The Dirty Dozen and the Pristine Fifteen: Crash-tested stocks to avoid - and to embrace

You don’t have to search far for headlines that would give even the most battle-hardened investor palpitations. 

US Economy Shrank in Early 2025, as Tariffs Sapped Growth, Imports Surged 
- The Washington Post, April 30

Consumer Confidence Craters to Three-Decade Low Amid Trump Tariff Chaos
- Politico, April 26

US-China Trade Collapse Threatens Supply Chains and Jobs
- The Wall Street Journal, April 25

Wall Street’s ‘Fear Gauge’ Soars to a Rare Crisis Level
- MarketWatch, April 8

As part of our risk management process at Plato, our team is regularly applying macro and geopolitical stress tests. We consider scenarios that could impact stock markets and ensure our downside exposure to these events is limited.

A big part of this involves identifying companies that would experience outsized impacts should these events take place.

This provides our investors a metaphorical flak jacket in a world of significant uncertainty.

With 35% of Australia’s exports (or $190 billion), headed to China, Australia may be the developed world’s most exposed economy in the event of a protracted trade war between the China and the United States.

So, right now it’s only natural, indeed prudent, to ask: which ASX stocks are most likely to suffer should the trade war accelerate. 

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The Dirty Dozen

At Plato, we’ve identified the twelve ASX stocks we believe are most vulnerable to a sharp equity market selloff.

To qualify for our Dirty Dozen, a company must meet two criteria:

1. Twelve or more of Plato’s 150 proprietary Red Flags (spanning forensic accounting, financial distress, executive remuneration, and governance)
2. A beta greater than 1.5 (indicating heightened sensitivity to market movements)

Our research shows that companies with eight or more Red Flags underperform the market by an average of 20% over the following 12 months.

Small cap battery technology company Novonix (ASX: NVX) tops the list with 22 Red Flags. 

Based on our analysis, if the ASX 200 were to decline by 20%, we estimate the battery technology company could fall by approximately –42%. 

Boss Energy (ASX: BOE) comes in second with 14 Red Flags, and a projected drawdown of –40%, reflecting the heightened risk profile of the fledgling uranium miner.

Silex Systems (ASX: SLX), also has 14 Red Flags. We estimate the uranium enrichment technology company would similarly fall –40% in a sharp market selloff. 

Not surprisingly this list is peppered with resource companies that are sensitive to a slowdown in the Chinese economy. To update a well-worn truism: If China sneezes, Australia gets COVID. 

The most resilient Aussie stocks

It's not all doom and gloom. In parallel, we’ve also modelled the ASX companies we expect to be most resilient in a major downturn.

Fifteen stocks stand out, with:

• Zero Plato Red Flags
• Beta below 0.6 (indicating low sensitivity to market volatility)

At the top of the list is Ricegrowers Limited (ASX: SGLLV), the company behind the popular SunRice brand. 

In a 20% market downturn, we estimate the Riverina-based food producer would fall just –3%. After all, people still have to eat, and rice is a go-to staple in tough times. 

Next is Shine Justice (ASX: SHJ), although somewhat a falling angel after flying high in the mid 2010's, personal injury claims have proven remarkably resilient during economic downturns. 

And in third place is Endeavour Group (ASX: EDV), owner of Dan Murphy’s, BWS, and Jimmy Brings. It’s hardly surprising that during periods of market stress, demand for Dutch courage tends to rise—particularly among fund managers.

The Pristine Fifteen

While predicting market corrections is notoriously difficult, being prepared for one doesn’t have to be. 

Whether you’re hunting for resilience or avoiding fragility, Plato’s quantitative Red Flags framework offers a data-driven lens to assess risk—before it shows up in your P&L.

Learn more about the Plato Global Alpha Fund 

The Plato Global Alpha Fund aims to generate “all-weather alpha” by investing in value, growth and quality ideas from across global markets while also taking short positions in companies expected to underperform. 

The Fund has delivered 22.7% p.a. after fees since inception in September 2021  (to 31 March 2025).

The Plato Global Alpha Fund is also accessible on the ASX via the Plato Global Alpha Complex ETF (ASX: PGA1). Click here to go to the PGA1 website.