The FY26 Rotation: ORG, QBE, MTS, HM1… Are our Core Holdings for Growth

The investing backdrop heading into FY26 is no longer about fighting fires, it’s about managing the recovery. For the past few years, policy settings have been dominated by inflation control and aggressive interest rate hikes. But the tide has turned. Inflation is back within range, and the Reserve Bank of Australia (RBA) is shifting its posture from combative to supportive. We’re entering a different phase of the economic cycle, one that rewards selectivity and patience rather than risk-chasing. This recalibration isn’t dramatic or sudden, but it’s meaningful. The transition is creating a new kind of opportunity, one where quality businesses with durable earnings and strong balance sheets are beginning to outshine the high-growth darlings of the last cycle. The RBA Is Done with Tightening (For Now), and the Market Knows It There’s a good reason equity markets are looking more confident. The inflation battle, at least for now, appears to have been won. According to the latest figures from the ABS, headline CPI came in at 2.1% for the year to June 2025, right within the RBA’s 2–3% target. And perhaps more importantly, the RBA’s preferred trimmed mean measure also eased to 2.7%. Source: Trading Economics, RBA vs. Fed – Interest Rates (2025) [2] This was not a one-off surprise. The trend has been consistently downward, and with the May CPI indicator also undershooting expectations, the market has taken the message: the RBA has room to pivot. In July, the central bank held rates steady at 3.85%, but market participants widely interpreted it as the final hold before a potential easing cycle. Most forecasts now point to the cash rate drifting toward 3.1–3.35% by mid-2026. That’s not a massive drop, but it’s enough to reshape the investment calculus. Source: Trading Economics, Australia unemployment rate (2025) [3] For investors, this creates something close to a “Goldilocks” setting: not so cold that we need emergency stimulus, but not so hot that inflation reignites. GDP growth is expected to rise to around 2.25% in FY26, while unemployment may peak gently at 4.5%, still within the Treasury’s full-employment range. It’s a setup that favours high-quality businesses: companies that don’t need cheap capital or a booming economy to deliver solid returns. Consumers Are Stirring, But Don’t Expect a Spending Spree Just Yet The Australian consumer is showing signs of life, but it's a cautious recovery. After a year of cutting back, households are slowly returning to discretionary categories like dining out and entertainment. It’s not exuberant, but it’s a noticeable shift. There’s also a clear lift in the housing market, with building approvals and home values edging higher, another indication that households are responding to the prospect of lower rates. Still, the scars of the cost-of-living crunch run deep. Commonwealth Bank economists have raised the idea of “consumer scar tissue”—essentially, a behavioural hangover from the squeeze of recent years. Even if incomes rise and borrowing costs fall, many households may prioritise rebuilding savings or paying down debt rather than returning to pre-pandemic spending habits. This measured recovery shapes where investors should look. Staples businesses, those that sell everyday necessities are likely to remain resilient. Metcash and Ricegrowers stand out as companies with strong brands, deep distribution, and dependable cash flows. These are firms built to withstand cautious consumer behaviour. We also see opportunity in companies tied to essential infrastructure and long-term capital cycles. Service Stream and Perenti, which operate in infrastructure and mining services respectively, aren’t relying on short-term sentiment. Their earnings are backed by multi-year contracts and predictable demand. Sector by Sector: Where the Next Phase of the Cycle Offers Real Opportunity Utilities: Playing the Long Game in the Energy Transition: Utilities are moving into focus thanks to a structural theme that’s bigger than the cycle, the shift to renewable energy. Electricity is forecast to become Australia’s largest infrastructure investment category starting in 2026, with a $36 billion renewables buildout peaking in 2027–28. That’s not to say the road is easy, transmission delays and rising costs are real challenges, but the long-term trend is clear. Origin Energy is well-positioned, managing legacy generation assets while investing heavily in future-ready solutions such as storage and customer technology. Financials: Beneficiaries of a Smoother Rate Environment: With the RBA pivoting, financials stand to benefit. Banks may see relief from the margin squeeze of the hiking cycle, while insurers get a steadier environment to manage their investment portfolios. We like QBE Insurance here, a global name with strong