Is BHP Group Limited (BHP) the Best Australian Stock to Buy Now?

We recently compiled a list of the 10 Best Australian Stocks to Buy Now. In this article, we are going to take a look at where BHP Group Limited (NYSE:BHP) stands against other best Australian stocks to buy now.

According to a report by Vanguard published on January 24, Australia’s economy is expected to experience a gradual recovery in 2025, following its slowest growth in 32 years in 2024. The report forecasts an economic growth of 2% year over year by the end of 2025, with trimmed mean inflation, a core measure that excludes items at the extremes, expected to reach 2.5% year over year. However, the report notes that low productivity growth and higher unit labor costs will keep core inflation from falling sustainably to the midpoint of the Reserve Bank of Australia’s (RBA) 2%–3% target range until later in 2025.

The RBA has left its policy rate target unchanged at 4.35% since December 10, but has softened its language around future policy decisions, noting that it is “gaining some confidence that inflation is moving sustainably toward the target.” Despite this, Vanguard expects the RBA to remain patient and not initiate rate cuts until the second quarter of 2025, due to a tight labor market.

READ ALSO: 12 Most Promising Green Stocks According to Hedge Funds and 10 Worst Performing Energy Stocks in 2024.

In an interview on January 19, Lochlan Halloway, Market Strategist at Morningstar Australia, pointed out that the premium to fair value of large-cap stocks in the Australian market is abnormally high, trading at around 20% above fair value. According to Halloway, this is a concern as 20 companies account for about 60% of the ASX 100.

In terms of value opportunities, Halloway identified the energy sector, particularly companies that are trading at significant discounts to their fair value. He also noted that small-cap companies, which were largely left behind in the market rally may offer value, although investors need to be judicious in selecting quality companies. Additionally, sectors such as consumer defensives appear close to fair value or even cheap.

As the Australian economy gradually recovers in 2025, opportunities lie in undervalued sectors such as energy and consumer defensives, as well as among small-cap companies that have yet to catch up with the broader market rally.

Is BHP Group Limited (BHP) the Best Australian Stock to Buy Now?

An aerial view of a mining operation in action, with large trucks and yellow diggers.

Our Methodology

To compile our list of the 10 best Australian stocks to buy now, we used Finviz and Yahoo stock screeners to identify Australian companies. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

BHP Group Limited (NYSE:BHP)

Number of Hedge Fund Holdings: 22

BHP Group Limited (NYSE:BHP) is a global resources company that extracts and processes commodities such as iron ore, copper, and coal. The company has a strong portfolio of assets and supplies raw materials essential for global infrastructure and energy needs to industrial manufacturers and governments.

BHP Group Limited (NYSE:BHP) is actively pursuing growth opportunities in the copper market, which is expected to experience significant demand growth over the coming decades. In South Australia, BHP Group Limited (NYSE:BHP) is expanding its Olympic Dam operation, with plans to increase production to over 500,000 tons per year by the early 2030s. The company is also progressing a number of other copper projects in Chile, including the Escondida mine, where it is planning to invest in new leaching technology to increase production and extend the life of the mine. Additionally, BHP Group Limited (NYSE:BHP) has recently announced a joint venture with Lundin Mining to develop the Filo del Sol and Josemaria copper projects in Argentina and Chile, which have the potential to become major new copper producers.

Another key area of growth for BHP Group Limited (NYSE:BHP) is its potash business, where the company is investing in the Jansen project in Canada. The Jansen project is a world-class potash asset that is expected to become one of the largest potash producers in the world. BHP Group Limited (NYSE:BHP) is currently constructing the first stage of the project, which is expected to produce around 4.3 million tons of potash per year. The company is also planning to expand the project in future stages, with the potential to increase production to over 16 million tons per year.

Overall BHP ranks 2nd on our list of the best Australian stocks to buy now. While we acknowledge the potential of BHP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BHP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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