'Twas the night before Christmas when all through the bourse,
Australian investors were feeling quite hoarse.
For the ASX rallied to a dizzying height,
And the cheering rang out across many a night.
But now savvy folk with more cash to invest,
Worry they may have missed out on the best.
Fear not, good investors, for now heed this;
We challenged our writers to a test of their wits.
And asked them to search the market low and high;
To find you the top ASX shares to buy.
So, without further ado, let's look to prove,
Why buying these stocks could be a smart move!
6 top ASX shares for December 2024 (smallest to largest)
- Mesoblast Ltd (ASX: MSB), $2.02 billion
- Lovisa Holdings Ltd (ASX: LOV), $3.26 billion
- Brickworks Limited (ASX: BKW), $4.02 billion
- TechnologyOne Ltd (ASX: TNE), $9.89 billion
- NextDC Ltd (ASX: NXT), $10.42 billion
- BHP Group Ltd (ASX: BHP), $205.85 billion
(Market capitalisations as of market close 29 November 2024)
Why our Fool writers love these ASX stocks
Mesoblast Ltd
What it does: Mesoblast develops allogeneic (off-the-shelf) cellular medicines to treat severe and life-threatening inflammatory conditions. The company has a broad portfolio of late-stage product candidates.
By Bernd Struben: Last December, you could have snapped up Mesoblast shares for just 28 cents apiece. Today, those same shares are worth $1.77. That's a 528% gain in just one year.
Now, I don't expect the stock to repeat that stellar performance in 2025. But I do believe Mesoblast is well placed for another year of significant outperformance, with two of its core products moving towards commercialisation.
As Mesoblast chair Jane Bell pointed out at the November AGM, "2024 has been pivotal in our journey toward commercialising our therapies."
Amid ongoing progress with the United States FDA, the company is aiming to launch its Ryoncil product to treat ill children. Mesoblast also plans to file for accelerated FDA approval of its Revascor product for end-stage heart failure patients.
On the bottom line, Mesoblast's balance sheet remains solid. And costs have been coming down, with the company's net operating cash spend for the September quarter declining by 26% year over year.
Motley Fool contributor Bernd Struben does not own shares of Mesoblast Ltd.
Lovisa Holdings Ltd
What it does: If you head to your nearest major shopping centre, there's a high chance you'll find a Lovisa store. The fast fashion jewellery retailer has rapidly become a go-to for the latest trendy accessories in 49 countries worldwide, flexing a 927-store footprint.
By Mitchell Lawler: Lovisa's recent performance may not look as stylish as in previous years, and the 19% dulling of the share price in the past six weeks says as much. However, there are few companies in the retail sector unaffected by tightened consumer spending at the moment.
In times like these, it is vital to see the bigger picture. While growth has slowed due to the weighty anchor of elevated interest rates, Lovisa remains an exceptional outlier of retailing excellence.
The company has more than doubled its net earnings and increased its revenue by nearly 2.8 times in just five years.
The expansion opportunity is still intact, and Brett Blundy's colossal 39% stake suggests retailing royalty hasn't lost faith either.
Motley Fool contributor Mitchell Lawler owns shares of Lovisa Holdings Ltd.
Brickworks Limited
What it does: Brickworks is best known as a major manufacturer of building products. It's the biggest brickmaker in Australia and northeastern United States. In Australia, it's also involved in roofing, stone and masonry, timber battens, cement, and more. The business also has an investments and property division.
By Tristan Harrison: It's a tough operating environment in the construction industry at the moment, which is limiting demand for Brickworks' products. But, in a cyclical industry like building products, I think right now is a good time to invest. Conditions are weak, and investors can patiently wait for a rebound of demand when interest rates in Australia eventually fall.
Another attractive feature of this investment is its large asset base, particularly its investments and property division. At 31 July 2024, Brickworks had an underlying asset backing of $35.79 per share, so Brickworks shares are currently trading at an approximate discount of 25% to this.
