While different investors have varying strategies and risk appetites, it's not outrageous to suggest they all need a solid foundation in their portfolios.
That's why it's notable to see which S&P/ASX 200 Index (ASX: XJO) shares Wilsons equity strategist Rob Crookston has chosen as the stocks that everyone should buy and forget about for the next five years.
"Our top 5 'bottom drawer' stocks that we see as long-term winners deserving a place in every investor's portfolio are CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Worley Ltd (ASX: WOR), NextDC Ltd (ASX: NXT), and Netwealth Group Ltd (ASX: NWL)," Crookston said in a memo to clients.
"These companies provide leverage to attractive structural thematics including healthcare innovation (CSL), the energy transition (Macquarie, Worley), cloud computing and AI (NextDC), and industry disruption (Netwealth)."
People are getting older
The world is ageing, and this gives healthcare businesses abundant opportunities.
"Breakthroughs in biotechnology, precision medicine, and digital health are reshaping the industry," said Crookston.
"Healthcare stocks present an attractive proposition for long-term investors seeking sustainable growth."
With CSL specifically, there are three tailwinds that give Crookston conviction that the stock price will be much higher in five years' time: plasma collection recovery, new products, and reinvestment.
"Plasma-derived therapies, such as immunoglobulins, are crucial for treating various medical conditions… CSL's robust pipeline of new products presents an exciting growth opportunity," he said.
"CSL's commitment to reinvesting in innovation ensures a sustainable competitive advantage."
Someone has to receive the investment in clean energy
The global transition to lower carbon emissions will require a lot of money to achieve.
Crookston cited International Energy Agency (IEA) figures that approximately US$2.8 trillion will be invested in the energy sector this year.
"More than US$1.7 trillion will be allocated to clean energy, including renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements, and end-use renewables and electrification," he said.
"This staggering figure underscores the immense scale of investment needed to transition to a low-carbon economy."
The Wilson team reckons Macquarie Group and Worley will be two of the major ASX beneficiaries of this massive investment.
"Green energy is an area of differentiation between Macquarie and its peers, with Macquarie having a first-mover advantage in the space," said Crookston.
"Worley's pipeline of sustainability projects is close to 70%, reflecting management's shift towards clean energy."
Cloud computing, artificial intelligence and disruption
Cloud computing had already been a massive growth area over the past decade, but the recent rise of artificial intelligence has placed even more demand on such infrastructure.
"AI algorithms rely on extensive datasets for training, testing, and continuous learning," said Crookston.
"Data centres provide the storage capacity and computational power necessary to handle these large datasets and perform the complex calculations and analyses required by AI models."
He called NextDC a "key player" in the Australian data centre industry.
"Our expectation is that the transition to cloud will be a long term — decades — process.
"In this scenario, NextDC should continue to win new contracts, and increase utilisation. This would lead to a substantial lift in earnings over the long term."
Meanwhile Netwealth is disrupting its own industry with its investment platform.
"The Specialist Platform Providers (SPPs), including Netwealth, are taking market share with platforms 2 to 3 years ahead of incumbents and we think this technology gap will continue over the medium-term," said Crookston.
"Netwealth has a market share of 6.7%… We believe there is further market penetration to go, which should continue to drive FUA [funds under management] and earnings growth over the medium-term."
