Five High-Conviction Buys to Capture Long-Term Growth

In this article, we explore five stocks that have the potential for tremendous long-term growth. From banking to energy and beyond, these companies offer a blend of solid financial performance, strategic initiatives, and market leadership that position them for sustained success. Westpac stands out with its reliable dividends and strong capital management, while GenusPlus Group’s significant growth in Australia’s renewable energy sector underscores its future potential. Northern Star’s impressive earnings and disciplined capital management make it a standout in the gold sector, while Ridley Corporation’s steady growth and strategic acquisitions bolster its position in the agricultural industry. Finally, Origin Energy’s diversified portfolio and commitment to renewables further enhance its long-term investment appeal. These stocks provide a balanced mix of income, growth, and sustainability for investors looking to build a robust portfolio. Westpac Banking Corp (ASX: WBC) – Up 37% year-to-date – Dividend Yield: 4.62% We believe Westpac Banking Corporation (ASX: WBC) presents a compelling long-term investment opportunity. The bank’s impressive +37% year-to-date gain, combined with a solid dividend yield of 4.62%, makes it a strong candidate for our long-term buy recommendation. Financial Performance Westpac has demonstrated robust financial performance with an unaudited net profit of $1.8 billion in the third quarter of 2024, reflecting a 6% increase compared to the first-half quarterly average. This growth, despite a slight dip in pre-provision profit, highlights the bank’s resilience and adeptness in managing economic challenges. Notably, the reduction in impairment charges and an increase in net interest income by 2%, driven by both higher margins and loan growth, underscore Westpac's solid financial foundation. Dividend Yield and Shareholder Returns We find Westpac’s dividend yield of 4.62% particularly attractive for income-focused investors. The bank’s CET1 capital ratio stands at a strong 12.0%, well above regulatory requirements, which supports its ongoing share buyback program and reinforces shareholder returns. This robust capital position is crucial for maintaining reliable dividend payments in the current high-interest rate environment. Solid Operational Momentum Westpac’s commitment to enhancing customer experience is evident through its various initiatives. We have observed improvements such as mobile notifications for savings opportunities, expedited processing for business customers, and advanced fraud detection systems. These measures, coupled with growth in deposits ($15.4 billion) and loans ($14.7 billion), particularly in housing loans, demonstrate the bank’s effective strategy in expanding its customer base and market share. Sustainability and Innovation Westpac’s role in the issuance of Australia’s first sovereign green bond underlines its leadership in sustainable finance. As investors increasingly consider ESG factors, Westpac’s proactive approach to sustainability adds to its appeal as a forward-thinking investment choice. That said, Westpac’s solid financial performance, attractive dividend yield, and strategic focus on customer service and sustainability make it a strong candidate for a long-term “buy”. GenusPlus Group Ltd (ASX: GNP) – Up + 64% year-to-date – Dividend Yield: 1.10% GenusPlus Group has delivered exceptional performance in FY24, with its stock up by an impressive 64% year-to-date. The company achieved record revenue of $551 million, reflecting a 24.1% increase from FY23, and a record normalised EBITDA of $45.3 million, up 23.2%. Additionally, normalised EBIT-A rose significantly by 35.4% to $33.7 million. GenusPlus has significantly strengthened its financial position, ending the year with a cash balance of $101 million, a 116% increase from the previous year, and net cash of $77.3 million, up from $22.4 million. This solid liquidity enhances the company’s ability to support growth and maintain operational flexibility. Strategic Positioning and Growth Prospects We believe that GenusPlus is well-positioned as a key player in Australia’s transition to renewable energy. The company’s involvement in high-profile projects, such as the HumeLink Transmission project with Acciona and the Battery Energy Storage System (BESS) installation for the Melbourne Renewable Energy Hub with Samsung, highlights its strategic importance in the sector. With a strong order book of $519 million and a substantial tendered pipeline of approximately $2 billion, GenusPlus is poised for continued revenue growth. We forecast at least 20% EBITDA growth in FY2025, driven by the company’s expansion efforts and an increase in recurring services revenue. The ongoing transition of the Australian power network presents significant opportunities, positioning GenusPlus for sustained long-term growth. Expansion and Diversification We note that GenusPlus has made significant progress in expanding its east coast presence, which now represents 35% of its revenue. The acquisition of Prasinus Energy Services and key contracts such as the Master Module Agreement with nbn underscore the company’s successful diversification strategy. The focus on recurring revenue, contributing approximately 40% of total revenue, adds stability and supports long-term financial health. Dividend Yield and Shareholder Returns GenusPlus offers a dividend yield of 1.10%, with a final fully