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2024 has been a cracking year for ASX investors. What's in store for 2025?

Marcus Today's Henry Jennings and Atlas Funds Management's Hugh Dive reflect on the year that was, and cast an eye towards 2025.
Buy Hold Sell

Livewire Markets

Every year, there are a couple of critical investment decisions that investors need to get right in order to set themselves up for a good year.

These big decisions often trump stock picking or catching the latest fad at the right time. Rather, they are fundamental to giving yourself a fighting chance of outperforming.

This year, if you did nothing else, buying the banks and selling the miners proved fruitful. A close second would have been staying long and strong in tech names, despite some of the nosebleed valuations we’ve all witnessed.

So, what are the key themes investors need to have on their radar as we head into 2025? To answer that question, Livewire’s Hans Lee sat down with Henry Jennings from Marcus Today and Hugh Dive from Atlas Funds Management.

In this episode, they reflect on what worked and what didn’t in 2024. They also highlight the key themes investors should have on their radars in 2025.

For good measure, they each pick one stock that they would bet the house on – if they had to. - and one stock to avoid. 

Note: This episode was recorded on Wednesday 4 December 2024. You can watch the video, listen to the podcast or read an edited transcript below.

Edited Transcript

Hans Lee: Hello and welcome to Livewire's Buy Hold Sell. I'm Hans Lee and today we'll be reviewing the year that was 2024. What were the big themes, the hot stocks? And we'll also be exploring what investors need to be doing to be successful in 2025, as well as a couple of stock picks to help you on your way. To do that, we are joined by Henry Jennings of Markets Today, and Hugh Dive from Atlas Funds Management. Happy holidays to you both. Thanks for joining us for the last one.

The one word to describe 2024

Hans Lee: Let's dive right in, shall we? Henry, in one word, how would you describe 2024?

Henry Jennings: Concentrated. I think that sums it up for me. I think when you look at NVIDIA and the FAANGs and the behemoths there. And then you look at our market and you see the effect the banks have had on our market, it's been a very concentrated market. It is just starting to broaden out somewhat. We've seen that in the last few months, I guess. So, that is a good thing because a lot of funds were in those particular stocks, which can be problematic.

Hans Lee: I read a chart title not too long ago. It's like the world's equity market is essentially leveraged to NVIDIA, so if it messes up, we're all in trouble.

Hugh, what word would you use to describe 2024?

Hugh Dive: Surprisingly - buoyant. I remember we were sitting here this time last year, things were looking a bit grim, where the banks were facing perhaps a lot of loan losses, which is why they've done very well. There was a lot of bad economic news out. A lot to be afraid of and the markets has sort of climbed this wall of worry and we're up close to 22%. We would never have expected that to be this, but I recognise Henry's point, it's quite concentrated. If you didn't own the right stocks, you've had a tough year.

What is one company you wish you backed and what is one you wish you didn't?

Hans Lee: Let's shift gears and we'll talk about investments. Hugh, I'll stay with you. I'm curious, could you tell us about a company you wish you backed during the year and what is one that you wish you didn't?

Hugh Dive: I mean, the key one that I wish I'd backed was ResMed (ASX: RMD). Sitting here last year, the stock price has gone from $36 to about $22. Due to the impact not of earnings or down sales, but just the fear of those GLP-1 drugs and Wegovy. There's a lot of big clouds on the horizon. We didn't really know what that was going to do to sales of sleep apnea devices. 

Philips has been out of the sleep apnea market for a while, but were going to come in the new year and then the new Mounjaro drug from Eli Lilly was supposed to make things any worse, and there's just a lot of fears and so, sitting here, it was probably the stock, a very high-quality stock that was on sale. 

But for us, it was all very binary outcomes, which I didn't really know the answers so I wish we'd owned ResMed and pulled the trigger. It was a very popular stock for a lot of fund managers but just because we couldn't really quantify those risks, we did not buy the stock.
Hans Lee: Yeah, absolutely. So, that's ResMed and what's one that you wish you backed or you wish you didn't back?

Hugh Dive: Every fund manager has several of these in their portfolio and any fund manager that tells you they don't-

Hans Lee: They're lying.

Hugh Dive: ...or they're Bernie Madoff. But the one where I wish we didn't have in the portfolio was Mineral Resources (ASX: MIN). So, it's just had a really tough year. Falling lithium prices, negative sentiment generally to the miners, that was there across the sector. Building two big mines, which has created a bit of a debt issue, and the big wild card there, the historic activities, and the governance issues from the very charismatic and well-regarded CEO, Chris Ellison. 

That's just been a drip feed of information, which is while it's been tough in that lithium sector, it's a quality stock, but that drip feed of information has just seen massive sort of de-ratings and just a bit of outlook. 

Sitting at the start of the year, I wish that was not in the portfolio.

Hans Lee: You and probably a few others. Henry, what about you? What are you happy that you backed and what would you have preferred to forego with the benefit of hindsight?

