Shares to buy now: Australia’s next stockmarket stars

Buying shares gets trickier when the market is near a record high, but investment managers and analysts have an eye on the future.

A surging sharemarket has left experienced and new investors wondering what to buy next.

As the market trades near record highs, many analysts say its strength should continue this year and next, but warn that buyers will need to be more selective.

And they share some common ideas about where the biggest success stories of the next five years will come from.

Tribeca Alpha Plus Fund portfolio manager Jun Bei Liu said shares remained in a “sweet spot” and were supported by rising commodity prices and income levels, stronger economic growth and ultra-low interest rates.

“With corporate profitability on the rise, dividends are also increasing, and this will provide strong incentive for income seekers to move back into the equity market,” she said.

Ms Liu likes technology companies including Cochlear, NEXTDC and realestate.com.au owner REA Group.

Biotechnology is expected to create more Aussie sharemarket success stories. Photo: istock

Datt Capital founder and chief investment officer Emanuel Datt said Australian biotechnology companies were “some of the best in the world”.

“COVID has led to a boom in the biotechnology sector, with huge strides being made in research and development driven by large funding increases,” he said.

“We expect to see an increasing number of local success stories in the coming years.”

Mr Datt said Telix Pharmaeuticals was a good example of a local biotech doing fantastic work.

Other sectors expected to shine include robotics, artificial intelligence, renewable energy and anything related to the coming boom in electric vehicles, including miners of nickel, copper and cobalt used in lithium-ion batteries.

Portfolio manager Chris Conway from investment newsletter Marcus Today said good investment gains should also come from “boring and old sectors” mining and banks.

“Almost every government in the world has committed to building their way out of the COVID downturn,” he said.

Massive infrastructure projects would require huge amounts of raw materials, Mr Conway said, while banking would benefit from economic recoveries.

Tribeca Investment Partners portfolio manager Jun Bei Liu says shares are in a “sweet spot”.

He sees huge growth potential for Betmakers Technology Group, which provides infrastructure for online gambling companies globally, and online retailer Kogan, which has almost halved in value since October.

“Kogan’s share price has been hammered but we think it’s gone too far the other way,” Mr Conway said.

Several 2020 technology darlings have dropped sharply recently.

Machine learning and AI company Appen has more than halved since December, and Catapult Wealth portfolio manager Timothy Haselum said this was a “short-term hit” caused by COVID disruption.

“On a five-year view it should be able to do great things,” he said.

Mr Haselum said Sydney Airport had a bright future once international travel eventually reopened, and stock exchange provider ASX should benefit from increased corporate activity and sharemarket optimism.

Shaw and Partners senior investment adviser Jed Richards said the “party’s not over” for technology-related sectors.

“The buy now, pay later space is still having excellent growth,” he said.

Zip Money, a rival to BNPL giant Afterpay, is one of his tips.

“The software sector, we think, is doing quite well and we have a ‘buy’ on several different software companies – a lot had slower rollouts during COVID but their growth rates are still there.” Software stocks with a bright future included Altium, ELMO Software and Fineos, Mr Richards said.

He also likes the ACDC exchange traded fund: “that covers the electric vehicle and battery sector – we think that it’s early days in the electric vehicle sector and it’s going to do well”.

Fellow ETF ROBO gives local investors a global slice in AI and robotics companies. “It has diversified exposure to the top companies in the world in that sector,” Mr Richards said.

BetaShares chief economist David Bassanese said continuing low interest rates would continue to support strong share valuations, while Ausbil economist Jim Chronis said he expected strong earnings growth from Australian companies in 2021 and 2022.

Analysts expect mining stocks to shine as economies rebuild after COVID. Picture: Supplied

10 STOCKS TO WATCH

ALTIUM (ASX code ALU)

A $1.9 billion artificial intelligence and machine learning company with global operations.

COCHLEAR (COH)

The biotechnology giant specialises in hearing implants and is valued at $14.8 billion.

IGO (IGO)

Previously known as Independence Group, the $5.3 billion company mines and processes metals that are critical to clean energy.

LYNAS RARE EARTHS (LYC)

Valued at $4.8 billion, Lynas is the only major producer of rare earths – used in tech devices – outside of China.

NEXTDC (NXT)

The data centre operator has facilities across Australia and its sharemarket value is $5.4 billion.

OZ MINERALS (OZL)

Copper is this $8 billion miner’s chief commodity and demand will be driven by increased electrification.

REA GROUP (REA)

The $21 billion owner of realestate.com.au and other property websites has almost doubled its share price in a year.

TELIX PHARMACEUTICALS (TLX)

This $1.1 billion nuclear medicine biotechnology company has a large focus on cancer therapies.

WISETECH GLOBAL (WTC)

WiseTech, valued at $10 billion on the ASX, creates operating systems for global logistics.

ZIP CO (Z1P)

Often overshadowed by fellow buy now, pay later giant Afterpay, Zip is worth $4.9 billion and has been expanding in the US.