pricing power and a well-managed book. We also see diversification benefits in Hearts and Minds Investments (ASX: HM1) and Platinum Asia Investments (ASX: PAI), which give exposure to global and Asian financial trends in a professionally managed structure. Consumer Staples: Quiet Strength in Caution: The logic is simple: even if consumers don’t splurge, they still buy essentials. The sector is expected to grow earnings at a steady clip, around 10% annually, thanks to stable demand and easing supply chain costs. Metcash and Ricegrowers are the go-to names, delivering dependable dividends and benefiting from their scale and reach. Materials: Go Beyond Iron Ore for Resilience: Iron ore is under pressure. China’s demand is softening, and oversupply concerns remain. But that doesn’t mean all is lost in the materials space. LNG demand is set to climb in 2026, and critical minerals continue to attract long-term capital. That’s why we focus on service providers like Perenti, who earn steady income from production contracts, and Origin Energy, which also exports LNG. These names give resource exposure, without the price volatility. Industrials: Infrastructure Is the Anchor: Within the broad industrials sector, essential service providers stand out. Australia's telecoms, transport and utility networks need continual upgrades, and this isn’t a cyclical choice, it’s a necessity. Service Stream is a standout: its work-in-hand pipeline provides long-term visibility, making it one of the most predictable earnings profiles in the sector. Source: Google Finance (2025) [4] A Different Cycle Needs a Different Playbook As the RBA changes tack and the economy enters a new phase, the investment landscape is being reshaped—not through drama, but through steady recalibration. Inflation is falling. Rates are expected to follow. Growth is subdued, but stable. And consumer sentiment, while fragile, is showing signs of life. This isn’t a moment to chase momentum or gamble on the next big thing. It’s a time to lean into quality—to focus on companies that don’t need perfect conditions to thrive. FY26 may not bring fireworks. But for long-term investors willing to be selective, it could mark the start of a quietly rewarding cycle. Our Conviction Holdings for FY26 and Beyond The following section provides a detailed analysis of each of the eight companies selected for our portfolios. The rationale is grounded in their recent performance, financial health, and specific catalysts that position them for sustained growth in earnings and income through FY26 and beyond. Origin Energy Limited (ASX: ORG) – Utilities Source: ORG, weekly chart (2025) Origin Energy remains a pillar of Australia’s energy system, backed by a resilient and diversified business model that spans electricity generation, energy retail, and its stake in the Australia Pacific LNG (APLNG) export project. This integrated structure continues to serve shareholders well, when one part of the business faces headwinds, another often picks up the slack. That balance was evident in the June 2025 quarter. While total revenue dipped 3% from the prior quarter to $2.24 billion, largely due to lower realised LNG prices, the Energy Markets division delivered standout results. Origin added 104,000 new customer accounts over FY25, highlighting the organic growth momentum in its core retail and generation businesses. Reflecting this strength, Origin narrowed its FY25 guidance for Energy Markets underlying EBITDA to $1.30–1.40 billion, an upward revision that underscores solid operational performance. The company’s financial muscle is particularly clear in its LNG exposure. Origin received $797 million in fully franked dividends from APLNG in FY25, and a further $335 million was paid out in the first days of FY26. These distributions are providing a powerful cash buffer as the company leans into Australia’s energy transition. Looking ahead, Origin is positioning itself for the next wave of energy infrastructure. With a forecast $36 billion clean energy construction boom expected from 2026, the company is investing heavily in renewables and customer-centric technology platforms. While these investments may compress margins in the near term, they’re essential to capturing long-term value. Key initiatives include expanding its renewable generation pipeline, scaling its virtual power plant capabilities, and accelerating the rollout of smart energy solutions through its partnership with UK-based Octopus Energy. For income-oriented investors, the dividend yield, currently around 4.93%, remains compelling. Backed by stable LNG cash flows and a growing domestic energy business, Origin’s capital returns are both attractive and sustainable. QBE Insurance Group Limited (ASX: QBE) – Financials Source: QBE, weekly chart (2025) QBE Insurance Group stands as a global leader in general insurance and