Buy, Hold or Sell? From Banks to Miners

In this article, we’ll dive into the ASX 200 and take a closer look at some of its key players like CBA, BHP, CSL, and more. With interest rates, commodity prices, and global economic trends all affecting the market, it’s crucial to understand how these factors might shape the performance of top stocks. We’ll also touch on the potential for RBA rate cuts, the challenges facing the mining sector, and some sector-specific opportunities. Whether you’re looking to buy, hold, or sell, we’ll give you our thoughts on where these stocks might be heading in the current market. As we take a look at the ASX 200, a few key factors are influencing the market right now. Interest rates, commodity movements, and global economic trends are all playing their part, and we’re keeping a close eye on how these developments could affect the top stocks. In this commentary, we’ll be reviewing some of the leading ASX stocks and offering our take on whether it’s a good time to buy, hold, or sell. There’s a lot of buzz around the potential for RBA rate cuts, and that’s definitely on investors’ radar. While Governor Michelle Bullock has kept a cautious tone, the current slowdown in economic growth might push the RBA to shift gears. If rate cuts do happen, we’d expect a positive reaction from equities, especially in sectors that are sensitive to interest rates. The mining sector has felt the squeeze, with falling commodity prices, particularly iron ore. That said, there’s still potential for recovery if China decides to roll out more stimulus. We’re anticipating a bit of a shift in the market, with investors moving from banks to resources, especially as valuations in the mining sector start to look more attractive. On the economic front, GDP growth is still sluggish, mainly due to higher interest rates and weaker consumer spending. However, core inflation seems to be moderating, which could lay the groundwork for more stability and potentially influence future RBA decisions. Geopolitical risks and trade uncertainties are still concerns, and we’re keeping an eye on how global market fluctuations, particularly in the U.S., might affect sentiment toward the ASX. When it comes to sector performance, gold miners are seeing some gains thanks to rising gold prices, so there’s some opportunity there. On the other hand, the fintech sector has potential but still lacks clear growth projections, which makes it a bit tricky to gauge where it’s headed. Looking at earnings, we see that banks and miners are under pressure to prove their valuations are justified. For the ASX 200 to show meaningful upside, we’d need to see a more positive earnings outlook. Superannuation fund inflows are still supporting the market, which is a positive sign in the face of broader economic challenges. Let’s now dive into the top 8 blue-chip stocks to assess whether it’s the right time to buy, hold, or sell based on the current market conditions. Commonwealth Bank of Australia (ASX: CBA) CBA delivered a solid first-half FY25 result, with net profit after tax (NPAT) coming in at $5.02 billion. The bank’s 12.2% CET1 capital ratio remains strong, and it’s continuing to return capital to shareholders through a $1 billion buyback, with $300 million already completed. While these are positives, rising costs, competitive lending conditions, and a weaker economic backdrop keep us cautious in the near term. Operating expenses jumped 6%, largely due to higher wages, inflation, and increased investment in technology. The bank spent $1.1 billion on AI infrastructure and digital upgrades, an 11% increase from 1H24. Margins held up, but competitive pressures on deposits and lending continue to be a challenge. That said, CBA’s 77% deposit funding ratio provides stability, even as private sector growth slows, and consumer sentiment remains under pressure. Looking ahead, we expect rate cuts in 2025 to ease some of the strain on households and boost business confidence. But with economic uncertainty still lingering and cost pressures remaining, we don’t see a strong enough reason to upgrade our view just yet. For now, we’re keeping CBA as a hold. BHP Group Ltd (ASX: BHP) We’re taking a cautious stance on BHP despite its strong presence in global mining. The latest half-year results show some challenges, especially in iron ore, where weaker prices and rising costs are putting pressure on earnings. Iron ore EBITDA dropped by $2.7 billion, mainly due to a 22% decline in average realized prices. Costs at Western Australia Iron Ore have crept up to $17.50 per ton, with higher expenses tied to productive movement. While Chinese infrastructure investment has helped support steel production, global iron ore demand looks like it’s leveling off. At the same time, major miners are ramping up supply, which could keep pricing under pressure. BHP is targeting over 305 million tons per year at WAIO, but new projects in Africa and South America might add even more competition. Net debt has climbed to $11.8 billion, with an extra $2.7 billion in obligations. That could limit flexibility for shareholder