Five stock picks for 2025

For many years, the New Zealand Herald asked local sharebroking and wealth management firms to nominate five NZX companies they think will do well over the year ahead.

The format changed last year with participants asked to choose three NZX companies, one ASX company and one global company.

Astute investors understand that any well-constructed portfolio will hold more than five stocks and know that diversification across various regions and asset classes is important.

Regardless, the tradition is an interesting way to gain insights into what various organisations are expecting to see.

Below are the five stocks our investment team has selected for 2025, and the rationale for these picks.

But first, how did we fare in 2024?

Positive momentum continued throughout 2024 and it was another exceptional year for investors.

World shares gained another 18.0% following an impressive 22.8% rise in 2023. US stocks were the top performer, although major indices in the UK, Europe, Japan, Australia and emerging markets all moved higher.

After struggling for a few years, our local sharemarket turned a corner in the second half of 2024 and finished up 11.4%. Inflation continues to moderate and reached 2.2% in the September quarter, which is within the 1% to 3% range targeted by the Reserve Bank of New Zealand. Accordingly, the central bank lowered the Official Cash Rate from 5.50% to 4.25% and more policy easing will happen this year.

On average, our five stock picks returned 20.8% in local currency terms and 25.2% when measured in New Zealand dollars.

We selected quality companies that produce strong earnings and cash flows, and pay predictable dividends. Our five picks and their total returns in 2024 were:

1. Contact Energy (+25.8%)
2. Summerset (+30.7%)
3. Sky Network Television (+3.6%)
4. CSL Limited (-0.4% in Australian dollars and +2.2% in New Zealand dollars)
5. Amazon (+44.4% in United States dollars and +63.8% in New Zealand dollars)

All five companies produced positive returns for New Zealand investors with Amazon, Summerset and Contact Energy the standout performers.

In August, Sky Network Television reported slightly lower-than-expected profit and tempered investor expectations by reducing its revenue guidance. Concerns about its ability to renew the
New Zealand Rugby agreement also weighed on the share price. We continue to see value in this company and its dividend guidance has been retained.

CSL Limited produced solid earnings growth of 15% last year, but guidance of 10-13% growth for this year disappointed investors. CSL remains a quality company with long-term potential and a valuation that isn’t demanding.  

Our approach to equity investing doesn’t always lend itself to coming first in a contest like this. 

To come out on top during a period as brief as 12 months, a short-term trading mindset is often needed. As long-term investors, this isn’t something we specialise in.

Investing in quality companies is a key tenet of our investment philosophy across all regions.
For us, this means looking for businesses that are reliable with sustainable (and growing) earnings.

Our strategy of minimising volatility and limiting downside risk in difficult environments has historically delivered consistent and steady returns over time, rather than impressive short-term gains.

We have full confidence in our approach as a long-term generator of wealth, as evidenced by our track record over many years.

Looking ahead at 2025

There are reasons to be optimistic about this year and we encourage you to stay invested.
However, a degree of caution is advisable and it’s important that portfolios remain well diversified to navigate any challenges that may lie ahead.

A key focus for financial markets will be policy changes that emerge following the recent US election. Donald Trump’s victory sparked a positive response while also raising concerns about the outlook for inflation and foreign trade. Extending tax cuts and reducing regulation would support American businesses, whereas trade conflicts with other nations and stricter immigration laws have the potential to hinder economic growth.

Inflation and interest rates will be under the microscope too. We expect most central banks to keep easing monetary policy this year, but the approach taken will vary by region and we don’t anticipate interest rates will return to the abnormally low levels observed before and during the COVID-19 pandemic.

Despite a prolonged period of elevated inflation and interest rates, the global economy remains in reasonable shape and is forecast to grow by 3.2% in 2025. The United States has been remarkably resilient and many other major economies have avoided a recession thus far.

Companies that are resilient in unpredictable environments are well positioned, in our view.
Quality businesses with competitive advantages, pricing power, low debt levels and growth options should also fare well.

The contest format has changed again this year, with participants now able to choose five stocks from any region. We’ve decided to go with four global companies and one NZX company.

Our five picks for 2025 are:

1. Amazon
2. Novo Nordisk
3. Visa
4. Zoetis
5. Summerset

Amazon

Amazon is once again a top choice for 2025. We continue to like the outlook for this company, which has long-term growth potential, a renewed focus on profitability and a valuation that isn’t stretched. Its retail business is winning market share and Amazon Web Services (AWS) is being supported by ongoing advancements in artificial intelligence.

Novo Nordisk

Novo Nordisk has growth potential that is unmatched in the European healthcare sector. This is underpinned by its GLP-1 drugs, which have been a phenomenon. Originally developed to treat Type 2 diabetes, GLP-1 drugs are now proving successful at treating obesity, cardiovascular disease, sleep disorders and other health issues. The company is a global leader in the GLP-1 market (alongside Eli Lilly), which is estimated to exceed a billion people by 2030.

Visa

Visa is a leading company in electronic payments and has powerful global networks. It consistently delivers strong financial results and will continue to benefit from a shift towards a cashless society and ongoing growth in e-commerce.

Zoetis

Zoetis is a clear leader in the animal health industry. It develops, manufactures and markets a wide range of reputable medicines, vaccines and diagnostic products for different animal species. The company has a proven R&D track record and has displayed pricing power in a variety of market environments, which make for a solid growth outlook.

Summerset

Summerset is another choice that returns for 2025. The company has strong momentum and its execution has been impressive. We came away from Summerset’s recent investor day with renewed conviction that it is best positioned in the New Zealand retirement sector to capitalise on improving market conditions.

Disclaimer – It’s a game

Readers should recognise that the results are skewed by some features of the game. The information in this article is of a general nature and not intended to be personalised financial advice. Pro Stock Picks is a revamp of the Herald’s Broker’s Picks game. The stock picking panel included Forsyth Barr, Craigs Investment Partners, Hamilton Hindin Greene, Nikko Asset Management and Salt Funds Management. The participants revealed their stock picks in January, ahead of the United States and domestic earnings seasons. We will revisit each firm’s picks mid-year and at the end of the year, to see how they performed.

The views expressed do not constitute personalised financial advice and are not directed at any person. Some shares picked may include shares held by the company’s directors and staff. Finally, past performance is no guarantee of future performance.

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