According to a report by Vanguard published on January 24, Australia’s economy is expected to experience a gradual recovery in 2025, following its slowest growth in 32 years in 2024. The report forecasts an economic growth of 2% year over year by the end of 2025, with trimmed mean inflation, a core measure that excludes items at the extremes, expected to reach 2.5% year over year. However, the report notes that low productivity growth and higher unit labor costs will keep core inflation from falling sustainably to the midpoint of the Reserve Bank of Australia’s (RBA) 2%–3% target range until later in 2025.

The RBA has left its policy rate target unchanged at 4.35% since December 10, but has softened its language around future policy decisions, noting that it is “gaining some confidence that inflation is moving sustainably toward the target.” Despite this, Vanguard expects the RBA to remain patient and not initiate rate cuts until the second quarter of 2025, due to a tight labor market.

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

In an interview on January 19, Lochlan Halloway, Market Strategist at Morningstar Australia, pointed out that the premium to fair value of large-cap stocks in the Australian market is abnormally high, trading at around 20% above fair value. According to Halloway, this is a concern as 20 companies account for about 60% of the ASX 100.

In terms of value opportunities, Halloway identified the energy sector, particularly companies that are trading at significant discounts to their fair value. He also noted that small-cap companies, which were largely left behind in the market rally may offer value, although investors need to be judicious in selecting quality companies. Additionally, sectors such as consumer defensives appear close to fair value or even cheap.

As the Australian economy gradually recovers in 2025, opportunities lie in undervalued sectors such as energy and consumer defensives, as well as among small-cap companies that have yet to catch up with the broader market rally. With that in context, let’s take a look at the 10 best Australian stocks to buy now.

Our Methodology

To compile our list of the 10 best Australian stocks to buy now, we used Finviz and Yahoo stock screeners to identify Australian companies. 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 Australian Stocks to Buy Now

10. Kazia Therapeutics Limited (NASDAQ:KZIA)

Number of Hedge Fund Holdings: 1

Kazia Therapeutics Limited (NASDAQ:KZIA) is an Australian biotech company dedicated to the development of innovative treatments for various types of cancer, with a particular emphasis on brain cancer. The company partners with research organizations and aims to bring novel cancer treatments to market for healthcare providers and patients.

Kazia Therapeutics Limited’s (NASDAQ:KZIA) lead candidate, paxalisib, has shown promising results in clinical trials for glioblastoma, a type of brain cancer. The company has recently received feedback from the US FDA regarding its lead candidate, paxalisib, which has implications for the company’s future development plans. Although the FDA has indicated that the data from the GBM-AGILE study will not support accelerated approval for paxalisib, the company is exploring alternative paths forward. The FDA has suggested that the overall survival data from the study could be used 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 be crucial in determining the future of paxalisib and the company’s prospects for growth.

In addition to its work on paxalisib, Kazia Therapeutics Limited (NASDAQ:KZIA) is also exploring new opportunities for growth through strategic partnerships and licensing agreements. The company recently entered into an agreement with QIMR Berghofer Medical Research Institute and granted it an exclusive license to certain intellectual property rights related to combination therapies consisting of inhibitor drugs and immunotherapy. This agreement has the potential to expand Kazia Therapeutics Limited’s (NASDAQ:KZIA) pipeline and create new opportunities for the company to develop innovative treatments.

9. Immutep Limited (NASDAQ:IMMP)

Number of Hedge Fund Holdings: 2

Immutep Limited (NASDAQ:IMMP) is a biotechnology company at the forefront of developing novel immunotherapies for the treatment of various cancers and autoimmune disorders. The company is pioneering the use of LAG-3 (Lymphocyte-Activating Gene 3) protein-based therapies, with a primary focus on its lead candidate, eftilagimod alpha (efti). Immutep Limited (NASDAQ:IMMP) collaborates with pharmaceutical companies and research institutions worldwide.

Immutep Limited (NASDAQ:IMMP) is focusing on the treatment of non-small cell lung cancer (NSCLC), a prevalent and aggressive form of cancer. The company has made substantial progress with its phase 1 INSIGHT-003 study, which evaluated the combination of efti, KEYTRUDA, and chemotherapy in first-line metastatic non-squamous (NSCLC) patients. The results have been highly promising and were observed across all PD-L1 expression levels. This success has paved the way for the initiation of the phase 3 TACTI-004 study, which aims to further validate these findings and potentially establish efti as a new standard of care for NSCLC patients.

Beyond NSCLC, Immutep Limited (NASDAQ:IMMP) is exploring the potential of efti in treating other cancers and autoimmune disorders. The company has already demonstrated positive results in a phase 2b TACTI-003 study, where efti in combination with KEYTRUDA was used to treat first-line recurrent or metastatic head and neck squamous cell carcinoma (HNSCC). Additionally, Immutep Limited (NASDAQ:IMMP) is investigating the use of efti in the neoadjuvant setting for resectable soft tissue sarcoma (STS), where it has shown the ability to achieve three-fold higher levels of hyalinization/fibrosis compared to historical radiotherapy controls.