The Class Annual Benchmark Report for 2025 has arrived, offering fresh insights into the evolving SMSF landscape. This year’s standout finding is the ongoing expansion of the SMSF sector, with investors seemingly undeterred by the looming challenges presented by the Division 296 tax.

SMSF establishments surged in FY25, with total funds rising 6.4% in the year. Notably, this marks the highest gross fund establishment rate since 2017.

number of smsfs established over time class

Direct Aussie shares remained the most popular investment representing almost 30% of total assets. Unsurprisingly, direct property came in second place, although down slightly from the previous financial year. ETFs were the only asset class to grow in popularity, with their presence across SMSF portfolios increasing 1.3% year-on-year.

class SMSF asset allocation by percentage

The below table outlines the top 20 domestic share holdings by popularity:

top 20 investment holdings in SMSFs class benchmark report 2025

The top three most popular names—BHP Group BHP, Woodside WDS and Westpac WBC remain unchanged from previous years. Notably Goodman Group bumped Amcor plc out of the list, taking the twentieth spot after an considerable expansion effort into data centres.

I’ve identified two popular holdings from this list that our analysts believe are undervalued:

Sonic Healthcare SHL ★★★★★

  • Fair value: $33.00
  • Last Price: $21.44 (09/10/25)
  • Price to Fair Value: 0.65
  • Moat Rating: Narrow
  • Uncertainty Rating: Medium

Sonic Healthcare is a multinational provider of specialist operations in laboratory medicine, pathology, radiology, general practice medicine and corporate medical services.

Covid-19 testing has proved a boon for Sonic and driven explosive earnings growth in the past. However, longer-term we expect an overall downward trend until a base level of testing is established from fiscal 2024 onwards. Over our 10-year explicit forecast period, we expect underlying non-coronavirus revenue growth of 4% in the base business. This will be driven by demographic factors, average fee increases due to mix shift and graduate market share gains.

Fiscal 2025 earnings disappointed the market after posting a 9% rise in earnings on 5% organic sales growth. Underlying earnings margins expanded 40bps to 18%. While these numbers met our forecasts, the market was disappointed by profitability. Margins were affected by temporary headwinds such as recent margin-dilutive acquisitions, an initial loss on UK public contracts and a cyclone shutting down operations in Queensland.

In the long term, we expect margin expansion on increased operating leverage from higher volumes and improved labor productivity as newer AI tools expedite diagnoses. Further, inflation of main costs, labor and rents is easing.

The company is in a strong financial position with a reported 2.2 net debt/earnings which is well within management’s target range. Free cash flow to earnings (before acquisition spending) has also averaged 82% over the last five years, allowing the company to quickly repay debt funded acqusitions.

Shares are currently undervalued as we remain optimistic about Sonic’s profitability improving. The business stands to benefit from cost savings on recent acquisitions. We forecast solid revenue growth on higher pricing, with the pathology and imaging segments to grow at a 5% and 7% compound annual growth rate over our 10-year forecast.

Endeavour Group EDV ★★★★★

  • Fair value: $6.10
  • Last Price: $3.55 (09/10/25)
  • Price to Fair Value: 0.58
  • Moat Rating: Wide
  • Uncertainty Rating: Low

Endeavour Group is a retail drinks network and portfolio of licensed hotels with hospitality services and gambling operations. It is currently the dominant player in a mature market with highly defensive and predictable earnings. The group commands around half of its addressable market in its core liquor retailing segment. Its liquor sales are also much more profitable than closest competitor Coles.

Fiscal 2025 results saw a 14% decline in normalised underlying net profit after tax to $426 million. This was in line with our estimate but liquor retailing sales are softer than we expected in the first seven weeks of fiscal 2026. The smaller hotels segment saw robust sales growth of 4% with a similar increase in operating profits in fiscal 2025.

We think liquor sales have bottomed. Consumers have been trading down to cheaper options and buying in bulk for at-home consumption. We think this reflects a cyclically weak environment amid elevated cost-of-living pressures, which now look to be abating. Real income growth should increase demand with potential interest rate cuts further boosting spending. Long-term we forecast liquor retail sales to increase at a compound annual growth rate of 3% over the next decade.

The group is in reasonable financial shape however net debt/earnings was 3.6 as of June 2025 which is slightly above management’s target range. We are confident that gearing levels will return to within target boundaries.

As Australia’s largest liquor retailer, its scale advantage structurally supports higher margins than competitors. We estimate Endeavour to hold onto its market share while maintaining this advantage, and anticipate group pre-tax margins to rise with improving sales growth.

Shares remain materially undervalued with the market expecting a more protracted earnings recovery and structurally lower long-term margins. However, macro drivers are improving and at-home consumption volumes are back to trend levels.

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It is important to note that any asset class should be considered as part of a well-defined investment strategy. For a step-by-step guide to defining your investing strategy, read this article by Mark LaMonica.

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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.