returns and future investments. The company announced a $2.5 billion interim dividend, but with iron ore revenues under pressure, the sustainability of payouts is something to watch. With softer prices, rising costs, and increasing supply competition, we think it makes sense to stay on the sidelines for now. Long-term, BHP’s exposure to commodities like copper and potash is compelling, but we see better opportunities once the macro environment improves. CSL Ltd (ASX: CSL) CSL put up a solid first-half performance, with NPATA hitting $2.07 billion, up 5% at constant currency. Revenue climbed 5% to $8.48 billion, thanks to 10% growth in CSL Behring and 6% in CSL Vifor. But CSL Seqirus took a hit, with revenue down 9%, mainly due to lower flu vaccination rates in the U.S. On the bright side, demand for immunoglobulin products remains strong, with 15% growth in Ig sales and 9% in albumin, especially in China. Plasma collections are improving, and CSL’s RIKA rollout should help efficiency. Still, with Seqirus under pressure and market sentiment looking bearish, CSL’s stock is facing some resistance. We think it’ll be a more interesting buy once it settles around the $220–$250/share range. For now, we’re staying on the sidelines. Westpac Banking Corporation (ASX: WBC) We’re steering clear of Westpac (ASX: WBC) for now, as the stock is facing some strong resistance due to the overall bearish market sentiment. While it’s fairly valued at the moment, we’d like to see the share price consolidate in the $27–$30 range before we consider it a potential buy. In their first-quarter update, Westpac reported a solid performance, with net profit sitting at $1.7 billion. However, notable items tied to hedge accounting led to a 9% dip in both net profit and pre-provision profit compared to the second half of 2024. But when you exclude those items, net profit actually grew by 3%, reaching $1.9 billion. Revenue was up by 2%, and expenses only saw a slight 1% increase, which is a good sign. The bank saw strong loan and deposit growth, with customer deposits rising by $14.4 billion and total loans up by $13.4 billion. Business loans grew by 3%, and institutional loans increased by 6%. They’ve also been busy strengthening their customer service, rolling out new tools for businesses, and committing to 200 additional small business bankers by 2027. Despite these positive trends, there are still some challenges. The net interest margin dropped slightly to 1.82%, mainly due to the ongoing mortgage competition and a shift in deposits towards lower-spread savings and term deposits. While Westpac is in a solid position with a CET1 ratio of 11.9%, cost-of-living pressures and high interest rates are still putting a strain on some customers and businesses. Looking ahead, much will depend on what the Reserve Bank of Australia decides to do with interest rates. If the RBA cuts rates, it could offer some relief to households and help support business activity. However, for now, we’ll wait to see if the share price shows more stability in the $27–$30 range before we revisit WBC. Macquarie Group Ltd (ASX: MQG) Despite the recent downturn, we’re still very optimistic about Macquarie Group’s long-term growth potential. The company’s net profit after tax (NPAT) for the nine months ending December 31, 2024, stayed roughly in line with last year, showcasing the strength of its diverse operations. While the markets-facing businesses, especially Commodities and Global Markets (CGM), have faced some headwinds due to weak commodity market conditions and timing issues with income recognition, its annuity-style businesses have continued to perform well. Macquarie Asset Management (MAM) saw solid growth, with assets under management (AUM) rising to $942.7 billion at the end of December, up 3% from September. A big driver here was a 5% increase in Public Investments AUM to $571.0 billion, mainly thanks to favourable foreign exchange movements. On top of that, the company’s performance fees and investment income in MAM have continued to contribute significantly, even though margins have been a bit compressed. Banking and Financial Services (BFS) also showed strong results, with total deposits growing 7% to $163.8 billion. The home loan portfolio was up by 5%, reaching $136.2 billion. While margins have faced some pressure, lower operating expenses and volume growth have been key positives for BFS. The business loan portfolio, however, did see a slight dip of 1%, which highlights some mixed results within this segment. On the flip side, Macquarie’s markets-facing businesses have had a tougher time. The combined net profit contribution from CGM and Macquarie Capital was down in 3Q25, mainly due to weak commodity market conditions and timing issues with income recognition, particularly in North American Gas and Power contracts. That said, Macquarie Capital did see a nice bump in fee and commission income, mainly driven by higher mergers and acquisitions fees, although lower investment-related income offset some of that growth. Looking at the financials overall, Macquarie’s capital position