The top 5 ASX stocks to watch in March 2024

The outlook for ASX stocks

The outlook for ASX stocks could be on the upswing, as the Reserve Bank of Australia (RBA) once again holds off on rate hikes at its first meeting for 2024.

On 6 February the RBA made its first interest rate announcement for the year, indicating that it would refrain from any adjustments this month. The move marks the second consecutive month that the Australian monetary authority has held off on rate hikes, keeping the cash rate target at 4.35% since November last year.

While the cash rate has risen to its highest level in over a decade to put heavy stress on borrowers and variable-rate mortgagors in particular, analysts are beginning to see potential cause for guarded optimism.

In the December quarter, inflation stood at 4.1% in annual terms, for sharp decline compared to the print of 7.8% for the same period the year previously.

If this trend continues, the sizeable easing of inflation could provide more breathing space for the RBA to refrain from further hikes, or even shift into the opposite direction and commence cuts to interest rates in the near-future.

RBA governor Michele Bullock expressed restrained optimism at the 6 February meeting, stating that Australia's economy is potentially on the 'narrow path' of containing inflation without incurring undue damage to growth.

An increasing number of economists are now anticipating cuts to interest rates by as early as the second half of 2024, given that inflation is now falling rapidly not just in Australia, but in other major economies including the US, UK and Europe.

All of this means a higher likelihood of support for ASX equities, especially as inbound migration rebound in the wake of the Covid pandemic and provides greater support for domestic demand.

The top five ASX stocks to watch

Here is a list of the top 5 ASX-listed stocks for investors to consider in the month of March, 2024.

1. BHP (ASX: BHP)

2. Resmed Inc (ASX: RMD)

3. Flight Centre Travel Group Ltd (ASX: FLT)

4. Woolworths Group Ltd (ASX: WOW)

5. Xero (ASX: XRO)

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BHP (ASX: BHP)

As one of the world's leading diversified mining companies on the planet, BHP could benefit in 2024 from the strength of the current commodity cycle, especially amidst the strong performance of iron ore prices.

The spot price for iron ore rose 35% in the six months to December 21, with further gains anticipated by some an analysts on the back of robust demand from China.

Despite easing growth, steel production in China remains strong and stockpiles of iron ore have fallen to multi-year lows.

BHP's share price could benefit if prices for iron ore remain high on the back of healthy demand and tight supply.

Resmed Inc (ASX: RMD)

Medical technology company ResMed Inc (ASX) has seen its share price perform well in 2024, rising over 6% year-to-date. Its share price languished in 2023, on the back of concerns over the impact of diabetes and obesity medicines such as Ozempic on demand for RMD's products, which include sleep apnea devices.

In a note on the top stocks to watch, Morgans said such concerns are likely overplayed.

'While weight loss drugs have grabbed headlines and investor attention, we see these products having little impact on the large, underserved sleep disorder breathing market, and do not view them as category killers,' Morgans said.

'Although quarters are likely to remain volatile, nothing changes our view that the company remains well placed and uniquely positioned as it builds a patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.'

Morgans has an add rating for RMD and a target price of $36.95. The company's share price currently sits at just short of $27.00.

Flight Centre Travel Group Ltd (ASX: FLT)

Brisbane-headquartered Flight Centre Travel Group Ltd is one of the world's largest travel agencies, with operations in over 23 countries including Australia, New Zealand, the United States, Canada,the United Kingdom, South Africa, India, China, Singapore and Mexico.The company also has a corporate travel management network covering over 90 countries.

Flight Centre's share price took a hit during the Covid pandemic when international travel dried up, but the company could be on track to return to its pre-2020 levels of over $40 a share as the world economy steadily returns to normality.

The travel agency recently returned to profitability, achieving NPAT of $86 million in H1 FY23, as compared to a net loss of $20 million in H1 FY23. Flight Centre also saw EBITDA rise 99% in the half.

Woolworths Group Ltd (ASX: WOW)

In addition to being one of the most iconic supermarket brands in Australia, Woolworths Group Limited also owns the Big W retail store brand and has made forays into the pet care sector.

Woolworths' share price has recently endured tough times amidst heavy inflation, falling more than 11% over the past year to $32.7.

Some analysts are upbeat about the future performance of Woolworths stocks, however, given that the drop in its share price translates into a dividend yield of more than 3%. Goldman currently has Woolworths on its conviction list with a buy rating, and a price target of $40.40.

Xero (ASX: XRO)

Xero is an online provider of accounting software solutions to over 3.7 million subscribers. It focuses on catering to the needs of small businesses with a slew of services that include sending invoices, bank reconciliation, paying bills, expense claims, payment acceptances and payroll.

XRO may have recently received a boost from the appointment of new CEO Sukhinder Singh Cassidy, who has led efforts to streamline the company with the axing of around 800 positions.

Analysts at both Citi and Goldman Sachs are upbeat about XRO's prospects for future growth. Both have given the company a buy rating, with Citi setting its price target at $120 and Goldman at $130.

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