6 high-conviction ASX stock picks that should be on your radar

Please note, this interview was recorded Monday 31 August 2026

For all the angst heading into reporting season, Australian companies emerged in considerably better shape than many investors expected, despite higher rates, a weakening consumer and an uncertain outlook.

With 91% of companies and 99% of the ASX 200 by market cap having reported when we filmed, market earnings had grown 12.1%, slightly ahead of the 11.9% expected coming into results.

There were roughly twice as many earnings beats as misses and, even more impressively, two and a half times as many dividend beats as misses. 

Resources did much of the heavy lifting, with earnings growth of around 30%, while the market gained 1.7% over the reporting period.

But the outlook is becoming tougher. FY27 earnings growth expectations have already fallen from around 9% to 6%, with higher rates and pressure on Australian households beginning to bite.

Against that backdrop, I sat down with Yarra Capital Management's Marcus Ryan, Michael Steele and Joel Fleming, covering large, small and micro caps respectively, to identify the most important investment themes from reporting season and, crucially, the stocks they believe can deliver from here.

Large caps: Income is making a comeback

For Marcus Ryan, one of the biggest developments was the return of income.

There were 25% more dividend beats than earnings beats in FY26, with strong balance sheets, relatively low payout ratios and large franking credit balances giving companies greater scope to return capital.

BHP Group (ASX: BHP) provided the headline example: profit was around 10% ahead of expectations, its payout ratio was 10% ahead, and the resulting dividend was approximately 20% better than expected. Evolution Mining (ASX: EVN) lifted its payout ratio policy from 50% to 60%, while Challenger (ASX: CGF), Suncorp (ASX: SUN), BlueScope (ASX: BSL) and NIB Holdings (ASX: NHF) all delivered special dividends.

Ryan sees two stocks particularly well placed.

Origin Energy (ASX: ORG)

Origin's FY26 EBITDA came in around 3% ahead of expectations, but Ryan believes the more compelling story is what lies ahead.

Energy Markets represents roughly 60% of the business and should benefit from growth in batteries and retail. APLNG, around 25% of value, offers opportunities to increase production and improve cash flow through debt refinancing, while its exposure to Octopus Energy and Kraken provides another potential source of value.

Put it together and Ryan believes Origin could become an increasingly attractive income stock.

It currently yields around 5%, fully franked, and combines a healthy balance sheet with controlled capex, strong LNG prices and surplus franking credits.

"It's a pretty good recipe for the outlook for income."

Dyno Nobel (ASX: DNL)

Ryan's second high-conviction pick is Dyno Nobel (formerly Incitec Pivot), a pure-play explosives business.

Its core assets produce gas-backed ammonium nitrate in Australia and the US, giving it direct exposure to mining activity. Strong commodity prices should support greater investment by miners, while increasingly complex deposits can require more explosives to extract.

But there is also a growth story, according to Ryan.  

"We like the operating outlook for the business, with opportunities to win more contracts and expand internationally.”

The next catalyst is its mid-September investor day. The company is targeting $600 million of EBITDA by FY28, and Ryan will be watching for indications of what growth could look like beyond that target.

Small caps: More growth for a cheaper price

Michael Steele sees a compelling disconnect in small caps. They have underperformed large companies by around 13% calendar year-to-date, yet delivered four percentage points more earnings growth during reporting season.

They are also cheaper. Small caps trade at around 16 times forward earnings, a roughly 15% discount to large caps. Steele believes stronger earnings growth can continue through market share gains, margin expansion and investment.

Pinnacle Investment Management (ASX: PNI)

Pinnacle's existing investment managers have significant room to grow, with Steele estimating capacity at around three times current levels across a diversified range of investment styles and asset classes.

It can then add another layer of growth by backing or acquiring new investment teams and using its distribution and back-office capabilities to accelerate them.

The emerging catalyst, however, is international expansion. After years of investment, Pinnacle reached an important milestone during the past six months, says Steele; 

"We saw an inflection point in the last six months where international inflows were larger than domestic inflows.”

