As the S&P/ASX 200 Index (ASX: XJO) notches yet another all-time record high on Friday, many experts remain optimistic about the year ahead. Former Macquarie Group Ltd (ASX: MQG) executive Jason Todd this week predicted "another strong year as earnings growth begins to pick up".
As for more bearish analysts concerned over current share market valuations? Todd went on to say, "Elevated valuations are more a stock-specific story than a market story".
High-flying fundie and Todd's co-founder of a newly launched $1.5 billion long-short hedge fund Jun Bei Liu is also bullish on Aussie shares — anticipating the ASX 200 will be "meaningfully higher" by the end of 2025.
And with much chatter in financial circles this week firming up on a potential cut to interest rates as soon as this month, February could be a great time to add some quality ASX shares to your portfolio.
On that note, we asked Foolish writers which ASX stocks they think are hot to trot right now.
Here is what they told us:
5 top ASX shares for February 2025 (smallest to largest)
- Betashares Global Defence ETF (ASX: ARMR), $14.19 million
- DroneShield Ltd (ASX: DRO), $584.32 million
- Washington H Soul Pattinson & Company Ltd (ASX: SOL), $12.59 billion
- ResMed Inc (ASX: RMD), $59.00 billion
- CSL Ltd (ASX: CSL), $135.79 billion
(Market capitalisations as of market close 31 January 2025)
Why our Fool writers love these ASX stocks
Betashares Global Defence ETF
What it does: The BetaShares Global Defence ETF is an exchange-traded fund that allows ASX investors to gain exposure to a portfolio of global companies that are all leaders in the aerospace and defence industries.
By Sebastian Bowen: Most unfortunately, one of the trends I anticipate emerging over the next few years is higher defence spending across the globe.
The election of Donald Trump to a second term as United States president is, in my opinion, likely to result in the US pulling back from its leadership role on the world stage. If this does indeed occur, I believe we could see massive rises in defence spending from a variety of countries, ranging from South Korea, Taiwan, and Japan to the United Kingdom, Germany, and France.
Whilst I personally hope this doesn't occur, we must invest based on what is likely to happen, not what we wish might happen. As such, I believe the companies this ASX ETF houses are set to be prime beneficiaries of this trend.
The ARMR ETF is made up of leading defence companies, including Lockheed Martin, Raytheon Technologies, Palantir Technologies, and Safran.
The index this ETF tracks has returned an average of 16.1% per annum over the past five years (as of 31 December). Given the trend discussed above, I think there is a decent chance this track record will continue.
Motley Fool contributor Sebastian Bowen does not own any of the shares mentioned.
DroneShield Ltd
What it does: DroneShield develops and sells artificial intelligence (AI)-powered hardware and software to detect and disable drones. The company's clients include governments and militaries, airports, commercial venues, prisons, and critical infrastructure around the world.
By Bernd Struben: If you're buying DroneShield stock, you'll need to be comfortable with significant share price volatility. Daily gains or losses of 10% or more are not uncommon.
After peaking at $2.60 a share in July on the back of investor overexuberance, DroneShield shares closed on Friday at a more rational 67 cents a share. Despite the big decline, the stock remains up 30% over 12 months. And I believe it can deliver more outperformance in the year ahead.
In its Q4 2024 results, the company reported a 6.3% year-on-year increase in revenue to $57.5 million. While that growth was lower than expected due to several project delays, 2025 is off to a strong start, with DroneShield already having received $36 million in revenue in the new year. The company also has a $33.4 million contracted backlog, expected as a cash payment in H1 2025.
With global conflicts unfortunately likely to continue, the company said it has a medium-term pipeline valued at some $1.2 billion.
Motley Fool contributor Bernd Struben does not own shares of DroneShield Ltd.
Washington H Soul Pattinson & Company Ltd
What it does: This investment house has been a publicly listed company for 120 years. It started as a pharmacy business and has since diversified into numerous sectors, investing in listed and private businesses and other assets.
By Tristan Harrison: Soul Patts has shown its ability to excel over the last five years, whether conditions are booming or not. The company significantly increased its credit/bonds portfolio as interest rates rose, enabling it to make equity-like returns with a different risk profile.
The ASX 200 stock has the flexibility to invest in whichever asset class or industry it considers an opportunity, which could be useful to take advantage of any volatility or pockets of economic stress for the foreseeable future.
The next few years could be strong for the ASX share market, with possible falling interest rates in Australia, depending on inflation. I think Soul Patts is well-positioned to benefit from rate cuts, with significant investments in building products, property, telecommunications, and financial services.
I'm choosing Soul Patts as an investment that could perform well in the next few years, thanks to its defensive and diversified portfolio.
As a bonus, it has a grossed-up dividend yield of close to 4%, including franking credits. And it has also grown its annual ordinary dividend every year since 2000, which appeals to me.
Motley Fool contributor Tristan Harrison owns shares of Washington H Soul Pattinson & Company Ltd.
ResMed Inc
What it does: ResMed is a sleep disorder treatment company. Its digital health technologies and cloud-connected medical devices transform care for people with sleep apnea, COPD, and other chronic diseases.
By James Mickleboro: Although ResMed shares have recently hit a record high, I don't believe it is too late to invest in this high-quality company. That's because I think ResMed has the potential to continue growing at a strong rate for a long time to come, driving its shares materially higher in the future.
This is due to its significant and underpenetrated total address market (TAM). The company estimates it has a TAM of 2.3 billion people globally. This includes more than 1 billion suffering from sleep apnoea.
And with its technology ahead of the competition and the company reinvesting 6% to 7% of revenue into R&D activities each year, I believe it is well-placed to grow its market share and drive strong earnings growth. Another positive is the increasing awareness of sleep disorders. This is being helped by smartwatches, such as the Apple Watch, now able to diagnose sleep apnoea.
Goldman Sachs still sees a lot of value in ResMed shares. Last month, it initiated coverage on the stock with a buy rating and a $48.90 price target. The broker expects "ongoing robust new patient growth for CPAP therapy despite the market entry of GLP-1 drugs to treat OSA."
Motley Fool contributor James Mickleboro owns shares of ResMed Inc. and does not own shares of Apple Inc or Goldman Sachs Group Inc.
CSL Ltd
What it does: CSL is a global biotechnology company established in 1916. It focuses on three key areas: Rare and serious diseases, influenza vaccines, and iron deficiency and nephrology.
By Aaron Bell: CSL is a blue-chip ASX 200 stock trading well below its fair value, in my opinion. Goldman Sachs echoes this, with a buy rating and a $325.40 price target on the stock. Given the CSL share price closed at $280.43 on Friday, this implies a potential upside of around 16% over the next 12 months.
One factor boosting CSL's short-term outlook is the recent news that Australian and United Kingdom regulators have approved the registration of a new therapy for the prevention of recurrent hereditary angioedema (HAE) attacks.
HAE is a rare, debilitating, and potentially life-threatening genetic disorder affecting approximately 1 in 50,000 people globally.
The therapy is also under review in the United States, European Union, and Japan.
Outside of this short-term news, CSL is one of Australia's largest companies by market capitalisation. It has a proven track record and strong position in the global market, servicing more than 100 countries.
Motley Fool contributor Aaron Bell does not own shares of CSL Ltd.