remains strong, with a Group capital surplus of $8.5 billion as of December 31, 2024. The Bank Group’s CET1 capital ratio stood at 12.6%, and the leverage ratio was 5.0%, well above regulatory requirements. This solid balance sheet means the company is well-positioned to handle any volatility that might come its way. Management has taken a cautious stance, with a focus on maintaining a conservative approach to capital, funding, and liquidity. The company’s mix of annuity-style and markets-facing businesses, along with ongoing investments in new products and markets, gives us confidence in its future growth. In short, despite the short-term challenges, we see significant upside potential in MQG, and we continue to maintain a target price above $320 per share. With a strong balance sheet and a diversified business mix, we’re excited about what’s to come for Macquarie in the long run. Wesfarmers Ltd (ASX: WES) We’re maintaining our Hold recommendation on Wesfarmers (WES) with an intrinsic value of $90 per share. The company’s recent half-year results show a solid 2.9% increase in NPAT, reaching $1.467 billion for the six months ending December 2024. Despite a challenging environment, Wesfarmers has executed well, with its biggest divisions—Bunnings and Kmart Group—continuing to perform strongly. Bunnings saw growth in both consumer and commercial sales, while Kmart Group benefited from its value-driven Anko product range and productivity gains from integrating Kmart and Target’s systems. While we’ve seen a pullback in the broader market, we don’t think this is a reflection of any fundamental issues with Wesfarmers. The group’s retail divisions are benefiting from customer demand for affordable, value-driven offerings, and we expect sales to continue growing in the second half of FY2025. Early signs are positive, with Bunnings, Kmart Group, and Officeworks maintaining good sales momentum, and Kmart Group’s sales even outpacing the first half of the year. On top of that, Wesfarmers’ non-retail sectors have also delivered strong results. Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) saw higher earnings, supported by favourable outcomes in ammonium nitrate contracts. The Kwinana lithium hydroxide refinery is nearing completion, with 95% of construction done, positioning the group well in the growing lithium market. Wesfarmers’ industrial and safety division did face some pressure, with revenue and earnings down due to a softer market and restructuring costs, but the sale of Coregas for $770 million to Nippon Sanso Holdings shows Wesfarmers’ commitment to optimizing its portfolio and focusing on areas with better growth prospects. Cash flow remains solid, with a realisation rate of 108%, though operating cash flows were down 11.1%, primarily due to a strong prior period driven by a normalisation in WesCEF’s net working capital. Even with this decline, Wesfarmers’ strong balance sheet gives it plenty of flexibility to continue investing in growth opportunities and managing risks effectively. Looking ahead, Wesfarmers is focused on long-term growth, with plans to continue investing in technology and sustainability. The OneDigital initiative, which is helping drive sales across retail and health divisions through improved data and digital capabilities, is one to watch. The company’s efforts to digitise operations and execute productivity initiatives should help offset ongoing cost pressures, such as labour, energy, and supply chain costs. They also have extensive hedging in place to manage short-term currency risks. Additionally, Wesfarmers’ lithium ambitions, particularly with the Covalent project, are on track, with first product expected in mid-calendar 2025. This aligns with the company’s long-term strategy to tap into growing sectors while continuing to strengthen its core retail operations. Overall, while the broader market sentiment may be uncertain, Wesfarmers’ fundamentals remain strong. With its diversified portfolio and commitment to long-term value creation, we believe the company is well-positioned for continued growth. We’re sticking with our Hold recommendation and intrinsic value target of $90 per share, confident that Wesfarmers will navigate current challenges while continuing to deliver shareholder value. Goodman Group (ASX: GMG) Despite the broader market downturn, Goodman Group (ASX: GMG) continues to be one of our top picks, and we’re sticking with our target price of $40 per share. The company’s performance in the first half of FY25 is a great example of its resilience, and we’re optimistic about its potential, even in these uncertain times. For 1H25, Goodman reported an operating profit of $1.22 billion, up 8% from 1H24, and operating earnings per security (OEPS) increased by 7.8% to 63.8 cents. Statutory profit also made a strong comeback, jumping from a loss of $220.1 million in 1H24 to $799.8 million. This shows that Goodman is not just weathering the storm but also positioning itself well for growth. One of the key reasons we’re so bullish on Goodman is its focus on data centres. The demand for cloud services, AI, and