The best ASX 200 shares to buy when interest rates fall

Bell Potter thinks investors should be buying these stocks ahead of interest rate cuts.

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While it is looking like there may yet be one more interest rate hike from the Reserve Bank of Australia, it won't be long until rates then start to ease.

For example, according to the Westpac Banking Corp (ASX: WBC) economics team, it is forecasting the cash rate to fall from 4.35% today to 3.1% by the end of 2025.

In light of this, analysts at Bell Potter think investors should be preparing their portfolios for when interest rates start to fall. Particularly given that US interest rates may start falling earlier and could put a rocket under global share markets.

But which ASX 200 shares should investors buy? Three of the best to buy according to the broker are as listed below. But firstly, here's what the broker is saying about which stocks to pick. It said:

The anticipated earlier rate cuts by the US Fed compared to the RBA will be more of an imminent catalyst for the Australian market. As a result, our stock ideas are focused on sectors within the Australian market that stand to gain the most from a US rate cut and that still look attractive from a valuation perspective.

Now, let's move onto the shares it rates as buys. They are as follows:

CSL Ltd (ASX: CSL)

Bell Potter is very positive on this leading biotherapeutics company and thinks now is the time to buy. Particularly after a few years of its shares going nowhere.

This is because it feels that CSL is going through a margin recovery phase which will underpin strong earnings growth. It said:

CSL presents an attractive buying opportunity. CSL has been in a holding pattern since 2020, and for good reason. COVID hit the business with higher collection costs for plasma, depressing margins. We anticipate the start of a margin recovery phase for CSL, driving above-market earnings growth. CSL trades at a 12-month forward PE of ~28x, representing a discount to its 10- year average of ~31x. With consensus expecting mid-teen earnings growth over the next few years, CSL trades on a PEG ratio of 1.7x, which looks attractive vs peers.

James Hardie Industries plc (ASX: JHX)

Another ASX 200 share that gets the thumbs up is building materials company James Hardie.

Bell Potter likes the company due to its strong market position, premium brand, and pricing power. It also sees rate cuts as an important catalyst. The broker explains:

James Hardie Industries (JHX), the leading global player in fibre cement, offers a compelling investment opportunity at current levels. 80% of JHX's earnings are from North America, so US Fed cuts will be an important catalyst for the stock. With a strong market position, premium brand, and pricing power, JHX is poised to capitalise on structural growth in the fibre cement market and cyclical tailwinds from potential US rate cuts. Following a recent pullback, JHX is trading at an attractive 12-month forward PE of ~19x. Considering the company's strong earnings growth prospects and robust fundamentals, this represents an appealing entry point.

Transurban Group (ASX: TCL)

Finally, Bell Potter thinks Transurban is an ASX 200 share to buy for when interest rates fall. It said:

Transurban (TCL) is a high-quality infrastructure stock poised to benefit from interest rate cuts. TCL can deliver consistent, low-risk cash flows over the long term, backed by its 30-year concession durations and proven ability to maintain earnings even during economic downturns. Strong population growth in key markets, margin expansion, and robust project pipeline should enable continued dividend growth over the medium to long term.

Motley Fool contributor James Mickleboro has positions in CSL and Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Transurban Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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