Share tips: Mining and energy stocks favoured by our experts

The latest ‘buy’ recommendations are dominated by one of the weakest performing ASX sectors this year. Here’s why.

ASX-listed resources stocks have struggled this year. Picture: Ian Waldie

Mining and energy stocks have been poor performers over the past year as the overall share market surged to record highs.

Impacted by economic worries in China, Australia’s biggest customer, our resources giants have struggled – with the S&P/ASX 200 Resources index sinking almost 18 per cent since January.

Compare this with the overall Aussie share market rise of 8.2 per cent this calendar year, and it’s clear that the current highs for the ASX 200 index would be much higher if our materials and energy companies came to the party.

Markets move in cycles and analysts are now looking more closely at our downtrodden giants.

Resources-related companies take the top four spots on this week’s share tips lists as our investment specialists seek value at a time many other companies’ share prices are going through the roof.

Equity Trustees head of equities Chris Haynes:

BUY

S32 (S32)

The metal and mining company – with exposure to alumina, aluminium and copper – used to be part of BHP. Recent retracement of the share price is an opportunity to get exposure to minerals key to the electrification dynamic. There is a reasonable margin of safety at current prices with little to no debt.

Orica (ORI)

It is the leading global manufacturer and distributor of commercial explosives and blasting systems to the mining and infrastructure markets. Financial metrics show it performing well.

Mining is a backbone of Australia’s wealth but has been bent a bit lately. Picture: iStock

HOLD

Origin Energy (ORG)

Origin is an energy retailer, power generator and producer of liquid petroleum gas. The stock price has performed well over the last couple of years as electricity prices recovered and inputs improved. It looks fairly valued at current prices.

Insurance Australia Group (IAG)

The general insurer has performed well as end product pricing outpaced claims costs over the last two years. From here it will be harder to raise prices, and the market appears to now have fully factored in this better environment.

SELL

Judo Capital Holdings (JDO)

Judo provides financial services to small and medium enterprises. It services

include business loans, home loans, term deposits, lines of credit and residential mortgages. Stock price is up 70 per cent year-to-date. A price-earnings multiple of 24 times for FY2025 is excessive for a business that has little comparative advantage.

ASX (ASX)

Expenses growing faster than revenues is not great for any company. This has been the case for quite a while now and it seems like things will not improve for some time. In addition, there is a large capital expenditure program underway. The stock price does not reflect reality. A price-earnings multiple of 25 times for FY2025 suggests it is still a sell.

Shaw and Partners senior investment adviser Jed Richards:

BUY

Beach Petroleum (BPT)

Oil prices have fallen 40 per cent over the last two years and the share price of Beach has slipped with it. While oil and gas is out of favour, it is the solution to the increased power needs the world faces. A lack of recent oilfield exploration will result in higher prices and bigger profits. This is a chance to buy into a growth sector cheaply.

Woodside (WDS)

Woodside is a global provider of oil and gas and Australia’s largest player. Its share price moves with the oil price and needs to be traded by investors in order to make profits. With the current low share price, now is a good time to buy as the company will reflect a recovering oil price.

Shaw and Partners senior investment adviser Jed Richards says CBA is overvalued.

HOLD

Cochlear (COH)

Cochlear has had a dominant position in hearing aids globally, and major competitors have not been able to match its performance and innovation. Recently more competition has arrived, and AI is being introduced to the sector quickly. Cochlear is well-managed and well-positioned to continue winning the innovation battle.

REA Group (REA)

Realestate.com.au is clearly the leader in the property advertising sector in Australia. The recent August property listings were once again stronger than the market expected. This company is here to stay, and no other website or company is close to competing with them in this consistently-growing sector. Although the share price is relatively high, hold for long term growth.

SELL

Commonwealth Bank (CBA)

CBA has attracted international investment lately as the Australian banking sector is seen as one of the safest, well-capitalised banking sectors in the world. CBA is the best-performing Bank in Australia but this has resulted in excess demand pushing the share price well above its true value. With a lofty PE of ratio above 22, it is time to take some profits.

Harvey Norman (HVN)

Harvey Norman’s share price has been strong as Australian retail sales were expected to drop back, but the retailer defied market expectations and performed well. The consumer has continued spending when most thought discretionary spending would dry up amid higher interest rates. The longer interest rates hold up, the more likely the discretionary household spending is likely to slow. I expect to see data in the coming year suggesting the consumer is more cautious with their spending, and this should be reflected in HVN sales figures.

Originally published as Share tips: Mining and energy stocks favoured by our experts