reinsurance, offering vital risk management services across Australia, North America, Europe, and beyond. The company’s latest results reflect strong operational momentum, with constant currency gross written premium (GWP) growth of 8% in the first quarter of FY25. This robust performance was driven by supportive market conditions and broad strength across its key international and North American divisions. Buoyed by this top-line growth, QBE’s management reaffirmed its full-year guidance, aiming for mid-single-digit GWP growth and a solid Group combined operating ratio around 92.5%. The backdrop of higher interest rates over the past two years has also played to QBE’s advantage, boosting returns from its substantial $31.6 billion investment portfolio, which generated a core fixed income exit yield of 4.1% at the end of 1Q25. Looking ahead to FY26, QBE appears well positioned to sustain earnings growth and deliver attractive income for shareholders. As monetary policy eases in Australia and other major markets later this year, the insurer can expect a steadier environment for its investment income, locking in the gains from the prior hiking cycle. Growth will also be driven by a disciplined focus on portfolio optimisation, including a measured run-off of non-core North American business, alongside new profitable underwriting ventures, most notably partnerships with Youi and the Sure Underwriting Agency in Australia. While catastrophe costs remain an inherent risk in global insurance, QBE’s commitment to refining its operating model and strategic capital management aims to reduce earnings volatility and enhance the quality of its profits. QBE offers a compelling blend of growth and income, supported by a dividend yield of roughly 3.75%. Metcash Limited (ASX: MTS) - Consumer Staples Source: MTS, weekly chart (2025) Metcash is the backbone of Australia’s independent retail sector, supplying vital wholesale distribution, logistics, and marketing services to a wide network that includes IGA supermarkets, independent liquor stores such as Cellarbrations and The Bottle-O, and hardware retailers like Mitre 10 and the rapidly expanding Total Tools chain. The company delivered a solid and resilient performance in FY25, showcasing the strength of its diversified, multi-pillar business model. Group revenue rose a robust 8.9% to $17.3 billion, driven in large part by an impressive 11% increase in Food sales, which benefited significantly from the timely acquisition of food service distributor Superior Foods. While underlying net profit after tax dipped slightly by 2.4% to $275.5 million, mainly due to a temporary slowdown in the hardware segment and higher finance costs, the core Food and Liquor businesses remained strong. Importantly, operating cash flow jumped 11.7% to $539 million, reflecting Metcash’s disciplined approach to financial management. The flagship IGA network continued to hold its own in a competitive market, with retail like-for-like sales excluding tobacco rising 2.7%. As Metcash moves into FY26, it is well placed to navigate what it describes as a cautious recovery in the economy. The company has reported a positive start to the new financial year, with group revenue for the first seven weeks up 4.7%, supported by growth across all three business pillars. A key long-term driver will be the continued integration and expansion of Superior Foods, which expands Metcash’s reach into the growing out-of-home food sector. Meanwhile, a cyclical rebound in the hardware segment could provide an important boost if lower interest rates spur construction and home improvement activity. For income-focused investors, Metcash remains an appealing choice. Reflecting its strong cash flow and confidence in the outlook, the Board declared a total full-year dividend of 18.0 cents per share for FY25. This represents a generous payout ratio of 72% of underlying profit and delivers a dividend yield around 4.63%. Hearts and Minds Investments Limited (ASX: HM1) – Financials Source: HM1, weekly chart (2025) Hearts and Minds Investments (HM1) stands out in the Australian investment landscape, offering something truly distinctive. This Listed Investment Company (LIC) delivers a dual advantage for investors. First, it provides access to a carefully curated, high-conviction portfolio of global stocks managed by some of the world’s most respected fund managers. Second, it allows investors to support a meaningful philanthropic mission, HM1 waives all investment management and performance fees, instead directing those funds to leading Australian medical research organisations. The company’s investment track record is impressive. In its June 2025 update, HM1 revealed its portfolio climbed 4.6% over the month, comfortably outpacing the MSCI World benchmark. This contributed to a strong one-year return of 25.5% for FY25. Such robust performance, driven