A growing number of older Australians are looking to break-up, often after long marriages, with women leading the charge. It’s a hard decision to make as it typically comes with financial difficulties and emotional trauma.
Labor must have thought it was home free to get this tax package through the Parliament after its election win and having control of the Senate with the Greens’ support. But there’s a growing realisation that its impact will be far wider than the government figure of only 80,000 “well-heeled” SMSF members.
Sorting the equity wheat from the chaff
Although the Australian equity market has, on average, returned to fair-value territory, there are still plenty of opportunities in certain sectors, according to Morningstar research analysts.
“About 40 per cent of stocks we cover are trading in that four- or five-star of undervalued territory, which is higher than the average over the past 10 years,” Morningstar Australia’s equity strategist, Lochlan Halloway, told a Morningstar Investment Conference this week.
“We see a fairly wide dispersion of value across our sectors. In terms of where we see the most opportunities, energy and consumer cyclicals really stand out. Some of the big-name oil and gas producers such as Woodside and Santos, particularly, form part of that mix and the opportunity there.
“Where we see less opportunities for investors are utilities and the banks. Not necessarily [that] there are a lot of overvalued stocks there in general, but a lot of them are trading close to fair value,” he said.
Morningstar compiles a list of Best Ideas that are its highest-conviction stock picks based on assessments of valuation and quality. These are stocks that have moats – a measure of a company’s durable competitive advantage – and which are trading at attractive discounts. The Morningstar team also ensures it diversifies the picks across sectors and market capitalisation.
Morningstar Australia equity analyst, industrials, Esther Holloway, said that Brambles – it’s on the Best Ideas list – was one of the most interesting companies she was covering.
“[For] a company that makes such a simple product, which is basically just wooden pallets, you think, well, there’s no opportunity to grow further … But it’s constantly revising. It’s using AI. It’s using digitisation. It’s finding different little pockets of value to improve margins, to grow further, to find new customers,” she said.
As a global company, the cost to transport empty pallets becomes lower as customers increase. Brambles is also innovative in its growth plans, often using a key customer to expand into new geographical areas. It also uses digitisation to track lost pallets and has focussed research on developing pallets that don’t break and therefore need minimal repairs.
“It’s amazing the little pockets of value that they’ve managed to find. They [recently] said that their capex this year would be lower than they had guided to,” Holloway said.
Interestingly, there are no banks on the Best Ideas list and Morningstar Australia senior equity analyst, financials, Nathan Zaia said that most of the banks were close to being overvalued.
Source: Morningstar. Data at May 9, 2025
“They’ve shown how defensive they can be, and I think a lot of it is a bit of exuberance now in some of their share prices. If you look at the fundamentals and the outlook, I don’t think it really matches some of the valuation metrics,” he said.
In terms of the big four, Zaia said ANZ was a little undervalued, Westpac and NAB were slightly overvalued and CBA was overvalued.
“Maybe there’s a case you could tweak some earnings forecasts for the other ones, and you get to what the market’s saying, but then you’ve got CBA, where, even if you go super-bullish on forecasts, you still have to lower your discount rate to what a utility might be,” he said.
Finally, equity strategist Halloway said that investors should keep three things in mind in the current market. Firstly, they should try and avoid big geopolitical bets and stay diversified. Secondly, they should focus on the fundamentals.
“And finally, I think the core principle of time in the market; I think that’s always a good one to come back to. It’s the eighth miracle of the world.”