That opens a much larger addressable market, while Steele believes the valuation remains attractive at around 20 times forward earnings.

Cuscal (ASX: CCL)

Cuscal offers a different proposition: defensive growth from critical payments infrastructure.

Steele sees organic earnings growth of around 10% per annum, supported by rising payments volumes and margin expansion in a market with high barriers to entry.

Acquisitions add another lever. Its recent deals provide significant EPS accretion, while Cuscal's infrastructure can also be expanded into additional payments markets.

For a business Steele regards as a high-quality growth company, its valuation of around 19 times earnings remains attractive.

"Cuscal has a core organic earnings growth opportunity of around 10% per annum, underpinned by volume growth in payments and margin expansion.”

Micro caps: Look for the inflection point

Joel Fleming's approach further down the market is particularly relevant when the economic cycle becomes harder.

Rather than relying on a strong economy, he is looking for businesses capable of creating their own momentum.

The key is finding an "inflection point": companies with strong order books, sufficient funding and improving execution that are beginning to demonstrate tangible earnings momentum.

Fleetwood (ASX: FWD)

Fleetwood has disappointed investors before, but Fleming believes a new management team is changing the equation.

Management has moved quickly, exiting the RV business and rationalising parts of the modular accommodation operation.

That leaves Fleetwood better positioned to capitalise on Australia's need for accommodation and housing solutions.

Its Searipple Village in Karratha remains a particularly valuable asset, with accommodation shortages and continued activity supporting demand. 

"Searipple, the accommodation village in Karratha, has always been the jewel in the crown. We think that market remains very, very strong.”

Meanwhile, the acquisition of the former Bechtel camp gives Fleetwood an even larger footprint in the region.

For Fleming, the combination of better management, stronger assets and an attractive entry point makes the stock worth another look.

Energy One (ASX: EOL)

Energy One is a software company positioned at the centre of increasingly complicated electricity markets.

As batteries, solar and wind become more deeply integrated into power grids, market participants need increasingly sophisticated software to manage them.

Energy One already has a strong Australian position and a growing European presence, while Fleming believes a recent acquisition materially expands its addressable market and strengthens its competitive position.

"We think it is structurally very, very well placed, and the recent acquisition makes a lot of sense to accelerate that process.

There has also been external validation of the opportunity: an offshore company made a takeover approach ahead of reporting season, which management rejected.

The shares have already performed strongly, but Fleming believes the structural growth runway remains significant.

Three themes investors shouldn't ignore

Beyond the six stock picks, three actionable themes emerged from the discussion.

• Healthcare has bounced, but fundamentals haven't necessarily followed. The sector jumped 19% and CSL Limited (ASX: CSL) surged around 40%, yet Ryan argues much of the recovery was a valuation rerating rather than stronger earnings. ResMed (ASX: RMD) remains his preferred large-cap exposure, while Steele likes the structural outlook for aged care and radiology.
• The consumer is getting weaker and more selective. Higher rates and cost-of-living pressure are weighing particularly heavily on big-ticket housing, auto and travel spending. Ryan believes premium-valued retailers remain vulnerable, although periods of weakness can create opportunities in quality operators such as JB Hi-Fi (ASX: JBH). Fleming also highlighted Universal Store (ASX: UNI) as a retailer continuing to take share and execute well despite the environment.
• Housing could get worse before it gets better. Mortgage applications are already down 12-20% across the banks, while residential developers are seeing weaker enquiries. Yarra remains cautious on banks and housing-exposed businesses, although Fleming sees pockets of opportunity in developers such as Finbar Group (ASX: FRI) and Cedar Woods Properties (ASX: CWP) where supply shortages, diversification and strong pre-sales provide some protection.

The broader message from reporting season is therefore less about whether the market is "good" or "bad".

Earnings held up. Dividends surprised positively. But the economic backdrop is becoming more difficult.

That makes company selection increasingly important. And across large, small and micro caps, Yarra is looking for the same thing: businesses with identifiable earnings drivers that don't need a booming economy to deliver.