The firm advised investors to avoid the big banks this year and instead focus on real estate investment trusts (REIT), healthcare, tech and discretionary stocks.
In its 2025 Australia outlook, JPMorgan pointed out that while 2024 was shaped by accelerated multiple expansion, major bank outperformance and a struggling resources sector, it expects these trends to reverse in 2025.
The firm sees REITs benefiting from macro tailwinds, strong earnings growth and significant valuation upside, while healthcare is anticipated to recover from last year’s underperformance with strong earnings growth. In discretionary stocks, rate cuts, tax cuts and employment resilience are expected to drive growth, it said.
JPMorgan also unveiled its “Super 7” stocks for 2025, which it believes offer more than 10 per cent upside potential. These include GQG Partners, Orica, QBE, Seek, Treasury Wine Estates, Vicinity Centres, and Xero.
The firm’s key underweights include the financials sector, excluding non-bank financials, where the team remains negative on the major banks due to stretched valuations and modest earnings growth. JPMorgan also noted it is underweight the industrials sector, although it has scaled back its position to a modest underweight, and underweight the energy sector due to concerns about the oil price outlook.
Super 7
For GQG Partners, JPMorgan sees a potential upside of 26.5 per cent.
Despite a challenging Q4 2024, marked by declines linked to Adani-related companies, it said the US-based global asset manager has delivered a three-year annualised outperformance of over 4 per cent across its core strategies.
Orica follows with a potential upside of 22.4 per cent. JPMorgan highlighted balanced supply-demand dynamics and steady activity in resources markets as supporting the company’s core blasting business.
Global insurer QBE is also featured, with an 18.3 per cent upside. JPMorgan pointed to favourable trends, such as premium rate increases, strong earnings from past deficits and cooling inflation, although moderating investment yields could be a slight offset.
Seek has an estimated upside of 22.7 per cent, with JPMorgan confident in its ability to achieve high single-digit yield growth and strong operating leverage through FY2024–25.
Treasury Wine Estates has the biggest potential upside of 35 per cent, with strong double-digit growth over three years at a significant PER discount, driven by Penfolds’ recovery in China and strong US potential, particularly in the premium/luxury wine segment.
Vicinity Centres, a REIT, has a 13.7 per cent potential upside, with JPMorgan noting its well-hedged debt position and focus on a $3 billion development pipeline.
Xero rounds out the list with a 13.4 per cent upside, as JPMorgan expects the company to continue its growth trajectory by expanding its market and broadening its payroll and payments services over the next three years.
