In this article, we take a look at the 10 best ASX stocks to invest in. If you want to see more stocks listed on the ASX, go directly to the 5 Best ASX Stocks To Invest In.

Australia, formally known as the Commonwealth of Australia, is an independent nation encompassing the primary landmass of the Australian continent, the island of Tasmania, and various smaller islands. The country holds a considerable landmass and benefits from its strategic location within the Asia Pacific region, home to economic giants like China, Japan, and South Korea. These nations have a substantial demand for Australia’s abundant natural resources, particularly iron ore. For those who are interested in learning, you can explore our article on the 15 fastest-growing countries in Asia.

ASX

The ASX, short for the Australian Securities Exchange, holds a prominent position among stock exchanges in the Asia-Pacific region due to the scale of the Australian economy. Being a primary exchange in the nation, ASX accommodates listings of over 2,000 companies, encompassing major blue chip firms in Australia. In the early months of 2023, the ASX/S&P 200 index had a robust beginning, marked by a revival in the tech sector and a significant rise in AI stock values. However, market dynamics remained unpredictable, and the research firm Morningstar emphasized caution to investors, citing the lingering effects of the 2022 rate hikes that would continue to influence household consumption throughout 2023.

Market Developments in Australia

The Westpac-Melbourne Institute Leading Index, an indicator predicting Australia’s economic activity for the next three to nine months, has shown a slight improvement. It has moved up from -0.56% in July 2023 to -0.50% in August 2023. Despite this small uptick, the overall outlook remains bleak. The series of negative figures since August of the previous year accurately foretold the economic downturn experienced in 2023. The economy expanded at an annualized rate of 1.6% during the March and June quarters, considerably below the typical trend growth of around 3% per year.

Westpac foresees this lackluster performance continuing into the following year, with an expected economic growth of less than 1% up to June 2024. Nevertheless, Westpac Banking Corporation (ASX:WBC) indicated the possibility of ‘some upside risks’ to this prediction, given an anticipated population growth exceeding 2% in 2023. Despite the potential positive impact of population growth on the economy, the bank cautioned that economic growth is likely to lag behind. This trend was evident in both the March and June quarters of the current year, during which GDP per capita contracted by 0.3%. While the leading index has seen a minor improvement since the beginning of this year, shifting from -0.73% in February to the current -0.50%, this marginal increase of 0.24 percentage points does little to allay concerns about the Australian economy’s recovery.

In another spectrum, the Australian government announced a budget surplus of 22.1 billion Australian dollars ($14.2 billion) on September 22 for the last fiscal year, marking the first time the nation has achieved a balanced budget in 15 years. This surplus was attributed to low unemployment rates and high prices of Australia’s key commodities like iron ore, coal, and gas, amounting to 0.9% of Australia’s GDP. The positive fiscal outcome for the fiscal year ending on June 30 surpassed the earlier May forecast of a AU$4.3 billion ($2.8 billion) surplus, thus marking a substantial improvement from the AU$77.9 billion ($49.9 billion) deficit predicted prior to the May 2022 elections.

However, Treasurer Jim Chalmers stated that he doesn’t anticipate another budget surplus in the current fiscal year. He pointed to China’s economic challenges and recent interest rate hikes in Australia as factors continuing to restrain growth. Chalmers emphasized the creation of 550,000 jobs since the election of the center-left Labor Party government last year. According to Australian Bureau of Statistics data, the jobless rate stood at 3.7% in August.

The last time the Australian government achieved a budget surplus was in the 2007-08 fiscal year, with a surplus of AU$19.7 billion ($12.6 billion), constituting 1.7% of GDP. This surplus was recorded just months before the global financial crisis, which plunged the nation’s finances into the red.

Our Methodology

In curating our list of the 10 Best ASX stocks to invest in, we picked 10 stocks possessing strong competitive edges, and are favored by hedge funds in our database. The mentioned firms may experience a short-term dip if economic data falls short of expectations, yet they exhibit promising long-term growth prospects. Additionally, fluctuations in the exchange rate between the U.S. dollar and Australian dollar can impact the valuation of these companies in U.S. dollar terms. The following stocks are ranked according to the number of hedge funds that are invested in them. However, in the event of a slowdown in the global economy, the Australian economy may also experience a deceleration. Given the uncertainties in the near term, it might be prudent for long-term investors to possess a diversified portfolio consisting of prominent stocks from various sectors.