machine learning is growing rapidly, and Goodman is in a prime position to capitalize on this. The company’s global power bank has now reached 5.0 GW across 13 major cities, with plans to develop 0.5 GW of new data centre capacity by June 2026. These projects, estimated to be worth over $10.0 billion, will help Goodman tap into the booming data centre market. To further fuel its growth, Goodman is raising $4.0 billion through a fully underwritten ‘pro-rata’ placement and a non-underwritten Security Purchase Plan (SPP) to raise up to $400 million. These funds will give the company the financial flexibility it needs to expand its logistics and data centre operations and reduce its gearing in the short term. Goodman’s liquidity position is strong, with $2.7 billion in undrawn lines, which gives it plenty of room to manoeuvre. Goodman’s total portfolio value has risen to $84.4 billion, a 7% increase from June 2024. The group’s portfolio occupancy is impressive, sitting at 97.1%, and its development pipeline remains strong, with $13.0 billion in work-in-progress (WIP) and a solid yield on cost of 6.7%. This ongoing development in prime urban locations keeps Goodman’s growth prospects looking very promising. Looking ahead, Goodman expects 9% OEPS growth for FY25, even after factoring in the equity raising. Without the raise, OEPS growth would have been even higher at 10%. With its solid fundamentals, growing exposure to data centres, and impressive development pipeline, Goodman is well-positioned to keep delivering strong results. Once the market stabilizes, we’ll likely be reiterating our “buy” recommendation, as we remain confident in Goodman’s ability to weather this downturn and come out even stronger in the future. Fortescue Ltd (ASX: FMG) Fortescue (ASX: FMG) just posted record half-year iron ore shipments of 97.1 million tonnes, which is an impressive operational achievement. But despite this, we’re choosing to stay on the sidelines for now. The geopolitical and macroeconomic backdrop remains highly uncertain, and the volatility in the commodity markets is making it harder to gauge where demand for iron ore is headed. China’s economic health is always a key driver for FMG, and while the country has rolled out stimulus measures, the property sector remains weak. Steel demand isn’t bouncing back as strongly as some had hoped, and that’s weighing on iron ore pricing. Outside of China, the broader global picture is just as murky. The upcoming U.S. election adds another layer of uncertainty, with potential shifts in trade policy that could affect global commodity flows. In Europe, questions over the Renewable Energy Directive III (RED III) are creating uncertainty around green energy investment, which is important for FMG’s long-term plans. On top of that, geopolitical tensions have led to disruptions in key shipping routes, which could impact supply chains and add cost pressures. FMG’s latest financials show the impact of these challenges. Revenue dropped 20% year-over-year to $7.6 billion, mainly due to weaker iron ore pricing. EBITDA margins have tightened from 62% in H1 FY24 to 48% this half, while net profit after tax fell 53% to $1.6 billion. Costs are also creeping up, with hematite C1 costs rising 8% to $19.17 per wet metric tonne. Meanwhile, net debt climbed to $2.0 billion as of December 2024, up from $0.5 billion in June, as FMG continues to invest in projects and pay dividends. Speaking of investments, the company is adjusting its spending plans. Metals capital expenditure guidance has been narrowed to $3.5 to $3.8 billion, and green energy capital expenditure has been trimmed to $400 million from the previous $500 million target. The Arizona and Gladstone PEM50 projects are under review, reflecting the challenges in getting green energy projects off the ground amid shifting global policies. While FMG is running a solid operation, the combination of weaker profitability, rising costs, and macro uncertainty makes us cautious. With net profit down 53%, revenue sliding 20%, and EBITDA margins under pressure, we’d rather stay on the sidelines until there’s more clarity on where the market is headed. Wrapping It Up: Where the ASX 200 Stands The ASX 200 is navigating a mix of challenges and opportunities, with interest rates, global trends, and sector shifts shaping the market. The potential for RBA rate cuts could give equities a boost, while mining stocks remain under pressure from weaker commodity prices. Looking at individual companies, banks such as CBA and Westpac are holding steady, but cost pressures and competition are making it tough. BHP and Fortescue are feeling the heat from iron ore price weakness, while CSL is facing some headwinds despite strong demand for its core products. Meanwhile, Macquarie and Goodman stand out as long-term winners, thanks to their diversified businesses and exposure to high-growth areas. Overall, while uncertainty remains, the ASX 200 still holds plenty of potential. Keeping an eye on economic shifts, earnings strength, and sector rotations will be key in determining the best opportunities ahead.