about, in the fund manager’s opinion.

US equities remain Underweight, European markets are Overweight. Japanese equities are Underweight. Emerging Markets are with Europe on Overweight.

Australian stocks have been upgraded due to a more resilient domestic economic outlook coupled with potential China stimulus with both potentially improving the rather “unexciting” earnings outlook, argues the funds manager. Policy easing and fiscal support could also keep valuation bid.

Within this context, we note market strategists at Morgan Stanley have redone their numbers and assumptions and made no change to their 12 month target of 8500 for the ASX200. On Thursday the index is trading around 8338, less than -2% lower.

Morgan Stanley’s Model Portfolio for Australia has only three sectors on Overweight:

-Real estate
-Telcos and Infrastructure
-Consumer Non-staples

Banks and diversified financials are the two most underweighted sectors.

Skimming through various strategy updates, it is clear most strategists believe equities have recovered too swiftly, while risks have not evaporated.

Morgan Stanley probably summarised general sentiment best earlier in the week:

“The stunning reversal in risk-asset pricing leaves valuations even richer than when the year started.

“While we consider the repositioning an overreach, it may be more concerning that other key asset classes are not confirming the euphoria.”

UBS strategists believe the next three months could prove a challenge for equities generally. Wilsons’ Model Portfolio is Neutral Aussie shares and Underweight international equities.

Wilsons motivation: “Australian earnings growth should improve in FY26 as policy is eased. Valuations are still not compelling. Small/mid caps preferred.”

Wilsons also repeated its assessment that Australian Banks seem grossly overvalued on underlying fundamentals.

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Four ASX-listed companies feature on Goldman Sachs’ Conviction Buy list for the APAC region:

-Iluka Resources ((ILU))
-NextDC ((NXT))
-ResMed ((RMD))
-Worley ((WOR))

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The latest update on AI and global software companies by RBC Capital has identified both likely winners and losers from this ‘new’ technological breakthrough.

The research nominated four categories of GenAI beneficiaries:
-large incumbent vendors that can leverage their data and distribution to take advantage of the technology;
-vertical software leaders that have not just significant data, but also the ability to verticalise GenAI solutions to accelerate the winner-take-all dynamics of vertical software;
-mid-market challengers that can use GenAI as an innovation engine to narrow the gap with market leaders;
-companies that enable GenAI for others.

As far as potential losers, RBC Capital has identified four categories of companies at risk:
-legacy, on-premise software companies that cannot truly embrace GenAI, which are primarily cloud-only services;
-companies that don’t fully embrace GenAI and re-architect around it;
-analytics companies claiming to be AI;
-companies whose base functionality could be replaced by generative AI.

RBC Capital’s list of most favourited companies to invest in for AI-winners exposure contains of 16 names, of which three are listed on the ASX:

-Pro Medicus ((PME))
-WiseTech Global ((WTC))
-Xero ((XRO))

Best Buys & Conviction Calls

Crestone’s Best Sector Ideas:

-Ampol ((ALD))
-APA Group ((APA))
-Aristocrat Leisure ((ALL))
-Beach Energy ((BPT))
-Brambles ((BXB))
-Cochlear ((COH))
-CSL ((CSL))
-Goodman Group ((GMG))
-IGO Ltd ((IGO))
-James Hardie Industries ((JHX))
-Lottery Corp ((TLC))
-Macquarie Group ((MQG))
-Metcash ((MTS))
-Monadelphous Group ((MND))
-REA Group ((REA))
-ResMed ((RMD))
-Suncorp Group ((SUN))
-Xero ((XRO))

Crestone’s selection for sustainable income:

-Amcor ((AMC))
-Ampol ((ALD))
-ANZ Bank ((ANZ))
-APA Group ((APA))
-Atlas Arteria ((ALX))
-Beach Energy ((BPT))
-BHP Group ((BHP))
-Car Group ((CAR))
-Coles Group ((COL))
-Dalrymple Bay Infrastructure ((DBI))
-Iress ((IRE))
-Lottery Corp ((TLC))
-Macquarie Group ((MQG))
-Metcash ((MTS))
-Mirvac Group ((MGR))
-Pro Medicus ((PME))
-QBE Insurance ((QBE))
-RAM Essential Services ((REP))
-ResMed ((RMD))
-Suncorp Group ((SUN))
-Tabcorp Holdings ((TAH))
-Telstra Group ((TLS))

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Jarden’s monthly update on Emerging Companies (i.e. smaller caps) showcases 16 stock picks in Australia; one less than in the month prior. The following seven have been highlighted as representing the potential highest return, ranked in order of total shareholder return:

-GQG Partners ((GQG))
-Qualitas ((QAL))
-Universal Store Holdings ((UNI))
-Dicker Data ((DDR))
-SiteMinder ((SDR))
-EVT Ltd ((EVT))
-Temple & Webster ((TPW))

Apart from their order of appearance, nothing has changed to that selection. The other ten:

-Arena REIT ((ARF))
-Genesis Energy ((GNE))
-Harvey Norman ((HVN))
-Integral Diagnostics ((IDX))
-Jumbo Interactive ((JIN))
-Karoon Energy ((KAR))
-Michael Hill ((MHJ))
-Pepper Money ((PPM))
-Vault Minerals ((VAU))

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Morgan Stanley’s Macro+ Focus List in Australia is currently made up of:

-Aristocrat Leisure ((ALL))
-ANZ Bank ((ANZ))
-Car Group ((CAR))
-Goodman Group ((GMG))
-GPT Group ((GPT))
-James Hardie Industries ((JHX))
-Orica ((ORI))
-Santos ((STO))
-Suncorp Group ((SUN))
-Xero ((XRO))

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Morgan Stanley’s Australia Macro+ Model Portfolio is currently made up of the following:

-ANZ Bank ((ANZ))
-CommBank ((CBA))
-National Australia Bank ((NAB))
-Westpac ((WBC))

-Macquarie Group ((MQG))

-Suncorp Group ((SUN))

-Goodman Group ((GMG))
-GPT Group ((GPT))
-Scentre Group ((SCG))
-Stockland ((STG))

-Aristocrat Leisure ((ALL))
-Eagers Automotive ((APE))
-CAR Group ((CAR))
-Domino’s Pizza ((DMP))
-The Lottery Corp ((TLC))
-Wesfarmers ((WES))
-WiseTech Global ((WTC))
-Xero ((XRO))

-James Hardie ((JHX))

-Amcor ((AMC))
-Cleanaway Waste Management ((CWY))
-Orica ((ORI))

-Coles Group ((COL))

-CSL ((CSL))
-ResMed ((RMD))

-AGL Energy ((AGL))
-Telstra ((TLS))
-Transurban ((TCL))

-BHP Group ((BHP))
-Newmont Corp ((NEM))
-Rio Tinto ((RIO))
-South32 ((S32))

-Santos ((STO))
-Woodside Energy ((WDS))

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Morningstar’s list of Best Buy Ideas regarding companies listed on the ASX can at times remain unchanged for a prolonged period of time.The current selection has been in place for quite a while now. Value investing has its challenges too.

-APA Group ((APA))
-ASX Ltd ((ASX))
-Aurizon Holdings ((AZJ))
-Bapcor ((BAP))
-Brambles ((BXB))
-Dexus ((DXS))
-Domino’s Pizza Enterprises ((DMP))
-Endeavour Group ((EDV))
-Fineos Corp ((FCL))
-IDP Education ((IEL))
-IGO Ltd ((IGO))
-Ramsay Health Care ((RHC))
-SiteMinder ((SDR))
-TPG Telecom ((TPG))
-Woodside Energy ((WDS))

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Shaw and Partners’ Large Caps Model Portfolio:

-ANZ Bank ((ANZ))
-Aristocrat Leisure ((ALL))
-BlueScope Steel ((BSL))
-Brambles ((BXB))
-Dexus ((DXS))
-Macquarie Group ((MQG))
-Newmont Corp ((NEM))
-South32 ((S32))

Shaw and Partners’ emerging companies Top Picks:

-AML3D ((AL3))
-Australian Vanadium ((AVL))
-Bannerman Energy ((BMN))
-Chrysos ((C79))
-Humm Group ((HUM))
-Metro Mining ((MMI))
-Santana Minerals ((SMI))
-Southern Cross Electrical ((SXE))

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UBS‘s portfolio sector recommendations currently have only two segments on Overweight’; Insurance and TMT (Technology, Media & Telecommunication).

All of Banks, Energy and Small Caps are Underweight’. Everything else sits on Neutral’ (i.e. their weighting is recommended to mirror the local index) with Healthcare being upgraded in April and Industrials downgraded.

UBS’s lists of Most Preferred and Least Preferred ASX-listed exposures currently consist of the following:

Most Preferred

Resources
-BHP Group ((BHP))
-BlueScope Steel ((BSL))
-Northern Star ((NST))
-Orica ((ORI))
-Origin Energy ((ORG))

Financials & REITs
-Dexus ((DXS))
-Lifestyle Communities ((LIC))
-Medibank Private ((MPL))
-QBE Insurance Group ((QBE))
-Steadfast Group ((SDF))

Industrials
-Brambles ((BXB))
-Coles Group ((COL))
-Collins Foods ((CKF))
-Light & Wonder ((LNW))
-REA Group ((REA))
-SGH Ltd ((SGH))
-TechnologyOne ((TNE))
-Telstra ((TLS))
-Telix Pharmaceuticals ((TLX))
-Xero ((XRO))
-Life360 ((360))

Least Preferred

-Aurizon Holdings ((AZJ))
-ASX Ltd ((ASX))
-Bank of Queensland ((BOQ))
-CommBank ((CBA))
-IDP Education ((IEL))
-Lovisa Holdings ((LOV))
-Reece ((REH))

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Wilsons’ Focus Portfolio currently contains the following:

-ANZ Bank ((ANZ))
-Aristocrat Leisure ((ALL))
-BHP Group ((BHP))
-Brambles ((BXB))
-Car Group ((CAR))
-Collins Foods ((CKF))
-CSL ((CSL))
-Evolution Mining ((EVN))
-Goodman Group ((GMG))
-HealthCo Healthcare & Wellness REIT ((HCW))
-Hub24 ((HUB))
-James Hardie ((JHX))
-Mac Copper ((MAC))
-Macquarie Group ((MQG))
-ResMed ((RMD))
-Sandfire Resources ((SFR))
-Santos ((STO))
-South32 ((S32))
-TechnologyOne ((TNE))
-Telix Pharmaceuticals ((TLX))
-The Lottery Corp ((TLC))
-Westpac Bank ((WBC))
-WiseTech Global ((WTC))
-Woolworths Group ((WOW))
-Worley ((WOR))
-Xero ((XRO))

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Wilsons’ analysts selected the following five as Key Investment Opportunities:

-ResMed ((RMD))
-Goodman Group ((GMG))
-Xero ((XRO))
-Brambles ((BXB))
-WiseTech Global ((WTC))

Wilsons’ High conviction investment ideas across the industrials (ex resources) part of the market; typically businesses with attractive structural growth prospects:

-Pinnacle Investment Management ((PNI))
-Nanosonics ((NAN))
-Ridley Corp ((RIC))
-ARB Corp ((ARB))
-SiteMinder ((SDR))

Wilsons’ number one speculative idea:

-Clarity Pharmaceuticals ((CU6))

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Paying subscribers have 24/7 access to my curated lists, including All-Weather Performers at: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

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P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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