Jun Bei Liu: 2 stocks for the bottom draw and the only realistic scenarios left for 2025

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At the start of 2025, there were three big-picture scenarios facing investors: a hard landing, a soft landing, or no landing at all. Just two of those scenarios remain, with a hard landing now off the table, according to Ten Cap’s Jun Bei Liu.

That view might seem a touch ambitious in light of the market rout that kicked off in mid-February and gathered steam as sticky inflation and a tariff war put equity valuations under pressure.

The ASX 200 has fallen 8.5% in a month and is down over 4.5% for 2025. The picture is worse for US equities, where, after back-to-back years of +20% gains, the S&P 500 has shed over 10% in a month and is down over 5% from the start of the year.

The headlines and moves are unnerving, but the backdrop for equities remains favourable, and the volatility is creating opportunities to buy businesses at better valuations, according to Jun Bei Liu.

Hard landing is off the table

Calls for a US recession have reemerged in recent weeks as tariff policies have rocked investor confidence. Combined with fears of rising inflation, which could hamper further rate cuts, investors have hit the sell button.

Despite this backdrop, Ten Cap’s house view is that a hard landing remains off the table for 2025, and the ‘soft’ or ‘no landing’ outcomes which were consensus views not long ago are the only realistic scenarios remaining. 

The recent news flow and subsequent moves in equity markets haven’t changed that view. It would take a dramatic tightening of financial conditions combined with a collapse in confidence for a hard landing to play out.

Valuations for many stocks are high - we’ve been hearing it for months - and it has been the richly priced stocks that have felt the worst of the selling abroad and on the ASX.

Market leader Nvidia is down over 17% since its recent high, and locally CBA shares are down over 14% since mid-February. There is a long list of distinguished companies that have been hit hard during this sell-off. High valuations, which were present before the trade wars kicked off, are partly to blame for the spike in volatility, albeit against a reasonably favourable backdrop.

The wild swings can be unnerving; however, Liu argues these are the moments investors should embrace rather than avoid.

“The share market is a strange place. When you go to a retail shop and see clothes that you’ve always wanted to buy go on sale, everyone flocks to the shops to buy them. In the share market, when good companies go on sale, everyone steers away,” Liu explains.

The confidence to step in and take these opportunities comes from having a view of the fundamental value for each company. That doesn’t mean the outlook can’t change, and Liu believes knock-on effects from tariff wars will dent confidence for consumers and companies in the months ahead. Her approach is to take this into account and adjust her assumptions for each company.

Australia is well placed

There’s a popular saying that when the US sneezes, the rest of the world catches a cold. There’s no doubt that our market takes a lead from offshore activity on a daily basis. Stepping back, however, Liu argues that there are some important differences that make the outlook for Australia more favourable than the US.

The first difference is that policy rates in Australia remain near the recent peak, giving the RBA more room to move if they want to cut interest rates. The second point relates to the economic cycle, which appears to have bottomed out, with activity levels across building approvals, retail sales, and new orders all picking up.

This is translating through to corporate earnings, where Liu is seeing evidence of an inflection point. Profit margins have bottomed and are expected to grow in the years ahead.

Where does Liu see ASX opportunities?

These are some of the themes post-February reporting that have been identified:

1. Selectively increasing cyclical exposure in REITs and retail as the RBA kicks off the rate-cutting cycle.
2. Rotating out of expensive parts of the market into cheaper opportunities or ‘catch-up’ trades to take advantage of an uptick in the earnings cycle.
3. Reducing emphasis on momentum bets as markets trade sideways with volatility.

Amcor (ASX:AMC) is one example of a ‘catch-up’ trade where investors have shown a willingness to look to the future despite a result that was largely in line with expectations and recent underperformance relative to peers such as Brambles.

“Amcor is a defensive, slow-growing business, and investors have really taken a view that maybe the worst is behind them. Even though earnings growth may not be huge, it’s turning the corner,” Liu commented.

Another example is in the property trusts, which have lagged due to concerns around office vacancy rates and subdued transaction volumes. Liu says she has observed a noticeable pickup in activity levels in the Sydney CBD, and this anecdotal observation is supported by data showing positive net absorption rates in Sydney.

Two stocks for the bottom drawer

One of the big stories to emerge during February was the bumper $4 billion capital raising completed by Goodman Group (ASX:GMG) supporting its plans to roll out a network of data centres. The capital raising was heavily oversubscribed, with participants getting scaled back on their bids.

Goodman has been a core holding for Ten Cap, and Liu says the data centre opportunity adds another angle to what is already a high-quality company in the property sector. Liu believes Goodman has a strong existing client base to which it can sell data centre capacity and is a defensive way to access this structural growth opportunity.

The timing of the capital raising coincided with the recent turn in market sentiment. Goodman shares now trade at a 7.6% discount to the raising price of $33.50. It’s not every day retail investors get the opportunity to buy at a discount to the institutions, and Liu says Goodman remains a core holding.

“It's one of those stocks that—what do they call it? The bottom drawer! You would buy and then you would just put it in the bottom drawer,” Liu says.

High-flyer Pro Medicus (ASX:PME) is another name Liu says is a compelling opportunity on a five-year view. Pro Medicus shares peaked at $287 on February 19 and have fallen more than 15%. It’s a well-covered stock that always looks expensive, but Liu expects it to continue its global expansion, tipping it to become a household name across hospital departments in the years ahead.