Guides

Guides
Invest in ASX outside over-priced banks - Morningstar
The Australian sharemarket presents many investment opportunities despite high valuations for most quality companies, according to Morningstar. The investment research firm said concentration was a risk in Australia, with more than half of the 32% return in the two years to August 2025 coming from the Big Four banks and Wesfarmers (ASX: WES). Commonwealth Bank (ASX: CBA) contributed about 25% of these returns, and banks represented 25% of the Australian Securities Exchange (ASX) by market capitalisation, up from 19% two years ago. “Valuations of most blue chips look stretched, though a volatile reporting season did throw up new opportunities, including wide-moat Woolworths,” Morningstar Market Strategist Lochlan Halloway said. “It makes sense to be selective, and we see plenty of opportunities outside the expensive banks.” He said although the Australian and New Zealand companies it researched were trading at a 5% premium to fair value on an equal-weighted average at 30 September 2025, he saw many opportunities, particularly among companies outside the ASX 50 index. About 30% of these stocks had four-or five-star ratings, which is comfortably above the trailing 10-year average of about 25%, and almost 40% of unde
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Gold and Bitcoin surge as traders hedge against turmoil
With Gold and Bitcoin - two assets that typically trade higher on the back of heightened fear - both rallying in the wake of macroeconomic uncertainty, investors have every right to ask which one is more deserving of a place in their portfolio? While gold recently blasted past US$4,000 – which saw many ASX 200 gold stocks double their value over the past year – the world's biggest cryptocurrency, Bitcoin, notched its own record high yesterday, with the token trading for US$126,198.07, according to data from CoinMarketCap. Before answering the question of gold or Bitcoin, Charlie Sherry, Head of Finance at Australian cryptocurrency exchange BTC Markets, says investors need to understand that both assets are designed to play very different roles. While gold is acting as a traditional safe haven, Sherry reminds investors that Bitcoin is capturing momentum from ETF inflows, post-halving dynamics, and growing institutional adoption. The Bitcoin halving Sherry is referring to is an event – occurring approximately every 210,000 blocks – that’s designed to control the issuance rate and total supply of the cryptocurrency. During the halving event, the number of new Bitcoins created with each block mined is reduced by half.
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Explainer: Private equity vs syndicated property
While private equity may offer a slew of investment strategies to Australian investors, recent speed wobbles within the sector, accentuated by regulator concerns over their liquidity, transparency, valuation practices, potential conflicts of interest, and governance concerns, warrant a timely direct comparison with syndicated property. While real estate syndications are a type of private equity, it’s important for you to understand how they differ from other private equity counterparts. Given that private equity in Australia – which has virtually tripled in size since 2010 to over A$66 billion - is often accused of understating underlying risks to investors, Azzet went in search of some guidelines as to how private equity operates and how it differs from property syndicates.Private equity structureFor starters, a private equity (PE) fund is a pool of capital used to invest in private companies that fit within a predetermined investment strategy. While there is no standard Private Equity fund structure, the internationally preferred structure is the limited partnership. Here in Australia, a private equity firm (the General Partner or GP) pools capital from investors (the Limited Partners or LPs) into a fund to acquire a
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Yield drop highlights overvaluation - Morningstar
The Australian sharemarket is somewhat overvalued because dividend yields are below average, according to Morningstar. The yield on companies in the ASX 200 index was about 3.1% at the end of August 2025, which was more than one standard deviation below its 10-year historical average of 4.4%, the investment research firm said. “Yields are less attractive than normal, which supports our view that the Australian stock market is somewhat overvalued,” Morningstar analyst Shaun Ler wrote in the firm's inaugural dividend outlook report for the third quarter of 2025. The stocks it covered were 6% overvalued on average based on the equal-weighted average price/fair value estimate at 21 September 2025, and 20% overvalued if using a market capitalisation weighted average. But Morningstar believed the potential for dividend growth was good with distributions set to increase across many sectors in 2026-2027, and yields in some sectors remained attractive. Falling interest rates were likely to dampen yields, increasing the appeal of equities compared with bonds, but shares appeared to reflect this, and further yield improvement would depend on stronger earnings. Morningstar expected 64% of the companies it covered to raise di
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The harsh new reality of the share market
