I narrowed my 2027 ASX watchlist to 3 shares. Then I picked a winner

One looks particularly cheap, another has a dominant market position, and the third could have enormous room to grow.

With 2027 approaching, I've been thinking about which ASX shares I'd most like to own over the next few years.

I've settled on three different businesses whose prospects and valuations give me reasons to be optimistic. I would buy all of them today, although one stands above the others for me.

Here's how I arrived at my decision.

Man working with his colleague with a hologram of a world map.

Image source: Getty Images

Qantas Airways Ltd (ASX: QAN)

My first pick is one I suspect some investors will find surprising. Airlines can be difficult investments. Fuel costs jump, demand weakens when the economy struggles, and aircraft are expensive.

But I think Qantas has more going for it than those challenges alone suggest. Its domestic position is strong, with Qantas serving full-service travellers and Jetstar targeting budget-conscious passengers. The loyalty business also generates earnings beyond selling seats.

As Qantas modernises its fleet, newer aircraft should lower operating costs and improve the passenger experience. Project Sunrise could also open new premium long-haul routes.

And importantly, I don't think Qantas shares are priced as though investors expect much of that to go right.

At current levels, Qantas trades on a P/E ratio of roughly eight times forecast FY27 earnings, falling to less than six times FY29 estimates. Analysts also expect a dividend yield of approximately 4.6% in FY27, potentially rising to 5.7% by FY29.

I wouldn't expect an airline to command the earnings multiples of a software company. But with the potential for stronger earnings as its fleet investment starts paying off, I think Qantas is being undervalued and is a buy.

That's one place on my watchlist filled. My other choices come from different industries, with different ways to grow.

One already dominates a market that millions of Australians use. The other is expanding internationally with technology I believe could become far more important.

And it's the second of those that ultimately wins my vote.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has recommended Pro Medicus. 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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