High Conviction Buys for March: The Stocks We’re Backing

In this article, we’re excited to share our top picks for March 2025. In the past, we’ve highlighted some solid growth stocks that have continued to outperform the market, even with recent volatility. Evolution Mining Ltd (ASX: EVN) really stands out right now. The company has had an impressive run, with EVN shares up over 39% year-to-date, alongside record profits, such as a solid 277% increase in net profit for FY25’s first half. With high-quality gold and copper mines in Australia and Canada, along with strong production, Evolution is definitely a key player in the industry. On the financial side, it’s in great shape, generating increasing free cash flow and reducing debt. Plus, the company’s benefiting from strong gold and copper prices. BlueScope Steel Limited (ASX: BSL) remains a solid pick. The company’s balance sheet is strong, with liquidity of $2.9 billion, including $819 million from its joint venture. It’s got an investment-grade credit rating and offers a dividend yield of around 2.38%. The company’s $240 million share buy-back program speaks to its financial health and dedication to shareholders. Even with the broader market downturn, BSL shares are up around 22% year-to-date. It’s undervalued compared to its peers, has solid growth prospects, and we’re expecting a boost in second-half EBIT. Plus, its diversified operations in Australia and the U.S. add stability, and it has strong institutional support behind it. GR Engineering Services Ltd (ASX: GNG) also remains promising. The company’s in robust financial shape, with a low debt-to-equity ratio, a reasonable P/E ratio, and a strong market presence. Despite the market correction, GNG has delivered +9% returns year-to-date, showing resilience. The company’s offering a nice dividend yield and has shown steady growth in earnings and shareholder return. With a diverse range of services in mining, mineral processing, and energy, and a solid project portfolio, GR Engineering is set up well for future expansion. Now, let’s dive into three of our top high-conviction buys for this month. West African Resources Limited (ASX: WAF) – Upside Potential: +47% TP: $3.30/share West African Resources (WAF) is one of our high-conviction buys, with a clear path to becoming a 420,000+ oz per year gold producer by 2025. As an unhedged miner operating in Burkina Faso, WAF benefits from full exposure to gold price upside while maintaining strong financials and disciplined cost control. At our target price above USD 3.30 per share, we see +47% upside, driven by increased production, operational efficiencies, and exploration success. Strong 2024 Performance Sets the Stage for Growth WAF delivered a solid 2024, generating USD 246 million in profit. Production totalled 206,622 oz at an AISC of USD 1,240/oz, while unhedged gold sales came in at 199,550 oz at an average price of USD 2,391/oz. This resulted in USD 730 million in revenue and USD 252 million in operating cash flow, boosting the company’s cash position to USD 392 million and net assets to USD 1.3 billion. These figures highlight WAF’s ability to generate significant cash flow while maintaining a strong balance sheet. 2025: A Transformational Year with Kiaka Coming Online Looking ahead, WAF’s 2025 production guidance is between 290,000 and 360,000 oz, a major step up from 2024. This growth will be driven by stable production at Sanbrado and the ramp-up of Kiaka. Sanbrado is expected to contribute 190,000 to 210,000 oz at a site sustaining cost below USD 1,350/oz, while Kiaka will add another 100,000 to 150,000 oz when it starts production in Q3 2025. Kiaka’s development remains on track, with construction more than 90% complete and first gold pour expected in Q3 2025. Once fully ramped up, Kiaka will more than double WAF’s annual production, cementing its status as a multi-mine gold producer. An updated 10-year production plan, expected in Q2 2025, will provide further clarity on long-term growth potential. Exploration Upside with a Robust Drilling Program Beyond production growth, WAF is aggressively investing in exploration. A USD 20 million drilling program is planned for 2025, targeting high-grade extensions at M1 South, M5 South, and Toega. The company already boasts a 12.5 Moz mineral resource and 6.2 Moz ore reserve, but with over 115,000 meters of drilling planned, we see plenty of room for further expansion. WAF also holds a dominant 1,385 km² land package along the Markoye fault system, offering additional exploration upside. Cost Efficiencies Enhancing Margins WAF is focused on keeping costs in check. The Sanbrado grid power connection, expected to be completed in 2026, will reduce processing costs by USD 12 million per year, with a payback period of just 20 months. The company has also rebuilt its in-house drilling capacity, lowering exploration costs, and is exploring throughput optimization studies at both Sanbrado and Kiaka, which could push production beyond 500,000 oz per year over time. Valuation Disconnect Presents a Buying Opportunity