According to a report by the Australian Bureau of Statistics (ABS) published on December 4, 2024, the Australian economy grew by 0.3% in the September quarter of 2024, which marked the twelfth consecutive quarter of growth. This growth, however, was the lowest rate since the December quarter of 2020 after the COVID-19 pandemic. The report also noted that in nominal terms, GDP rose by 0.4%.

In terms of trade, a key indicator of the economy’s international competitiveness fell by 2.5% in the quarter. This decline was primarily due to a 2.6% drop in export prices and was the third consecutive quarterly fall. The weakening in global bulk commodity demand, particularly from China, significantly affected the prices of metallurgical coal and iron ore. Import prices also fell slightly by 0.1%, aligning with lower global oil prices.

However, public investment surged by 6.3% after three-quarters of decline, with government investment rising, driven by increased imports of defense equipment and investments in hospital and road projects. State and local public corporations also contributed to the rise, with increased activity on major road and renewable energy projects.

READ ALSO: 12 Most Promising Green Stocks According to Hedge Funds and 10 Worst Performing Energy Stocks in 2024.

According to Morgan Stanley’s 2025 Outlook and Implications for Australian Investors, the outlook for Australian equities is optimistic, though it is expected to lag behind major developed markets, particularly the United States. Morgan Stanley has raised its year-end 2025 price target for the ASX 200 to 8500, reflecting a base case multiple of 17.0x and a forecasted 10% earnings per share growth over the next 12 months. Within the Australian market, Morgan Stanley favors sectors that are poised for strong performance, such as healthcare, technology, and consumer discretionary. These sectors are expected to benefit from secular growth trends and favorable macroeconomic conditions.

In the energy sector, Morgan Stanley anticipates lower crude oil prices in 2025 due to rising supply from both OPEC and non-OPEC producers, outpacing slowing demand growth. This could impact energy-related stocks and investments. Regarding metals, copper remains the top pick, driven by declining inventories and demand recovery at lower price levels. For gold, the outlook is more cautious, with limited upside expected despite potential tailwinds from rate cuts. According to the report, physical demand for gold is beginning to soften, which may dampen its appeal as a safe-haven asset.

The Australian economy continues its growth streak and sectors such as healthcare, technology, and consumer discretionary are positioned for strong performance. With that in context, let’s take a look at the 10 best ASX stocks to buy according to hedge funds.

Our Methodology

To compile our list of the 10 best ASX stocks to buy according to hedge funds, we used Finviz and Yahoo stock screeners to identify companies that are dual-listed in the United States and Australia. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10 Best ASX Stocks to Buy According to Hedge Funds

10. NOVONIX Limited (NASDAQ:NVX)

Number of Hedge Fund Holdings: 1

NOVONIX Limited (NASDAQ:NVX) is an Australian-based battery materials and technology company specializing in high-performance synthetic graphite anode materials and cathode materials for lithium-ion batteries. The company’s products are integral to electric vehicles and energy storage systems. NOVONIX Limited (NASDAQ:NVX) also offers advanced battery cell testing equipment and research services to assist manufacturers in enhancing battery performance.

NOVONIX Limited (NASDAQ:NVX) is taking significant steps to grow and solidify its position as a leader in the battery materials and technology sector. One of the key initiatives is the expansion of its production capacity. The company is in the process of securing a new site in the Enterprise South Industrial Park in Chattanooga, Tennessee, for its second mass production plant. This facility is expected to reach a full production capacity of 31,500 tonnes per annum (tpa) by the end of 2028. This expansion, combined with the existing 20,000 tpa facility at Riverside in Chattanooga, will bring the company’s total production capacity to over 50,000 tpa by 2028 and will significantly enhance the company’s ability to meet the growing demand for high-performance synthetic graphite.

NOVONIX Limited (NASDAQ:NVX) is also focusing on strengthening its customer relationships and securing long-term supply agreements. The company has signed binding offtake agreements to supply synthetic graphite to major players in the battery industry, including Panasonic Energy, Stellantis, and PowerCo. These agreements ensure a stable demand for the company’s products and provide a solid foundation for the company’s growth plans.

9. Kazia Therapeutics Limited (NASDAQ:KZIA)

Number of Hedge Fund Holdings: 1

Kazia Therapeutics Limited (NASDAQ:KZIA) is an Australian oncology-focused biotechnology company dedicated to developing innovative cancer therapies. The company’s lead program, paxalisib, is an investigational drug designed to treat glioblastoma, an aggressive form of brain cancer.

Kazia Therapeutics Limited’s (NASDAQ:KZIA) leading drug candidate, paxalisib, has demonstrated encouraging results in clinical trials for glioblastoma. The company recently received feedback from the US FDA regarding paxalisib, which will influence its future development plans. While the FDA has stated that data from the GBM-AGILE study will not support accelerated approval for paxalisib, the company is actively assessing alternative strategies. The FDA has indicated that overall survival data from the study could be utilized to support traditional or standard approval, and Kazia Therapeutics Limited (NASDAQ:KZIA) is working to design a pivotal registrational study for the drug. This study will play a key role in shaping the future of paxalisib and the company’s growth prospects.

Beyond its work on paxalisib, Kazia Therapeutics Limited (NASDAQ:KZIA) is pursuing growth opportunities through strategic partnerships and licensing agreements. Recently, the company entered into an agreement with QIMR Berghofer Medical Research Institute, granting it an exclusive license to specific intellectual property rights related to combination therapies involving inhibitor drugs and immunotherapy. This partnership has the potential to expand Kazia Therapeutics Limited’s (NASDAQ:KZIA) pipeline and unlock new opportunities for developing innovative treatments.