Some All Ordinaries (ASX: XAO), or All Ords, ASX stocks look like compelling opportunities in the current economic conditions. While higher interest rates are currently a headwind for some businesses, they could turn into tailwinds if interest rates start being cut.
Not only can lower interest rates boost company valuation, but it can also mean an increase in earnings for some businesses if customers are interest rate-sensitive, particularly when it comes to discretionary spending and house-related spending.
Let's get into the two ASX All Ords stocks I'm watching.
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Beacon Lighting Group Ltd (ASX: BLX)
Beacon Lighting may be familiar to investors with its national Australian network of stores that sell lighting, fans and other related products for households. It also has a growing trade/commercial segment, e-commerce websites and a number of new businesses.
Those new businesses are exciting to me because they include US growth (lighting showrooms, e-commerce, wholesalers and big box retail), a property fund and growth in other markets like Hong Kong and Germany. Beacon is looking to grow its international sales and improve its margins and operational efficiencies for all international businesses.
The Beacon share price is still 27% lower than where it was in January 2022, so it's a lot cheaper to invest in right now.
The ASX All Ords stock can grow profit in the next few years from growing its store count and (hopefully) benefiting from a recovery of spending.
According to Commsec, the Beacon Lighting share price is valued at under 14x FY26's estimated earnings.
Nick Scali Limited (ASX: NCK)
Nick Scali sells furniture through Nick Scali stores and Plush stores.
Understandably, households aren't buying as much furniture at the moment as they were in FY23. In the three months to 30 September 2023, group written sales orders were down 5.4% year over year. Store traffic was down 10% to 15% in the first quarter. Nick Scali explained that store conversion rates had improved, driven by its "better value product offer" for both of its brands.
If interest rates start falling, it could lead to more houses being built and more people wanting to buy furniture from the ASX All Ords stock.
I think this business is a very impressive retailer, which usually has a much higher return on equity (ROE) than many other ASX retail shares.
It plans to open dozens of more stores across Australia and New Zealand. Expansion into a new country could also be a good help for earnings in the longer term.
According to Commsec, Nick Scali shares could be valued at 12x FY26's estimated earnings and a possible grossed-up dividend yield of 7.4% for that year.
