The team at Bell Potter has made some significant changes to its Australian equities portfolio this month.
And the broker's message is clear. Now could be a good time to increase exposure to quality.
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Focus on quality ASX shares
Bell Potter notes that the S&P/ASX 200 index (ASX: XJO) has been one of the weaker major equity markets in 2026. But underneath the index, the falls have been much more severe, with a number of quality businesses down more than 20% despite relatively modest changes to earnings expectations.
It believes higher bond yields, subdued economic growth expectations, and concerns around artificial intelligence (AI) disruption have weighed on valuations more than company fundamentals.
This has created an opportunity to upgrade the quality of its portfolio, highlighting Charter Hall Group (ASX: CHC), Washington H. Soul Pattinson and Company Ltd (ASX: SOL), and Wesfarmers Ltd (ASX: WES) as opportunities. It explained:
The portfolio changes reflect a deliberate shift towards businesses with proven management teams, resilient earnings, strong balance sheets and long-term capital allocation credentials. Specifically, Soul Patts and Wesfarmers are proven high-quality capital allocators, providing a solid ballast in a portfolio and worthy of long-term ownership. Charter Hall, on the other hand, offers compelling value at a point when markets appear to be underappreciating the group's long term growth potential.
Bell Potter also notes that it has been positioned for interest rates to remain higher for longer.
However, with that view now becoming more widely accepted and rate-sensitive sectors already de-rating, the broker believes valuations are starting to offer a margin of safety. It said:
Knowing equity markets look forward, we are neutralising our positioning given affected sectors have moved to factor in rate, policy and competitive headwinds, with valuations now representing a margin of safety. Collectively, these changes increase exposure to long-term structural growth, recurring earnings and proven capital allocators which have scope for long term value creation.
The buys
Bell Potter has added Charter Hall to gain exposure to a potential recovery in property capital markets.
The broker highlights the company's $94 billion funds management platform and its exposure to office, industrial, retail, and social infrastructure.
It also likes that Charter Hall is not simply a traditional property owner. Its earnings are driven heavily by managing capital for institutional investors, giving the business a more scalable model. Bell Potter said:
CHC offers exposure to recovering property capital markets, growing institutional allocations to real assets and a high-quality funds management platform, underpinned by solid dividend growth averaging 6% per annum and a strong track record of long-term earnings growth.
Bell Potter is also buying Soul Patts shares, which it describes as Australia's Berkshire Hathaway. It likes the company's permanent capital base and ability to invest across listed shares, private businesses, credit, and real assets.
This gives management flexibility to deploy capital wherever it sees the best opportunities, including during periods of market weakness. It said:
SOL's portfolio is deliberately diversified and increasingly liquid, providing the flexibility to capitalise on opportunities as they arise. The group's strong balance sheet, permanent capital base and extensive deal flow allow it to invest counter-cyclically when others cannot.
Finally, Bell Potter has added Wesfarmers after its shares fell around 20% from their mid-year peak.
The broker believes this has created an opportunity to buy one of Australia's highest-quality companies at a more attractive valuation.
It sees the investment case as extending beyond Bunnings and Kmart, with Wesfarmers also offering exposure to healthcare, lithium, and industrial businesses. Bell Potter said:
WES combines earnings resilience, growth optionality and disciplined capital allocation. Its portfolio spans household spending, housing, industrial demand and healthcare, reducing reliance on any single driver, while market-leading positions at Bunnings and Kmart generate defensive cash flows and healthcare, lithium and industrial technology investments provide additional growth avenues.
