Australian Market Insights: ASX Stocks to Consider
The Australian Securities Exchange, more commonly abbreviated ASX, is the beating heart of financial markets rooted in Australian territory.
Headquartered in Sydney, Australia, the ASX is the country’s largest exchange by market capitalisation, with a cap breaching two trillion territory as of June 2022.
Being Australia’s primary exchange, there are over 2,800 local companies listed in this exchange as of late.
Given those figures, there’s no question that there’s ample opportunity for people to grow their wealth by investing in some sectors and businesses found in this exchange.
That said, the opposite can also be true. Making investments hastily and without proper research can backfire and cause your capital to lose value quickly. This applies to all markets, not just the ASX in general.
If you want to make the most out of your money, you should put that capital in the right investment vehicles.
This article will give you some ASX stocks that have a superior chance of growing your wealth than the average listed stock.
Let’s take a look at them!
Considered to be one of Australia’s most prominent financial giants, the Commonwealth Bank of Australia, or CommBank, is a company to look out for.
This company boasts a strong local market position while simultaneously holding assets overseas, with some notable regions including Asia, North America and the United Kingdom.
This company’s 5-year share has a respectable growth rate of 58.26%. In 2019, CBA had a share price of about AUD 70. It bottomed out during the middle of the pandemic at about $60 per share but has since rallied and grown to its price of AUD 112 as of January 2024.
CBA investors enjoy a respectable dividend rate of 3.92% as of 2023, among the highest in their sector. Investors can also enjoy additional franking benefits when paying fully franked dividends when investing in this stock.
Besides CBA, investing in any of the “big 4” financial institutions in Australia is typically a safe bet. This includes Westpac, ANZ, and NAB, with the latter two enjoying increasing price value per five years similar to CBA.
With a landmass so large that it covers six different time zones, Australia’s underground mineral resources are quite abundant. In fact, Australia comes number one in ore production and extraction, with its yearly mining output making up about 37.5% of the total world production.
As an extension, the mining industry in this country is also incredibly lucrative. And among many mining behemoths, Rio Tinto Company Limited (RIO) is one publicly-listed mining company that’s shown some promising growth over the last few years
Many experts believe that the RIO stock is undervalued, and these assumptions do hold some truth to them.
For one, RIO’s debt-to-equity ratio is 0.2, considerably lower than the recommended upper threshold of 2. Secondly, RIO also boasts an EBITDA-to-interest ratio of 23.1, which is more than respectable.
The share value of RIO stock is also worth more than a passing eye. The value of this iron ore mining company five years ago was valued at $52 per share. As of January 2024, It has since grown to $68.75 per share—a 31% increase.
The market capitalisation of this stock also hovers above $100 billion. This means that it’s quite established in the ASX market. If you want to invest in ASX RIO, then now is the right time as it’s currently undervalued.
Predominantly known throughout Australia for its plentiful retail chains, Woolworths Supermarkets, the Woolworths group (WOW) is a good company to put some money into.
While the pandemic has brought about an emerging reliance on digital shopping for the average consumer, Woolworths still manages to grow because of its resiliency and ability to adapt to changing consumer behaviour.
Its share price is a testament to this fact. Back in 2019, WOW shares were about AUD 25 per piece. But as of January 2024, its price levels fall at a respectable AUD 36 per share, a 40% 5-year growth.
Its P/E ratio is 27.4, a bit higher than the industry standard. However, the company’s competitiveness, eagerness to expand to new territories around Australia, as well as its diverse category mix all show solid future growth plans.
Couple that with it being a recognised household brand with a matured digital platform where people can do their grocery shopping online, there’s ample reason to believe that Woolworths will only be on the up and up for the next few years.
There’s no question that telecommunication industries are among the most essential in today’s day and age. Even with the proliferation of digital communication channels, mobile coverage and communication is a mainstay piece of technology for decades to come.
Three of Australia’s most popular telecommunication companies—Telstra, Vodaphone, and Optus—are all listed in the ASX. However, the only one that’s enjoying continuous year-on-year growth is Telstra Group Ltd, or TLS.
Over the past 5 years, Telstra has enjoyed 25% stock price growth, from shares valued at AUD 3 in 2019 to AUD 4 as of January 2024. Furthermore, Telstra also has a high dividend yield of 4.25%, providing shareholders with generous payments when the company turns in profits.
Telstra’s P/E ratio is also respectable at AUD 23.97. With a market cap of $46 billion, Telstra is the king in this high barrier-to-entry industry.
In contrast, Optus has a declining stock value and a market cap of $39 billion, whereas Vodaphone is at a meagre $18 billion market cap with a similar declining stock value.
CSL Limited is one of the biggest Melbourne-run biopharmaceutical and healthcare companies, and its reach goes beyond Australian territory.
Under CSL Limited is Seqirus, an influenza vaccine business, as well as CSL Behring, a subsidiary company that’s responsible for making tools for plasma therapies.
CSL’s graph pattern is distinct from the former four in that its shares peaked during the crash of early 2020. And now, it has yet to return to those levels.
This is largely because of its underlying industry in healthcare—which was one of the most essential industries during the pandemic era.
Nonetheless, it’s still a reputable company to invest in, enjoying a 45% growth from AUD 200 per share in 2019 to AUD 290 per share as of January 2024.
Biotech and healthcare are mainstay industries that enjoy stable and consistent growth. Since Australians are an ageing population, there’s bound to be increased demand in the healthcare industries as more elderly individuals need to get their health needs checked.
The world’s digitisation is inevitable. Whether you’re running or a part of a small business or a large multinational company, you’re likely relying on data centres to store and sort valuable pieces of company data.
For many small companies, managing and owning multiple data servers is a costly endeavour, to say the least. But data centre providers are a great solution to this.
NEXTDC Limited, or NXT in the ASX, runs multiple colocation data centre facilities across Australia and the Asia Pacific in which businesses can “rent” out storage space.
They’re also a publicly listed company that has shown tremendous growth potential. To provide contrast, NXT stocks were going for AUD 7 back in 2019. Last year, they were going for a little less than AUD 10 per share.
As of January 2024, they’re going for AUD 13.77 per share—a whopping 102.80% increase from its share price 5 years ago.
The market cap of NXT is around $7 billion, and the industry is a bit riskier to enter than traditional industries.
That said, if you’re willing to go aggressive and risky for a chance of greater profits later on, NXT is a good stock given the fact that it’s the foundation for many up-and-coming digital companies today.