In this piece, we will take a look at the ten best long term ASX stocks to invest in. If you want to skip our overview of the Australian stock market, then you can take a look at the 5 Best Long Term ASX Stocks To Invest In.
Australia is one of the most prosperous nations in the world and stands shoulder to shoulder with the developed countries of Europe and North America when it comes to progress and quality of life. However, since most of the world's business flows through America, the U.S. stock market is considerably bigger. These facts also hold true for the European Euronext stock exchanges and the London Stock Exchange, especially since the latter is another hub for global finance.
The Australian economy is quite advanced but also relies on traditional sectors such as mining. When it comes to analyzing the best ASX stocks, and particularly those that might be suitable for the long term, it is important to see which industries dominate Australia, what companies are operating in them, and what the future outlook for these sectors might be. On this front, data from the Reserve Bank of Australia can be of some help. Its data shows that the five biggest industries in Australia are mining, health and education, finance, construction, and manufacturing. Percentage wise, they account for 14.3%, 12.8%, 7.4%, 7.1%, and 5.7% of the Australian economy, respectively.
Building on this, the next thing to ask when thinking about the best ASX stocks is whether the current global macroeconomic environment is favorable for some of the biggest sectors of the Australian economy. Well, starting from the biggest Australian industry i.e. mining, this is one of the most sensitive businesses to global economic health. Since 27% of Australian exports go to China, and another 17.5% are headed to Japan, Asian economic health is a key determinant of Asian stock performance.
If you've been following Insider Monkey and have signed up for our newsletter, you'll know that the Chinese economy has been struggling. In fact, even the International Monetary Fund (IMF) hasn't held back and called the economy a 'drag' on global output - a sentiment that comes after ill-fated analyst optimism at the start of 2023 that had seen many analysts opine that a robust recovery in China would prove to be a blessing for commodities and oil in particular. So, since Chinese growth has been lackluster, it's time to see how ASX mining stocks have fared amidst this.
Some notable ASX mining stocks, which trade exclusively on the Australian stock exchange and also through their American Depository Receipts (ADRs) on U.S. stock exchanges such as the NYSE are BHP Group Limited (NYSE:BHP), Rio Tinto Group (NYSE:RIO), Fortescue Ltd (ASX:FMG.AX), and South32 Limited (ASX:S32.AX). Year to date, their performance is -15.05%, -14.17%, -12.56%, and 10.98%, respectively. Looking at this, it's clear that all these stocks are down year to date and they were under pressure earlier this year when the Australian central bank's meeting minutes revealed that officials had actually considered an additional interest rate hike since they were uncertain that the beast of inflation had been fully tamed.
However, while the biggest Australian industry might be struggling, ASX stocks for the second biggest sector namely health and education have done much better. A highly developed education system and a corruption free society have allowed Australian healthcare companies to hold their ground against their global counterparts. Some of the biggest healthcare ASX stocks are CSL Limited (ASX:CSL.AX), Cochlear Limited (ASX:COH.AX), ResMed Inc. (ASX:RMD.AX), and Sonic Healthcare Limited (ASX:SHL.AX).
Year to date, their performance is -0.13%, 12.16%, 18.75%, and -8.69%. Looking at this, it appears that healthcare ASX stocks have done much better than their mining counterparts, and even better than Australia's premier education consulting firm IDP Education Limited (ASX:IEL.AX) whose shares are down 9.59% year to date amidst a rating downgrade by Bell Porter and changes in Canadian visa rules to scrutinize unscrupulous applicants that seek to work in the country instead of studying there.
Since healthcare is a hot ASX stock sector these days, here's what the management of Mesoblast Limited (NASDAQ:MESO), an Australian regenerative medicine company had to say during the firm's Q2 2024 earnings call:
As at December 31 2023, cash reserves were $77.6 million after completion of an institutional placement and entitlement offer of AUD60.3 million in the period. During the period, we also delivered on our planned cost containment strategies, which reduced our cash burn for operating activities. In the three-month period ended December 2023, our cash burn for operating activities was $12.3 million, which is a 25% reduction on the comparative three-month period in FY 2023. In the six-month period ended December 2023, the cash burn was reduced but 14% on the comparative six-month period in FY 2022. We are also pleased to report the 21% reduction in our loss after tax of $32.5 million.
With these details in mind, let's take a look at some best long term ASX stocks. A couple of notable picks are Aristocrat Leisure Limited (ASX:ALL.AX), Telstra Group Limited (ASX:TLS.AX), and BHP Group Limited (NYSE:BHP).