franked dividend of 2.5 cents per share for FY2024, up from 2.0 cps in FY2023. This increase in dividends reflects our confidence in the company’s ability to deliver shareholder value while continuing to grow. In our view, GenusPlus Group represents a strong long-term buy. The company’s impressive financial performance, strategic market positioning, and expanding operations underscore its growth potential. With robust year-to-date results and a promising outlook, we see GenusPlus as a compelling investment opportunity for exposure to the evolving energy and communications infrastructure sectors. Northern Star Resources Ltd (ASX: NST) – Up +8% year-to-date – Dividend Yield: 2.70% We see Northern Star Resources as a compelling long-term investment opportunity. The company reported record cash earnings of A$1,805 million for FY24, complemented by an underlying free cash flow of A$462 million. This robust performance highlights the company’s strong operational efficiency and effective cost management. Revenue and EBITDA: The company achieved impressive revenue of A$4,921 million and an underlying EBITDA of A$2,192 million, translating to a solid EBITDA margin of 45%. These results highlight Northern Star’s capability to generate substantial profit from its mining operations. Dividend and Share Buy-Back Program: We note that Northern Star declared a final dividend of A$0.25 per share, leading to a record FY24 total dividend of A$0.40 per share. The ongoing on-market share buy-back program, with A$128 million remaining out of a A$300 million program, reflects the company's commitment to returning value to shareholders. Strong Balance Sheet: The company’s balance sheet remains robust, with net cash of A$358 million and liquidity of A$2,748 million. This strong financial position provides Northern Star with the resilience needed to navigate market fluctuations and invest in future growth. Production and AISC: Northern Star achieved FY24 gold sales of 1,621koz at an all-in sustaining cost (AISC) of A$1,853/oz. For FY25, we expect the company to produce between 1,650-1,800 koz of gold, with a projected AISC of A$1,850-2,100/oz. The anticipated increase in production from higher-grade ore and improved mill availability bodes well for future performance. Capital Expenditure: The forecast for FY25 growth capital expenditure is between A$950-1,020 million, with additional spending allocated to the KCGM Mill Expansion project. This investment aligns with Northern Star’s strategy to enhance production capabilities and support long-term growth. We are confident in Northern Star’s ability to deliver superior shareholder returns, as evidenced by its strong capital management and proactive buy-back program. The company's disciplined approach to investing in growth projects while maintaining a solid financial base positions it well to seize future opportunities. Overall, Northern Star offers a compelling long-term investment case due to its strong financial performance, effective capital management, and promising growth outlook. We believe that Northern Star represents an excellent addition to any long-term investment portfolio. Ridley Corporation Ltd (ASX: RIC) – Up +7.6% in the past year – Dividend Yield: 3.77% We view Ridley Corporation as an excellent long-term investment, driven by solid operational execution, consistent earnings growth, and a clear focus on delivering shareholder value. Despite challenges in FY24, Ridley has demonstrated resilience, positioning itself for continued growth. Key Financial Performance Ridley’s EBITDA increased by 4.9% to $92.8 million, supported by strong performance in the Bulk Stockfeeds segment. We are particularly impressed with the customer wins and operational efficiencies that boosted earnings by $8.4 million in this segment. While the Packaged Feed and Ingredient Segment faced headwinds from lower tallow and meal pricing, the acquisition of Oceania Meat Processors (OMP) contributed $3.2 million in EBITDA, mitigating the decline. Ridley has also maintained a robust balance sheet, allowing it to continue investing in growth projects, such as the expansion of the Clifton and Pakenham feedmills. Operating cash flow increased by 5.9% to $107.7 million, driven by disciplined working capital management. This strong cash generation not only funded acquisitions and increased dividends but also supported future investments, reinforcing Ridley’s position for long-term growth. Strategic Growth Drivers Looking ahead, we expect Ridley to deliver continued earnings growth through several key initiatives: Packaged & Ingredients Segment: A full-year contribution from OMP, along with benefits from supplier wins and cost savings from operational restructures, will drive performance. Bulk Stockfeeds Segment: Volume growth from debottlenecking projects at key facilities, along with market share gains in broiler feed, will be significant contributors. Premiumisation: Ridley’s ongoing focus on premium pet food products positions the company well to capitalize on strong demand in this segment. These growth drivers, combined with Ridley’s diversified business model, will help offset inflationary pressures and fluctuations in commodity cycles. Dividends and Shareholder Returns We are also encouraged by Ridley’s commitment to rewarding shareholders. The company declared a fully franked final dividend of 4.65 cents per share for FY24, reflecting its strong operating performance. Additionally, the $20 million share