by key holdings including Zillow, Guzman y Gomez, and Brookfield, has helped HM1 deliver a since-inception annual return of 11.6%. Meanwhile, its pre-tax Net Tangible Asset value reached $3.71 per share as of 30 June 2025. Looking forward, HM1 remains an appealing option for investors seeking professionally managed global equity exposure amid growing geopolitical and economic complexity. The company’s ASX-listed LIC structure offers liquidity and convenience, allowing investors to tap into transformative global themes such as digital platforms, financial technology, and property technology with just one trade. Growth prospects depend largely on the continued success of its elite fund managers and their skill in identifying long-term compounders. Income is another growing draw for HM1 shareholders. Supported by strong investment returns and a healthy profits reserve of 62 cents per share, the company raised its half-year dividend to 8.0 cents, pushing the FY25 total dividend to 15.5 cents per share. This translates into an attractive annualised fully franked yield of around 4.5%. The combination of diversified global growth exposure alongside a solid, tax-effective income stream makes HM1 a compelling core holding in any well-balanced portfolio. Platinum Asia Investments Limited (ASX: PAI) – Financials Source: PAI, weekly chart (2025) Platinum Asia Investments (PAI) stands out as a Listed Investment Company managed by the seasoned team at Platinum Asset Management, known for their deep expertise and long history in Asian markets. PAI offers Australian investors a focused, actively managed portfolio that targets undervalued companies across Asia, excluding Japan. This strategy has paid off handsomely in recent times. For the 2025 financial year, PAI delivered a strong one-year return of 15.8%, comfortably outperforming its regional benchmark. The June 2025 monthly update highlighted the portfolio’s momentum, with a 5% gain driven largely by its North Asian technology stocks. Major contributors included semiconductor leaders SK Hynix, Taiwan Semiconductor Manufacturing Company (TSMC), and Samsung Electronics, which all benefited from the surge in global investment in artificial intelligence. At the end of June 2025, PAI’s pre-tax Net Tangible Asset (NTA) value was $1.1692 per share, reflecting the solid value behind the portfolio. Looking ahead to FY26, the fund is well positioned to ride powerful structural growth trends across Asia. The team’s confidence is clear: the portfolio remains nearly fully invested, with only around 6% held in cash. Future growth drivers include the ongoing global semiconductor cycle and rising AI demand, alongside high-quality, domestically focused businesses in key economies such as China and India. These companies benefit from strong local growth dynamics that add further depth to the portfolio. Valuations remain attractive too, with holdings trading at a notable discount compared to broader market averages on key metrics like price-to-earnings and price-to-book ratios. While the dividend yield sits at a modest 1.3%, the main attraction of PAI is its potential for long-term capital growth. For Australian investors seeking liquid and expertly managed exposure to Asia, a region vital to the global economy but often difficult to access directly, PAI offers a compelling option. Ricegrowers Limited (ASX: SGLLV) - Consumer Staples Source: SGLLV, weekly chart (2025) Ricegrowers, trading worldwide under the familiar SunRice brand, stands as one of Australia’s leading branded food exporters. This diversified international food group spans across several segments, including branded rice products, stockfeed through its CopRice division, and gourmet foods via Riviana Foods. In FY25, the company delivered a strong financial performance despite a tough global environment. While group revenue dipped slightly to $1.85 billion, SunRice grew its net profit after tax by a solid 4% to $70.7 million. This growth came from a smart shift toward a better product mix and improved operational efficiencies across its supply chain. A key factor behind this success was the enduring strength of its brand portfolio, with trusted branded products making up around 70% of total sales. The company also showed discipline in expanding its footprint by acquiring the pet food brand SavourLife, tapping into a promising market segment. Looking ahead to FY26, SunRice is set for both top-line and bottom-line growth. One of the main drivers will be the significantly larger 2025 Riverina rice crop, estimated at 511,000 tonnes. This larger harvest is expected to support a full milling program and boost sales of premium branded rice in key export markets. Growth will also be supported by expansion plans in the high-potential Middle East market, new product innovation in the snacking category, and a focus on popular