10 Best Long Term ASX Stocks To Invest In
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Our Methodology
To make our list of the best ASX stocks for the long term, we ranked the forty most valuable ASX stocks by their average analyst share price target upside. All average share price target data was sourced from Yahoo Finance.
10 Best Long Term ASX Stocks To Invest In
10. QBE Insurance Group Limited (ASX:QBE.AX)
Average Analyst Share Price Target: A$18.89
Percentage Upside: 4.19%
QBE Insurance Group Limited (ASX:QBE.AX) is a sizeable Australian insurance company headquartered in Sydney, New South Wales. The firm provides property, casualty, health, and other insurance products. It's also one of the highest rated stocks on our list, as QBE Insurance Group Limited (ASX:QBE.AX)'s shares are rated Strong Buy on average. The average share price target is A$18.89, pricing in a 4.19% upside over the latest closing share price. The firm's CEO also gave a rather interesting talk in February 2024 when he shared that due to natural disasters, reinsurance companies were often wary of doing business in Australia.
Along with Telstra Group Limited (ASX:TLS.AX), Aristocrat Leisure Limited (ASX:ALL.AX),and BHP Group Limited (NYSE:BHP), QBE Insurance Group Limited (ASX:QBE.AX) is a top long term ASX stock according to analysts.
9. Sonic Healthcare Limited (ASX:SHL.AX)
Average Analyst Share Price Target: A$30.87
Percentage Upside: 4.96%
Sonic Healthcare Limited (ASX:SHL.AX) is the first Australian healthcare company on our list, a segment of the ASX that has performed quite well as of late even as mining giants and other ASX stocks feel the brunt of high interest rates and an economic slowdown in the major Asian economies of China and Japan. The firm is also headquartered in Sydney, and it has more than forty thousand employees on its roster. Sonic Healthcare Limited (ASX:SHL.AX) is a medical devices and diagnostics services provider that caters primarily to the needs of hospitals, health centers, and their patients. Its shares are rated Buy on average but teeter on the edge of Hold.
As Australia's economy continues to struggle, Sonic Healthcare Limited (ASX:SHL.AX) made an important announcement in March 2024 when it revealed that it had expanded its global network. This came in the form of an acquisition of a Swiss laboratory for a $132 million price tag.
8. CSL Limited (ASX:CSL.AX)
Average Analyst Share Price Target: A$302
Percentage Upside: 5.23%
CSL Limited (ASX:CSL.AX) is another major Australian healthcare company. Given the way that ASX healthcare stocks have performed this year, it's unsurprising that it's yet another healthcare stock to make it to our list of the best Australian stocks to buy for the long term. CSL Limited (ASX:CSL.AX)'s shares are rated Buy on average, and its average share price target of A$302 prices in a 5.23% upside. Like Sonic Healthcare, the firm has also been busy on the global front as of late. CSL Limited (ASX:CSL.AX) scored a win in March 2024 when Canadian healthcare regulators approved its medicine for iron deficiency. At the same time, management is also hoping to capture some of the U.S. market for influenza vaccines this season.
7. Washington H. Soul Pattinson and Company Limited (ASX:SOL.AX)
Average Analyst Share Price Target: A$35.6
Percentage Upside: 5.92%
Washington H. Soul Pattinson and Company Limited (ASX:SOL.AX) is a small Australian financial services firm headquartered in Sydney, Australia. It is one of the oldest companies on our list and was set up in 1872. The firm invests in publicly and private companies through the stock market and also through private equity. Only one analyst share price target is available for Washington H. Soul Pattinson and Company Limited (ASX:SOL.AX), and it prices in a 5.92% upside to the shares.
6. Santos Limited (ASX:STO.AX)
Average Analyst Share Price Target: A$8.37
Percentage Upside: 8.00%
Santos Limited (ASX:STO.AX) is an Australian oil and gas exploration and production company headquartered in Adelaide, Australia. It has operations in Australia, the U.S., Timor-Leste, and Papua New Guinea. The shares are rated Buy on average, and the average analyst share price target is A$8.38. Santos Limited (ASX:STO.AX) has been relatively quiet on the news front as of late, after its talks with Australian energy giant Woodside collapsed earlier this year.
Aristocrat Leisure Limited (ASX:ALL.AX), Santos Limited (ASX:STO.AX), Telstra Group Limited (ASX:TLS.AX), and BHP Group Limited (NYSE:BHP) are some ASX stocks with high upside.
