Part one of the strategy is to favour stocks that have had their 2026 earnings forecasts upgraded recently, where momentum is positive, and where Macquarie’s analysts have an “outperform” rating, which is the firm’s equivalent to a “buy”.
Six stocks sit at the top of the Macquarie list: medical devices giant Resmed, property group GPT, retailer Metcash, toll road operator Atlas Arteria, gas pipeline player APA Group and explosives manufacturer Orica. Small-cap names on the Macquarie list include Growthpoint Properties, infrastructure group Chorus, Graincorp, and AUB Group.
The second part is to avoid companies that have experienced earnings downgrades and where earnings momentum is poor. Despite the market rally, this is a surprisingly target-rich environment right now – 22 per cent of the ASX 100 have seen downgrades of 20 percentage points or more.
Macquarie’s top five names to avoid include ANZ, online classifieds firm REA Group, pubs and bottle shop giant Endeavour Group, James Hardie Industries and Rio Tinto. Other companies to have suffered big downgrades include Computershare, Flight Centre, CSL, Treasury Wine Estates, Reliance Worldwide, Orora, South32, BHP, Fortescue, Mineral Resources, IGO and Pilbara Metals.
Many fund managers will rightly argue that buying or selling stocks based on earnings momentum rather than fundamentals is ultimately a fool’s errand.