Henry Jennings: Well, I'm happy that I backed Zip (ASX: ZIP). It was my pick for 2024 last Christmas for another media outlet, which I had to do so I'm pretty happy with that. We pushed it pretty hard in the newsletter as well. 

I guess the downside of that is that I saw it going from 40 cents to a dollar. It's now $3.50. I did suggest taking some profits in all honesty at around a dollar because we had done pretty well out of it, but not taking all the profits. Having said that, it has done extraordinarily well this year due to a combination of factors.

And I guess it was interesting. They did a capital raise which actually raised more money in the capital raise than it was capitalised at last Christmas. Go figure, it's a $3.5-4 billion company now. We even saw the founder, Larry Diamond, pull the trigger and resign and move back into doing philanthropic stuff, and yet, the stock hardly rippled. He sold shares as well and it hardly moved. I guess it's testament to the business model that we're seeing in the US. The strength of the US market, the US consumer as well as the lack of bad debts, which Hugh was talking about in terms of banks. It's similar in buy now, pay later as well.

And the ones that I shouldn't have backed have been primarily resource-based. Resources has been kind of tricky this year, uranium, to say the least. It's been very cyclical and you've got to be quite quick on your feet. I think I've been probably too wedded to some of those ideas. The likes of Paladin (ASX: PDN), Boss Energy (ASX: BOE), Deep Yellow (ASX: DYL), even the big one, BHP (ASX: BHP), has been problematic this year, I have to say.

What do investors need to get right in 2025?

Hans Lee: Henry, I want to stay with you to ask you a more general question. What do you think investors need to get right in 2025 in order to be successful?

Henry Jennings: It's going to be stock-picking, I think, more so than in 2024. What is going to be interesting, I think from a global perspective (or maybe it's just a US perspective,) is how the big guys monetise AI. Because we've seen a huge spend in terms of gearing up with chips and the whole AI from the Big Four, from NVIDIA, which has done really well. But we're yet to see really how they monetise that and now they've completed the land and expand. It's very hard for anybody else to get in there. So, it's now what apps come from it and what the platforms do to drive revenues.

So, I think that's going to be interesting, but I think 2025 is going to be back again to stock-picking. I don't think we're going to get a repeat of 2024 with the banks. I don't think we're going to get such a repeat of what I call the Plastics. 

Some people may remember Mean Girls back from 2004, and the Plastics were the really popular school kids. They were the popular ones in school, could do no wrong, but underneath, there was a bit of a niggle. They were a bit cruel, a bit nasty, and we've had our own plastics. We've had very, very popular stocks that have gone absolutely nuts this year to extreme valuations. And you've just got to be careful with those that we don't see a little bit of a slip and they will get punished, as the Plastics did.

Hans Lee: Tina Fey, creator of Mean Girls, if you're watching this, I'm a big fan. Hugh, portfolio construction, theme management, usually good key to a healthy return. What do you think investors need to be getting right next year?

Hugh Dive: It's the same as every year. As an institutional fund manager, getting your banks versus resources call right. They're both about 25% of the index and if you've got that tilt wrong, you can often have a good stock-picking year but that negates it. If you'd followed what a lot of the sell side were arguing in February and March, which was to sell all the banks. If you were a fund manager, you're probably looking for a new job right now or you've been fired. 

And then, following what Henry said, the banks have had a great year. There's been a massive P/E expansion, particularly in the largest bank, CBA, trading at 22 or 23x versus the long-term historic of 16. Getting that call right, I think, as always it is, and if you've got that wrong, it's going to be a hard year.

The stock picks Hugh and Henry would 'bet the house on'

Hans Lee: All right, thanks for that. All right, time for what you all came for. What you always come here for on this show and that's some stock picks. Hugh, I'll come to you first. What is one stock you would bet the house on over the year ahead?

Hugh Dive: Okay, well, this is a pretty boring pick, but if I had to buy a stock today and not be able to trade it for the rest of the year and then try and crystallise it at the end of the year without being concerned about what nasty macro stuff is going to happen, it's got to be CSL (ASX: CSL).  

It's been left behind a bit in the rallies this year. There's a bit of concern about vaccines. RFK Jr. is the new head of health in the US. He's concerned about vaccines. 17% of CSL's [earnings] is from flu vaccines and he was obviously very concerned about the COVID vaccines, but the flu vaccines, they work, they've been around a long time. I take mine every year and I've avoided a flu this year. But that's been a bit weighing on it.

But looking ahead, they've already guided at the most recent at the AGM for a 10-12% earnings per share growth. Bad things happen in the US. Bad things happen globally. But a lot of the stuff they sell is non-discretionary, which you need to live. Some of the immune bio-therapies are still going to be around. It's had a bit of a weak year. I'd be happy to own that if I couldn't trade it for the rest of the year. 
Hans Lee: And I mean, boring as it may seem, I mean, CSL has consistently been the number one pick from Livewire readers in our annual survey, which is also a good reminder for anybody who hasn't filled out that survey yet. You can access that via the website!

