Buy BHP, sell Rio Tinto: the top 12 tips from our stock experts

Giving your portfolio a makeover for the new year? Our expert stock pickers recommend buying BHP and Woolies, while ditching Rio Tinto and QBE. See what else they suggest.

AMP chief economist Shane Oliver expects the ASX 200 to end 2025 at around 8800 points.

After the benchmark S&P/ASX 200 surged 7.5 per cent in 2024, many investors are looking to see where the growth will come from in the year ahead.

The major “known unknowns” for investors include the shape and sequencing of incoming US President Donald Trump’s policies after his inauguration on January 20, the magnitude and timing of interest rate cuts by central banks including the US Federal Reserve and the Reserve Bank of Australia, and the extent of China’s fiscal and monetary stimulus, most of which is expected to be announced in March.

“Our overall assessment remains that the trend is still up, including for Australian shares, but expect a more volatile and constrained ride over the year ahead,” said AMP’s head of investment strategy and chief economist Shane Oliver.

Dr Oliver expects global and Australian shares to return a far more constrained 7 per cent in 2025.

“Stretched valuations after two strong years, the ongoing risk of recession, the likelihood of a global trade war and ongoing geopolitical issues will likely make for a volatile ride in 2025, with a 15 per cent correction somewhere along the way highly likely,” he said.

“But with central banks still cutting rates, the RBA expected to start cutting in the first half 2025, and prospects for stronger growth later in the year supporting profits should still see OK investment returns.”

Dr Oliver expects the ASX 200, which closed on Friday at 8250.5 points, to end 2025 at around 8800 points.

For investors looking to fine tune their portfolios, our expert stock pickers this week see plenty of opportunities.

Here are their tips:

Shaw and Partners senior investment adviser Jed Richards

BUY

Woolworths (WOW)

The last decade for the Woolworths Group has been difficult. The Woolworths Group market cap has fallen to only $23bn (previously $38bn in 2020). Although competition from Coles, Aldi and Metcash continue to grow, Woolworths remains the dominant player with around 30 per cent share of the supermarket industry. With the industry forecasting an annual growth rate of 3 per cent in Australia, we are confident that Woolworths will grow revenues and have the management in place to adapt to the changing environment. The dividend yield is currently 3.4 per cent fully franked. Due to the non discretionary spending, Woolworths shares are usually more resilient in a negative share market environment.

BHP (BHP)

BHP market cap is down 27 per cent over the past year. Miners typically have volatile earnings and therefore volatile share prices. I suggest clients buy mining stocks while the share prices are off and BHP is currently suited for this strategy. The shares were trading above $50 in January 2024 and are now under $40. The market is concerned that China’s growth is slowing and therefore will require less of BHP’s commodities. This theory is not yet a reality and although China have high stockpiles at their ports, they continue to buy our Iron ore in record volumes. BHP has more commodity diversification than the other large miners and this adds a level of protection. I expect to see BHP up above $45 this year. As a cyclical stock with a volatile share price, this company is not a “Buy and Hold” and needs to be traded to realise the potential profits.

Woolworths dividend yield is currently 3.4 per cent fully franked.

HOLD

Origin Energy (ORG)

Origin is Australia’s major electricity generator, gas distributor and retailer. The company has grown consistently and achieved a positive return for the last 4 years. In 2024 the company market cap grew 16.7 per cent. Whilst the Australian Energy regulator expects electricity prices to soften in 2025, Origin is well managed and therefore well positioned to maintain market share and profitability. The expected increase in gas prices is to grab the headlines in 2025. We expect Origin share price to remain around $10 while providing a dividend yield of 5 per cent.

Telstra (TLS)

Telstra have the most commonly used mobile and broadband services in Australia. Historically Telstra was considered a growth stock as technology and data usage gripped Australia. The share price subsequently fell back as the company is now priced as value stock with strong cashflows. The consistent revenues along with regular dividend payments, makes Telstra a favourite Australian blue-chip for income-focused investors. As data usage continues to grow, Telstra is well placed to continue delivering good solid results for Australian investors.

SELL

Rio Tinto (RIO)

Rio Tinto is a global miners that historically has concentrated on iron ore production. Rio Tinto have their new African mine which will increase iron ore supply later this year. This is new supply is expected to contribute to the softening of the global iron ore price. I have often witnessed companies that operate in Africa come across trouble. Operational and geopolitical risks seems to be more problematic in Africa. The share price has held up relatively well and I prefer to gain my mining exposure from more diversified miners.

QBE Insurance (QBE)

QBE Insurance is an Australian general insurance and reinsurance company that offers commercial, personal and specialty products and risk management products. They have more than 13,000 staff globally and employment costs continue to rise. Insurance companies typically perform better in high interest rate environments as they have large bond portfolios. This is true for QBE and the share price has risen to $20 recently. We expect interest rates to reduce during 2025 and this may be the end of the economic cycle that favoured QBE. As the company now trades near the consensus price target I suggest locking in some good profits.

The global iron ore price is expected to soften. Photographer: Carla Gottgens/Bloomberg

Equity Trustees head of equities Chris Haynes

BUY

Worley (WOR)

Worley engages in the provision of services to the resources, energy, and industrial sectors. Management recently reconfirmed the outlook for FY2025 at its AGM. Solid growth is expected. Worley has exposure to the growing need for energy, driven by data centres inter alia. Pricing is attractive at 14.7 times FY2025 earnings.

Elders (ELD)

Elders is engaged in providing financial, real estate services to rural, agricultural and automotive businesses. The acquisition of Delta, other bolt-on acquisitions, the backward integration strategy and transformation projects (systems modernisation, supply chain, wool handling) should all lead to Elders reporting strong earnings growth over coming years. Elders is oversold and too cheap (FY26 PE of 10.4x, and dividend yield of 5.8 per cent).

HOLD

Pilbara Minerals (PLS)

The company is a major producer of minerals (spodumene) for lithium batteries. The price of spodumene has fallen significantly in line with an excess of supply over demand. The price of spodumene) looks to have stabilised as supply is gradually withdrawn. This should see the Pilbara Minerals share price stabilise.

Guzman y Gomez (GYG)

GYG engages in delivering clean, fresh, made-to-order, Mexican-inspired food. It operates through Australia and US geographical segments. There is a strong store roll out story for the next few years, however this appears to be captured in the price with the stock trading on forward price to earnings of 185 times for FY2025.

A strong store roll out already appears to be factored into the GYG share price, says Equity Trustees head of equities Chris Haynes.

SELL

Downer EDI (DOW)

Downer EDI engages in the provision of integrated services. The ACCC has initiated civil cartel proceedings against Ventia Australia, Spotless Facility Services (a subsidiary of DOW) in relation to alleged price fixing behaviour on the Estate Maintenance and Operation Services (EMOS) for the Department of Defence. This will distract management for some time and weigh on the stock price. Better value elsewhere.

Pinnacle Investment Management (PNI)

PNI is an aggregator, owner, distributor of funds management businesses. 2024 was a stellar year with the stock price up 129 per cent. PNI now trades on a forward price to earnings of 36 times for FY2025. This is excessive for the business that it is. Everything has to go right from here to justify this valuation, which seems unlikely. Time to take profits.

Originally published as Buy BHP, sell Rio Tinto: the top 12 tips from our stock experts