Are share prices more volatile than they used to be? It depends on who you ask and how and when you measure it. But factors like the emergence of mega funds, passive investing, day traders and algorithms are certainly changing the face of equities. Immediate feedback The issue was brought into sharp focus during the August profit-reporting season when the prices of a number of large stocks fell sharply on the day of their results. Building materials group James Hardie (ASX: JHX) plunged by 28% after unveiling first-quarter numbers below expectations, while biotechnology giant CSL (ASX: CSL) and retailer Woolworths (ASX: WOW) shed 17% and 15% of their respective values. The catalyst for CSL’s record one-day fall was lower than expected revenue from its plasma division, while Australia’s second biggest supermarket group dropped because its full-year numbers disappointed investors. “Judging solely by share price volatility, we haven’t seen a reporting season like August 2025 in years,” Morningstar Equity Market Strategist Lochlan Halloway said. He said the average change in the prices of the companies Morningstar covered was more than 6% on results days, with about a quarter of stocks swinging by more than 10%. T

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Questions raised about small cap green shoots
Australian smaller companies have delivered their best earnings results in more than 25 years but doubts have been raised about their valuations, according to Goldman Sachs. ‘Small-cap’ stocks increased earnings by 8.5% year-on-year in the period ending 30 June, the broker wrote in a portfolio strategy research document. “The results mark a potential turning point for the sector, which has struggled in the post-COVID era amid rising interest rates, wage pressures, and weak domestic demand,” Co-head of Australian Research and Head of Portfolio Strategy & Quant Research Matthew Ross and Associate Tony Wu wrote. These stocks have underperformed large caps by 27% with a -10% return compared to +17% for larger peers since late 2021, when markets began pricing in higher inflation and interest rates. This was a result of smaller companies relying on short-term floating-rate debt and having a greater exposure to labour-intensive business models, which suffered disproportionately in the monetary policy tightening cycle. They derive a much higher share of revenue from the cyclical and rate-sensitive sectors like retail, housing and domestic services, which had underperformed global benchmarks until recently, but recent result
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Making sense of the rapid rise in passive investing
Due in part to the rise of exchange-traded funds (ETFs) and target date funds, there’s been a significant shift away from active to passive (aka index) investing which seeks to replicate the performance of a specific market index. With passive funds now comprising around 50% of equity assets and 30% of fixed income assets, it’s evident that investors have waning confidence in the skills of active fund managers to outperform a particular benchmark or market index through stock-picking, market timing, and asset allocation. For example, while China’s equity market rebounded in 2024 after a difficult stretch, active managers struggled to keep pace with large passive products. According to the latest Morningstar Active/Passive Barometer reports for China and Europe, only 13.4% of China’s stock-heavy funds managed to outperform passive peers, a sharp decline from the previous year. While actively managed large-growth funds in China fared the worst, with only 9.7% beating the average passive return, small- and mid-cap active managers performed better, with 38.2% outperforming. By comparison, across 38 equity categories in the UK, active managers’ weighted average one-year success rate stood at 29.0% in June 2025, almost unc
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Making sense of broker share market research
If share investors have learnt anything meaningful this year, it’s a reminder of how unforeseen regulatory and policy changes can disrupt markets in a manner not unlike more sinister black swan events. For example, myriad policies by United States President Donald Trump this year – notably trade tariffs – have had huge implications for corporate earnings. So much so that any broker recommendations, written a day before Trump’s so-called Liberation Day tariffs measures on 2 April – which resulted in a massive global market selloff – would have quickly been rendered obsolete. Given that stock brokers are still seen by many as oracles with superior insights into future listed company performance, Azzet thought it was time to highlight some home truths around what they do and how they operate.Broker research isn’t what it used to beIt’s true, broker research can help you learn a lot about stocks you might be looking to trade. However, in the last decade or so, the number of broking firms conducting in-depth analysis of stocks has dwindled dramatically. The spiralling costs associated with broker research mean the gravitas often given to broker reports has lost its gloss. As a result, the sheer number of stocks now cov
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Research turns profit season focus to returns and value
The sharp fluctuations in share prices have overshadowed perceptions of the Australian corporate reporting season last month, with Morningstar highlighting that share market returns were among the best in 20 years. However, the research firm believes the strong returns from Australian shares are unlikely to be repeated in 2025. Market strategist Lochlan Halloway said the ASX 200 index rose almost 3% in August, which ranked amongst the best reporting season returns in the last 20 years. “No small feat, given valuations looked stretched coming into reporting season and plenty of macroeconomic risks linger,” he said in a research note. Shares were also more volatile than usual as the prices of companies moved more than 6% on the days they reported, with about 25% changing by more than 10%. “But if we take a longer-term perspective, and judge reporting season not by stock price moves, but changes in intrinsic value, we see a different picture,” Halloway wrote. Morningstar upgraded fair values for 44% of reporting companies, which was more than in recent reporting cycles, while the proportion of downgrades was average at 14%. He said results mostly met consensus expectations, and although it did not mean investors