Despite its growth trajectory, WAF remains undervalued relative to peers. With a strong balance sheet, no hedging, and a clear path to higher production, we see significant share price appreciation ahead. At our target price above USD 3.30 per share, WAF presents a compelling opportunity, and we believe the market will start recognizing its full value as the company executes its growth strategy. With production set to double, a rock-solid financial position, and significant exploration upside, WAF is well-positioned for a major re-rating. We reiterate our high conviction buy rating and expect continued value creation as the company advances toward its next phase of growth. Qantas Airways Limited (ASX: QAN) – Upside Potential: +19% TP: $10.75/share Qantas Group (QAN) is a solid long-term buy, and there’s a lot to like about its current trajectory. For the half-year ending December 31, 2024, the Group posted an impressive Underlying Profit Before Tax (PBT) of $1.39 billion, up 11%, and a Statutory Profit After Tax (PAT) of $923 million, an increase of 6%. This performance highlights the strength of Qantas’ dual-brand strategy, catering to both premium and budget-conscious travellers. It’s clear that their diversified model is delivering strong results, even in a challenging economic climate. Strong Performance Across the Board What stands out to us is how both Qantas and Jetstar have thrived in different segments. Qantas saw solid growth in premium and corporate travel, capturing a strong market share among both large corporations and small-to-medium-sized businesses. At the same time, Jetstar hit a record number of customers, even with the pressures of a high-cost environment. Interestingly, one in three Jetstar customers flew for under $100, proving that even in tougher times, there’s demand for affordable options. Overall, the Group carried almost 10% more customers than the year before, which speaks volumes about the strength of both brands. The Group’s ongoing fleet renewal is key to future growth. In the first half of FY25, Qantas added 11 new aircraft and five mid-life aircraft to its fleet. Jetstar’s fleet grew with six A321LRs and two A320neos, improving fuel efficiency and boosting capacity. These aircraft are a big part of the Group’s plan to increase operational efficiency and customer satisfaction. On top of that, Qantas introduced five A220s, which are expected to deliver $9 million in annual EBITDA benefits once the fleet reaches scale. Qantas is also refreshing its cabins, with 42 Boeing 737s set to receive new next-gen business and economy seats. This investment not only enhances the customer experience but supports the airline’s strategy to maintain a premium offering in a competitive market. Loyalty Program Showing Strength Qantas Loyalty continues to perform well, with 11% growth in active members and 10% growth in points earned. Membership now stands at 17 million, and over 13,000 Classic reward seats are booked daily. The recent acquisition of TripADeal is expanding its holiday package offerings, driving even more engagement. With the introduction of Classic Plus, offering an additional 20 million reward seats, Qantas Loyalty is building stronger customer loyalty, and we expect 10% EBIT growth for the full year. Looking Ahead We’re optimistic about Qantas’ future. For the second half of FY25, Group Domestic revenue is expected to rise by 3-5%, driven by ongoing demand from both corporate and leisure customers. Group International revenue is expected to stay flat, but international travel is still performing well, particularly in premium cabins. Meanwhile, Qantas Freight is set to see $10-30 million more in revenue, thanks to strong e-commerce growth and high demand in the freight market. Jetstar’s expansion also looks promising, with new routes opening to Singapore, Vanuatu, and Bangkok. And even though Group International fares were down by 6.6%, this is largely due to increased capacity and more competitive pricing – an effort to boost demand as the market remains competitive. Financial Strength and Shareholder Returns Qantas is in a strong position financially, with $11.5 billion in liquidity, including $2.3 billion in cash. For the first time since FY19, the Group is paying out dividends – $250 million in base dividends and an additional $150 million in special dividends, both fully franked. This is a sign of Qantas’ strong recovery and commitment to rewarding shareholders. The Group has also completed $431 million in on-market share buybacks, further showing their focus on delivering value to shareholders. Despite rising costs, Qantas is actively managing inflation and higher expenses through transformation initiatives, aiming to save $400 million in FY25. This includes offsetting the impact of Same Job Same Pay legislation, which is expected to cost $65 million in FY25. By executing on these cost-saving initiatives, the Group is well-positioned to mitigate inflationary pressures. Valuation and Upside Potential Given Qantas’ strong financial position, ongoing fleet renewal, and solid