Henry, what about you? What stock would you bet the house on next year?

Henry Jennings: Well, it is a bit of a cyclical stock. It is Newmont (ASX: NEM)...

Hugh Dive: It's a gold-y!

Henry Jennings: It is a gold-y. There's a lot of people that are still pretty bullish about gold going forward. And we know, I think that under Donald Trump, things could get interesting, to say the least. We could see a little bit more volatility. For me, Newmont had a production downgrade recently and the stock got whacked on the back of that. So, that's a good thing because at least you're buying it at a lower base.

And what appeals to me is it's a company going through, what I call a Humpty Dumpty stock because they put it back together again. Obviously, the Newcrest deal has changed it. They've sold off a lot of assets. There's a lot of surgery going on with this stock at the moment. I think they've sold over $3 billion worth of gold projects. They've got a couple more to go and I think that's going to put a pretty good balance sheet in place. 

We could see some capital management initiatives, and I think that gold prices, it may not be as stellar as it has been this year, but I can see it having its moments and I think the gold miners have been left behind. 

And this, I think, with Newmont is an interesting opportunity on the back of that slight production downgrade to get in at kind of, not the rock bottom, but to get in at a level which is reasonable compared to where I think gold could be at the end of the year.

Hugh Dive: They were punished pretty hard on that downgrade.

Henry Jennings: They were punished pretty hard but they did a really good deal the other day with a couple of projects they sold. They've got a couple more to go and that's going to give them a pretty good balance sheet and then the surgery's done. I think they're going to raise close to $4 billion, which is double what they said they were going to do in terms of sales at the beginning of the year. They've all been done at pretty attractive prices. 

So, the only thing missing is a bit of sentiment and I think it'll take a while for that to pan out, if you pardon the gold pun somewhat. But I think at these kind of prices, it looks quite attractive.

The one stock these fundies would avoid next year

Hans Lee: All right. Well, to round things out, we've also asked the gents to bring along one stock they would avoid next year. Henry, what are you avoiding?

Henry Jennings: Well, this was a 50/50 coin toss, I have to say, in terms of whether it would be my stock pick for the year or one to avoid because it feels like a binary outcome and it's Star Entertainment (ASX: SGR). It does feel like a binary outcome. Here we are at 20, 22, 23 cents or whatever it is and it's got serious problems. 

It's been able to draw down the first $100 million of its debt package. But the underlying problems in terms of patronage and profitability are still there. In terms of the high rollers coming, they are still there. So, for me, it is in the too-hard basket, but if you wanted to have a massive flyer, you could easily see this at 35 cents again, or you could easily see this at 10 cents.

Hugh Dive: Or zero.

Henry Jennings: Or zero.

Hugh Dive: Lenders have taken control of it.

Henry Jennings: Or lenders have taken control. But really, who in your right mind will want to take control over a casino that has got those kinds of problems? You'd do anything, wouldn't you, to keep it out of your own hands? NAB doesn't want to run the thing.

Hans Lee: That's a governance story, I reckon, that's going to be written about in Harvard Business Review before too long.

Henry Jennings: I think already probably.

Hans Lee: It probably will already be written. Hugh, we'll finish up with you. What's one stock you are avoiding next year?

Hugh Dive: Not quite as exciting as Henry's pick, which is-

Hans Lee: You're not on the roulette table?

Hugh Dive: Yeah, no. They have two capital raisings last year, one of which to pay a fine.

Hans Lee: Wow. Remarkable.

Hugh Dive: And their lenders are losing patience. For us, we nominate a more high-profile stock. I look at Ramsay Health Care (ASX: RHC). This company is under a lot of pressure. It's a very low-margin business and has a lot of debt on the books. We're seeing in the press today, they're clamouring for private health patients to pay extra money. But also looking at it a bit further, we've got higher wage costs. The nurses are going on strike, and it looks like we're seeing the private health insurers, the likes of Medibank Private (ASX: MPL) doing more in-home patient care. Rehab care, instead of paying $2,000 or $3,000 to Ramsay to sit in a hospital because at home, they have a nurse comes and visits you. This is very popular with the patients and very popular with shareholders. 

The sell side have got it on 30-odd times earnings. They've got a 50% increase in the consensus numbers over the next two years with massive expansions in margin. There is so much capacity for that to go backwards. There's a lot of pressure. I think, there's a lot of capacity for disappointment. I'd be giving that a wide berth. The winds of change are going against that. It's still viewed as a premium stock. Once upon a time it was trading at $70 or $80. But I think those times and those large amount of growth is gone.

Hans Lee: Well, that is all we have time for today. If you enjoyed that episode of Buy Hold Sell, why don't you give it a like. You can subscribe to our YouTube channel and our Livewire Markets website where we are adding lots of fantastic content all the time. Till we see you next, take care.
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