Brickworks is expecting the property trusts, which it owns half of, to deliver "significant growth in net rental income" over the coming years from both new developments and lease renewals of existing assets.
The industrial properties are also benefitting from the structural trend of e-commerce demand growth, which the company thinks will "continue to drive demand" for prime industrial facilities for many years to come.
The company is continuing to evaluate the development potential of its real estate sites. Brickworks has used this land for building manufacturing but is now looking to develop it with industrial properties.
Motley Fool contributor Tristan Harrison owns shares of Brickworks Limited.
TechnologyOne Ltd
What it does: TechnologyOne is a software company that provides enterprise software to large corporations and governments. It is Australia's largest listed software company, with a footprint across six countries.
By Zach Bristow: The securities of listed companies typically follow the earnings growth of the businesses they represent. TechnologyOne has compounded earnings at nearly 15% per year since 2015.
It earns tremendously high rates on capital employed, averaging more than 30% annually over the same period. Dividends, meanwhile, have averaged more than 10% growth per year since then.
It's no wonder that TechnologyOne's stock price has compounded by about 21% per year since 2014, as well.
Part of the reason for this is that TechnologyOne's earnings are defensive, as it has exposure to sectors unrelated to the business cycle, such as governments, the education sector, healthcare, and so forth.
These recession-proof profits have shown resilience and are valued highly in the market – the stock trades at a price-to-earnings (P/E) ratio of 84x at the time of writing. This is pricey, but consensus projects earnings to compound at 21% per year until 2027, according to CommSec.
When you adjust for these growth rates, the forward P/E ratio is around 48x, which, according to CommSec data, is within range of the company's 10-year average of 42x. Any pullback to this valuation should be viewed favourably under this context.
Management now has the audacious goal of producing $1 billion in annualised recurring revenue (ARR) by FY30 and, if history is anything to go by, behind every dollar of these sales could be about 30 cents of operating cash flow. This kind of persistent earnings growth and heavy cash production is hard to come by.
Motley Fool contributor Zach Bristow does not own shares of TechnologyOne Ltd.
NextDC Ltd
What it does: NextDC is a technology company enabling business transformation through innovative data centre outsourcing solutions, connectivity services, and infrastructure management software.
By James Mickleboro: Although NextDC shares have rallied strongly this year, a recent pullback means they are trading meaningfully below their 52-week high. I think this has created a rare buying opportunity to snap up shares in a high-quality company that has at least a decade of very strong growth ahead of it.
This is being underpinned by the data centre operator's growing footprint across the Asia-Pacific region and the third wave of demand that's being driven by the artificial intelligence (AI) boom.
For example, analysts at Morgans stated that recent industry updates reinforce their "view that the significant demand for cloud computing and AI-related digital infrastructure is going to un[der]pin attractive returns and long-term growth."
For this reason, the broker recently gave NextDC shares an add rating and a $20.50 price target.
Motley Fool contributor James Mickleboro owns shares of NextDC Ltd.
BHP Group Ltd
What it does: BHP is the largest mining company on the ASX and one of the largest in the world. It has huge operations in resources like iron ore, copper, and nickel.
By Sebastian Bowen: With the ASX 200 continuing to break new record highs, finding compelling value opportunities in the current market is difficult. That's why I'm checking out mining giant BHP. Unlike most ASX 200 shares, BHP has not had a good year in 2024, tanking by almost 20% since January.
To be fair, this hasn't come out of the blue. Commodities like iron ore have had a rough year, with their short-term outlook looking challenging today.
However, I always think the best time to initiate a position in a mining stock is when things are looking bleak. BHP is a cyclical company and has proven to be a lucrative investment (and dividend payer) when the cycle inevitably swings back up.
As such, buying BHP shares at current levels might prove to be a wise decision down the road. Even when commodity prices are low, BHP tends to pay out a decent, fully franked dividend yield, as well.
Motley Fool contributor Sebastian Bowen does not own shares of BHP Group Ltd.