buy-back program demonstrates management’s confidence in Ridley’s future cash flow generation. That said, we believe Ridley is well-positioned for long-term growth, thanks to its strategic focus on operational efficiencies and premium product offerings. The company’s diversified portfolio provides stability, while ongoing investments in capacity expansion and market share growth will drive future earnings. With a strong balance sheet supporting both dividends and reinvestment, Ridley offers a compelling mix of income and capital growth potential. Given Ridley’s consistent performance, clear growth strategy, and an attractive dividend yield of 3.77%, we rate it as a solid long-term “buy”. Origin Energy Ltd (ASX: ORG) – Up +14% year-to-date – Dividend Yield: 5.69% We believe that Origin Energy presents a compelling long-term buy opportunity, with a solid +14% year-to-date performance and an attractive dividend yield of 5.69%. The company’s solid financial results and strategic focus on renewables position it well for sustained growth, making it a valuable addition to a long-term portfolio. Strong Financial Performance Origin has delivered a strong set of FY24 results, with statutory profit rising to $1,397 million from $1,055 million in the prior year. Underlying profit increased significantly, up $436 million to $1,183 million, driven primarily by the improved performance of both the Energy Markets and Integrated Gas businesses. We are particularly encouraged by the $3,528 million in underlying EBITDA, demonstrating Origin’s ability to navigate volatile markets and capitalize on favourable conditions within key segments. The company’s adjusted free cash flow of $1,296 million, compared to $965 million in FY23, shows robust cash generation, allowing for both reinvestment into strategic initiatives and increased shareholder returns. With total fully franked dividends for FY24 of 55 cents per share, up from 36.5 cents in the prior year, we see this as a positive signal of Origin’s confidence in its financial position and ability to deliver long-term value to shareholders. Diversified Portfolio for Resilience and Growth Origin’s diversified portfolio across electricity, natural gas, LNG, and renewables continues to be a core strength. While lower commodity prices impacted the Australia Pacific LNG business, we believe the uplift in earnings from Energy Markets more than offset this, underscoring the benefit of having multiple revenue streams. This diversification helps to mitigate risk, positioning Origin to thrive even in uncertain market conditions. In addition, Origin’s commodity hedging, and LNG trading activities contributed positively to earnings, further demonstrating the company’s ability to manage market fluctuations effectively. Strategic Investments in Renewable Energy We are particularly impressed by Origin’s continued investments in renewable energy and storage. The company has developed a robust pipeline of renewable projects, including the Yanco Delta Wind Farm, Ruby Hills Wind Farm, and Salisbury Solar Farm, among others. These projects underscore Origin’s commitment to leading Australia’s energy transition and its ability to capitalize on the growing demand for cleaner energy. Origin’s investment in battery storage, with 1.5 GW of owned and tolled battery systems under development, strengthens its position in the market. This strategic focus on renewable energy and storage will not only enhance future earnings but also align the company with broader global trends towards decarbonization. Customer Growth and Market Leadership Origin’s ability to grow its customer base in a competitive environment stands out to us. The addition of 132,000 new customer accounts in FY24, bringing the total to 4.7 million, reaffirms Origin’s position as Australia’s leading retail energy brand. Origin’s low customer churn rate of 13.2% versus the market average of 20.1% further highlights its strong customer loyalty and retention capabilities. We also view Origin’s expansion into adjacent services, such as broadband and electric vehicle subscriptions, as key to further diversifying its revenue streams and capitalizing on emerging market opportunities. This diversification strengthens the company’s long-term growth prospects, making it more resilient to traditional market risks. Outlook and Long-Term Growth Potential While Origin has guided that FY25 Energy Markets EBITDA may soften due to lower electricity tariffs and higher coal procurement costs, we believe this is a temporary headwind. The company’s ongoing investments in digital platforms, like Kraken, and its strategic focus on renewables and storage will drive sustainable growth over the medium to long term. Additionally, Origin’s share of Octopus Energy continues to present upside potential, with its innovative Kraken technology platform scaling globally and supporting long-term growth. In our view, Origin Energy is a compelling long-term buy. The company’s strong financials, diversified portfolio, and strategic focus on renewables provide a foundation for sustained growth. With an attractive dividend yield of 5.69% and clear earnings potential from both traditional energy sources and emerging technologies, Origin is well-positioned to deliver long-term value for shareholders. We suggest Origin Energy as a key holding for investors seeking both income and growth in a diversified energy company, well-aligned with the global transition towards cleaner energy sources.