10. Mesoblast Limited (ASX:MSB)

Number of Hedge Fund Holders: 2

Mesoblast Limited (ASX:MSB), an Australian company specializing in regenerative medicine, is focused on developing therapies for inflammatory conditions, cardiovascular disease, and back pain. In a recent development on September 21, Mesoblast Limited (ASX:MSB) advanced in its pursuit of gaining approval for its off-the-shelf therapy, remestemcel-L, targeting steroid-refractory acute graft-versus-host disease. Following a meeting with the FDA, the company is optimistic about utilizing new potency assay data and a single-arm trial to enhance the candidate’s chances of approval, marking their third attempt to bring this therapy to the market. Despite previous challenges in gaining FDA approval, Mesoblast Limited (ASX:MSB) remains committed to finding viable solutions. Investors demonstrated enthusiasm for these propositions, causing Mesoblast Limited (ASX:MSB)’s shares to rise by 6% to $1.39 in premarket trading.

9. Immutep Limited (ASX:IMMP)

Number of Hedge Fund Holders: 2 

Immutep Limited (ASX:IMMP) operates as a biotechnology firm primarily focused on advancing cancer immunotherapy through the utilization of the LAG3 immune control mechanism. Based in New South Wales, the company’s foundations were established with a focus on CVac, a therapeutic cancer vaccine. On September 21, the company obtained regulatory approval for the commercial-scale production of Eftilagimod Alpha (efti) at a volume of 2,000 liters for use in clinical trials. Eftilagimod Alpha, developed by Immutep Limited (ASX:IMMP), is a proprietary soluble LAG-3 protein and MHC Class II agonist intended to activate innate and adaptive immunity for cancer treatment. This approval spans several European countries, including Germany, Belgium, Denmark, and the United Kingdom. After the successful expansion of efti’s production process to commercial scale at WuXi Biologics, significant modifications to the process were integrated into a substantial update of the Investigational Medicinal Product Dossier (IMPD). This achievement ensured comprehensive comparability between the original 2,000L scale and the earlier 200L scale manufacturing process utilized in clinical phases. The publicly listed company on ASX mentioned its plans to include efti produced through the 2,000 liter scale process in ongoing and forthcoming clinical trials.

8. Opthea Limited (ASX:OPT)

Number of Hedge Fund Holders: 4

Opthea Limited (ASX:OPT) is a biopharmaceutical company focused on developing innovative treatments for prevalent and progressive retinal conditions, notably wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME). The company’s primary product candidate, OPT-302, is in pivotal Phase 3 clinical trials. OPT-302 is designed for use in combination with anti-VEGF-A monotherapies to achieve broader inhibition of the VEGF family. This approach aims to enhance overall treatment efficacy and demonstrate superior vision improvements compared to inhibiting VEGF-A alone. Earlier this August, Opthea Limited (ASX:OPT) disclosed plans to secure AU$80 million (US$51.2 million) through a AU$10 million private placement and a AU$70 million entitlement offer for its OPT-302 candidate.

7. James Hardie Industries plc (ASX:JHX)

Number of Hedge Fund Holders: 6

James Hardie Industries plc (ASX:JHX) is a leading international building materials corporation and the largest worldwide producer of fiber cement goods. Based in Ireland, it is a dual-listed entity on both the Australian and New York Stock Exchanges. The company’s current management is based in Chicago, Illinois, United States. On August 7, James Hardie Industries plc (ASX:JHX) released its first-quarter results for the period ending 30 June 2023. The company witnessed a 13% rise in Net Income and achieved earnings of $0.39 per share, indicating a remarkable 11.43% increase compared to the $0.35 per share earned during the same period the previous year, and a 14% increase in compared to the first quarter of the fiscal year 2023.

6. Iris Energy Limited (ASX:IREN)

Number of Hedge Fund Holders: 8

Iris Energy Limited (ASX:IREN) operates as an Australia-based sustainable Bitcoin mining company, specializing in constructing, possessing, and managing data center infrastructure. The company emphasizes entering regions with ample and underutilized renewable energy resources to sustain its operations. The eco-friendly Bitcoin mining firm reported a notable 28% surge in revenue, reaching $75.5 million for the fiscal year ending on June 30, compared to $59 million in the previous year. This growth was achieved even amidst a decline in the average price of Bitcoin. The amount of Bitcoin mined witnessed an impressive 133% increase, setting a new record at 3,259, largely propelled by the expansion of the operating hashrate.

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Disclosure. None. 10 Best ASX Stocks To Invest In is originally published on Insider Monkey.