As of December 2024, there are 638,411 active self-managed super funds (SMSFs) in Australia with listed shares being the top asset type held (26%).

The largest funds (>$10m) have higher concentrations allocated to unlisted trusts, listed shares and non-residential real property. Funds with less assets tend to concentrate on cash and term deposits as well as listed shares.

The below table outlines the top 20 ASX investment holdings.

Source: Class 2024 Annual Benchmark Report. September 2024.

The top three most popular names - BHP, Woodside WDS and Westpac WBC remain unchanged from the previous year with similar percentages of accounts holding these stocks in their portfolios in FY24 as in FY23. Notably Ramsay Healthcare RHC, which held 20th position last year, dropped out of the list.

I’ve identified two popular domestic equity holdings which Morningstar analysts believe are undervalued.

ResMed Inc RMD ★★★★

  • Fair value: $43.00
  • Last Price: $37.33 (as at 6/05/25)
  • Price to Fair Value: 0.87 (Undervalued)
  • Moat Rating: Narrow
  • Uncertainty Rating: Medium

ResMed are a pioneer of digital health technology and cloud-connected medical devices for people with sleep apnea, COPD and other chronic illnesses.

The company’s third-quarter fiscal underlying EBIT grew 2% over the previous quarter, on higher revenue despite typical seasonal softness and currency headwinds. This result was solid and broadly met our forecasts with our five-year revenue and EBIT compound annual growth rates at 8% and 11% respectively.

The global sleep apnea market is underpenetrated with most patients being undiagnosed. Key trends that are boosting new patient diagnoses are wearable tech such as the Apple Watch that can detect signs of sleep apnea.

The global obstructive sleep apnea device market is a two-player duopoly with over 80% of the market share split between ResMed and Philips. ResMed remains the market leader in the majority of the 140 countries it competes in. There is a large global growth opportunity as penetration within developed markets is estimated at one fifth of the roughly 15% prevalence, with emerging markets essentially untapped.

The smart device player wins a narrow moat based on switching costs and intangible assets, which have helped the company achieve high customer adherence rates and above-average industry growth.

Our $43 fair value estimate factors in an 8% revenue growth in a typical year and an operating margin of 35% by fiscal 2029. The company is in a strong financial position with free cash flow conversion of earnings (prior to acquisition spending) averaging 86% over the last five years and has allowed ResMed to quickly repay the debt funding its acquisitions.

US volumes are mostly sourced from Singapore and Australia but imported under a chapter of the Harmonized Tariff Schedule that provides tariff exemption for its sleep apnea products.

Analyst Shane Ponraj believes the shares are undervalued; likely given we are more optimistic than the market as to ResMed’s ability to take advantage of the growing awareness of sleep apnea.

Endeavour Group EDV ★★★★★

  • Fair value: $6.10
  • Last Price: $3.98 (as at 6/05/25)
  • Price to Fair Value: 0.65 (Undervalued)
  • Moat Rating: Wide
  • Uncertainty Rating: Low

Endeavour Group Limited (EDV) is a dominant player in a mature market with highly defensive and predictable earnings. The Australian liquor retailer enjoys a clear cost advantage over others and thus is ascribed a wide moat – a rarity in Australian retailing coverage.

The business is divided into two segments: the retail segment which is Australia’s leading omnichannel liquor retailer, and its hotels segment which provides hospitality services and gambling operations. The group revenue is highly skewed to the retail segment, which we forecast will contribute approximately 85% of revenue over the next decade.

Shares have suffered almost a 25% fall in the past 12 months after cost of living pressures softened liquor demand and profit margins remain under pressure.

However, Morningstar analyst Johannes Faul believes liquor sales growth will improve going into fiscal 2026 as consumers benefit from lower mortgage rates. Faul also expects cost pressures to abate with inflation rates stabilising and liquor EBIT margins reverting to historical levels by fiscal 2027. We forecast group earnings before tax CAGR of 5% over the next decade.

Notably there has recently been an appointment of a new CEO, Jayne Hrdlicka who is due to start in January 2026, but we don’t envisage material changes to strategy or portfolio in the interim.

Our fair value estimate of $6.10 per share implies a 2025 EV/EBITDA of 8 and a P/E ratio of 24 with a dividend yield of 3%. This places Endeavour in the upper and lower bounds of Coles’ and Woolworths’ respective dividend yields. We estimate this is a reasonable outcome given these businesses are all dividend-orientated, low growth and operate in the mature consumer staples sector with low correlation to macro-conditions providing low uncertainty in earnings.

Australian liquor retailing and gaming are a safe haven from US tariffs with the recent softness in liquor sales to prove cyclical. Faul thinks recent trading prices are discounting these aspects, and the shares currently screen cheap.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.