growth in both its domestic and international businesses, we see 19% upside potential from here, with a target price of $10.75 per share. That said, the Group’s diversified approach, fleet investment, and loyalty program make it a compelling long-term investment. With a strong balance sheet and a focus on shareholder returns, Qantas is well-positioned for further solid growth potential. Macquarie Group Ltd (ASX: MQG) – Upside Potential: +62% TP: $320/share We’re sticking with Macquarie Group (MQG) as one of our top picks this month. The recent market correction presents a great opportunity to pick up shares at a more attractive price. Despite some market headwinds, MQG’s well-diversified business model continues to show resilience, especially in its annuity-style businesses, which are delivering solid growth. Our target price for MQG is $320, which represents a potential upside of +62% from current levels. Strong Performance from Annuity-Style Businesses For the nine months to 31 December 2024 (FY25 YTD), Macquarie’s net profit after tax (NPAT) has remained fairly consistent with last year, but what stands out is the performance of its annuity-style businesses. These businesses, including Macquarie Asset Management (MAM) and Banking and Financial Services (BFS), have seen strong growth. MAM, for example, has benefited from higher performance fees and investment income, while BFS has continued to grow its volumes and reduce operating expenses, even though margins have been under some pressure. Macquarie Asset Management (MAM) Keeps Growing MAM saw its assets under management (AUM) reach $942.7 billion by 31 December 2024, a 3% increase from the previous quarter. Public Investments AUM grew 5%, reaching $571.0 billion, largely thanks to favourable foreign exchange movements. Private Markets AUM climbed to $371.7 billion, boosted by increased net asset valuations. Private Markets now holds $212.9 billion in equity, with $27.4 billion of equity available to deploy. The team raised $3.8 billion, invested $7.3 billion, and divested $12.7 billion during the quarter, showing that the business is still firing on all cylinders. BFS Continues to Perform Well BFS is also delivering strong results. Total deposits grew by 7%, hitting $163.8 billion by the end of December 2024. The home loan portfolio increased by 5% to $136.2 billion, and funds on platform rose to $152.4 billion. However, we did see a slight dip of 1% in the business banking loan portfolio, down to $16.5 billion. While that’s something to keep an eye on, it doesn’t take away from the overall solid performance across BFS. Markets-Facing Businesses Face Some Challenges Now, the markets-facing businesses, including Commodities and Global Markets (CGM) and Macquarie Capital, have had a tougher time. CGM saw a significant decline in net profit, mostly due to soft conditions in certain commodity markets and the timing of income recognition on North American Gas and Power contracts. That said, Macquarie’s financial markets business did well, especially with more income from corporates and private equity firms through risk management and financing activities. Asset Finance also saw growth, especially in areas like Shipping Finance, Technology, and Resources. Macquarie Capital Is Holding Up Well Macquarie Capital had an increase in fee and commission income, driven by higher M&A activity, although this was partially offset by lower investment-related income due to the timing of gains. Overall, we see this segment holding steady and continuing to contribute to Macquarie’s diverse revenue stream. Solid Balance Sheet and Strong Capital Position One of the things we really like about Macquarie is its strong financial position. The company ended December 2024 with a group capital surplus of $8.5 billion, well above regulatory requirements. The Bank’s CET1 ratio stood at 12.6%, while the harmonized ratio was 17.7%. The leverage ratio came in at 5.0%, with a liquidity coverage ratio (LCR) of 196% and a net stable funding ratio (NSFR) of 113%. These numbers demonstrate that Macquarie has a solid foundation and plenty of room to navigate through potential challenges. Outlook: Positioned for Medium-Term Growth Looking forward, we maintain a cautious approach, but we’re confident that Macquarie is in a strong position for continued medium-term growth. Its diversified business model, solid balance sheet, and effective risk management all give it the ability to thrive, even in uncertain times. With structural growth drivers still in place in key markets and Macquarie’s disciplined approach to growth, we believe the company will continue to perform well. That said, we see the recent market pullback as a great opportunity to increase exposure to MQG. The company’s strong performance in its annuity-style businesses, solid capital position, and proven ability to adapt to market volatility make it a strong pick. With everything we’re seeing, we’re confident that Macquarie Group remains a high-conviction buy this month, offering a target price of $320 with a potential upside of +62%.