rice varieties like Jasmine and Basmati that are in rising global demand. To back up its growth ambitions, the company is investing millions to upgrade its Riverina manufacturing facilities, aiming to increase capacity and improve long-term productivity. For investors focused on income, SunRice offers an appealing and growing dividend. Reflecting its solid results and optimistic outlook, the company raised its total FY25 dividend by 8% to 65 cents per B Class Share. Service Stream Limited (ASX: SSM) – Industrials Source: SSM, weekly chart (2025) Service Stream stands out as a leading provider of vital network services across Australia’s telecommunications, utility, and transport sectors. The company works closely with major asset owners such as NBN Co, national telecom carriers, and key water and energy utilities. In the first half of FY25, Service Stream posted a notably strong financial performance. Revenue climbed 7.9% to $1.27 billion, while underlying EBITDA saw an impressive rise of 16.4% to $73.6 million. This operational strength translated into a significant boost to the bottom line, with adjusted net profit after tax jumping by 49.9% to $37.7 million. This growth was driven by excellent operational execution, effective contract management, and a meaningful improvement in margins, especially within the expanding Utilities division. The company’s financial position remains solid, highlighted by a net cash balance of $55.4 million at the period’s end and an outstanding operating cash flow conversion rate of 126%. Looking ahead to FY26 and beyond, Service Stream’s outlook is supported by exceptional revenue visibility, which offers strong confidence in future earnings. By the end of the first half of FY25, its contracted work-in-hand pipeline reached a substantial $5.9 billion. This was further strengthened by the addition of over $1.1 billion in new and extended multi-year contracts during the period. Future growth will largely come from the company’s crucial role in delivering major national infrastructure programs that are non-discretionary in nature. One key example is the ongoing NBN fibre upgrade program, where Service Stream recently secured additional significant work packages. With a strong, contracted, and long-dated order book, the path is clear for sustained earnings growth in FY26 and beyond. The company’s commitment to rewarding shareholders was evident in its decision to increase the interim dividend by 25% to 2.5 cents per share. There is room for further dividend growth as earnings and cash flow continue to expand. Service Stream offers investors a pure-play opportunity focused on the essential maintenance and upgrade cycle of Australia’s critical infrastructure. Perenti Limited (ASX: PRN) – Materials Source: PRN, weekly chart (2025) Perenti stands out as a global leader in mining services, offering a full range of surface and underground contract mining, drilling, and support services to a strong client base across various commodities and regions. The company’s performance in FY25 has been remarkable, marked by a significant and unexpected boost to its free cash flow guidance. Preliminary unaudited results now suggest FY25 free cash flow will reach around $280 million. This far surpasses the previous guidance of over $150 million and marks a major milestone for Perenti. This outstanding performance was driven by several factors: the receipt of $92 million from the sale of assets tied to a completed contract in Botswana, excellent working capital management that delivered a cash conversion rate above 95%, and disciplined capital expenditure. These efforts have dramatically strengthened Perenti’s balance sheet, with net leverage expected to drop to just 0.5 times by 30 June 2025. Heading into FY26, Perenti carries strong operational momentum and a solid balance sheet that should support sustained value creation. The company maintains a clear strategy focused on delivering steady value and certainty for all stakeholders through disciplined execution of its portfolio of large, long-term contracts. Management highlighted that more than $2 billion in new contracts were in late-stage negotiation as of the first half of FY25, pointing to a solid and tangible growth pipeline. The newly strengthened balance sheet offers considerable flexibility to pursue further growth opportunities and enhance shareholder returns. Management has reaffirmed its commitment to delivering strong results in FY26 and beyond. The interim dividend of 3.0 cents per share declared in the first half of FY25 underlines the company’s focus on income returns, which are expected to grow in line with its impressive free cash flow. For investors, Perenti presents an attractive opportunity to gain leveraged exposure to the mining cycle, backed by the security of a long-term contract book and excellent operational management.