ASX Results Season 2025

We’re in the middle of reporting season and our analyst team is as busy as ever, which includes me.

Commonwealth Bank (ASX. CBA)

I cannot go past the CBA’s result.
Current price: $165.24

The stock has returned about 45% in the past 12 months and 25% a year for the past three years.

My key reading of this stellar rise is that investors are scared and are paying up for quality. We’ve been promoting a dollar cost averaging for CBA in our Building Wealth $500 Strategy. But whatever strategy you’ve used, if you own CBA you’re happy.

Does valuation matter?

The stock now trades on a PE of 27 times and as we ask in Blue Chip, does valuation matter? Yes it does! But I might add that it’s a pretty grey area. Brokers have been wrong on CBA, selling it for the past 2 years. I argue that they’re missing the wood for trees.

I like to compare CBA to the 10-year bond

You need to compare CBA to the 10 year bond. Why? Because it’s got consistent earnings so long as the economy doesn’t fall out of bed, meaning unemployment. But the spread between CBA’s dividend yield and the 10 year government bond is widening. A year ago CBA was trading on a yield of 4% while Aussie bonds were 4.3%. Now CBA’s on 3% while the bond’s 4.6%.

Valuations are based on future cash flows discounted back to today. The more you pay for a stock, the lower your return. 

Core stocks for your portfolio

CBA is a good core stock and the return reflects momentum, driven by an unexpected goldilocks economic landing supercharged by ETF buying. But it’s a core stock and this return won’t be repeated.

Core stocks is how we view Blue Chips – that’s why we call them blue chips. But what we’re seeing is big valuation differentials. You need to be buying stocks that can deliver bigger returns. I’m not saying sell CBA. I’m just saying bank those dividends and buy stocks that have better bang for your buck.

Which Blue Chips are we buying?

In blue chip this week we analyse Amcor and Macquarie Group – these are both stocks worth buying.

Small Caps is where there is future growth

But if you really want to make a difference to your future you cannot go past small caps. This is where the juice is. Why? Because there are heaps of stocks where the future isn’t priced into the current valuation.

I’ll just repeat some of the small caps that have moved by 50% plus in the past few months:

• Omni-Brideway
• Paragon Care
• SomnoMed
• Medical Developments
• Praemium
• Hansen Technologies
• PureProfile
• Quickstep

I could go on. The point is that there will be more because that’s where the value is.
We will have packed blue chip and small cap reports in the next few weeks with lots of stocks highlighted where we see value.