The winners of the next cycle? Airlie argues they’re already in front of you

The themes that dominated 2025 will most likely continue into 2026. Who remembers the quaint market selloff in April over the clumsy Trump tariffs? 

Since then, the dominant theme has been AI – overwhelmingly positive vibes driving the Magnificent 7 onward - but now the debate has become more nuanced, with many questioning the returns profile from all this AI capex.

The other big themes that we think will shape the year ahead:

• Are we in the late part of the US profits cycle? Rate cuts to come in the US!
• The energy transition, along with the general costs of doing business in Australia, is increasing the cost of everything. No rate cuts for us!
• Does China want more or less of our commodities? The iron ore price has been remarkably resilient. When will the new supply from the Simandou mine in Guinea start to have an impact?
• The impact of GLP-1s: Will they really start to affect the profits of food retailers, healthcare providers and others?

So, these themes, amongst others (geopolitics?), will continue to drive the overall macro narrative. What does this mean for us at Airlie as investors looking for companies that can continue to grow profits sensibly over the medium term? 

We need to stay mindful of how these themes affect the companies we invest in while recognising we won’t have all the answers. What we can do is take opportunities where we believe the market has mispriced companies because of these trends.

So, what companies fit that bill?

Resmed, News Corp and Aristocrat: What do they have in common? 

• They have strong historical track records
• They have high exposure to growth markets in the US
• They have management teams that have been in their roles for years and have allocated capital sensibly
• And we’d argue they are undervalued based on their ability to compound, as per the charts below showing the growth in net profit:

All three companies trade at an average market P/E multiple despite compounding profits of>11%-15% p.a., as shown above. 

Why is that? 

Let's look at some of the themes mentioned above and see how they affect each stock.

Resmed (ASX: RMD)

Considered a “GLP-1 loser”, but as the profit chart shows, these drugs are not affecting the company yet. 

This is important, as currently, circa 12% of US adults have tried a GLP-1: we would argue that if they had a large deleterious impact on CPAP demand, we would likely have already started to see it. 

The company argues that the weight loss drugs bring new sleep apnoea patients into their orbit. 

Time will tell – but our analysis currently leads us to conclude that Resmed is well-placed to continue producing results as shown above.

News Corp (ASX: NWS)

Owner of 62% stake in REA (realestate.com), which is currently considered a possible AI loser. Perhaps the LLMs (ChatGPT et al) can place themselves between the consumer and real estate agents, bypassing the portals – REA and Domain. 

We believe this is not probable, and with the ex-REA business similarly trading incredibly cheaply, we believe the current sell-off is an opportunity. 

Aristocrat (ASX: ALL)

Aristocrat is exposed to the US consumer; recent data suggests cost-of-living pressures and high rates are hurting. We believe this short-term focus is creating an opportunity, not least as interest rates look set to fall from here, providing relief. 

We also argue that Aristocrat’s gaming operations business (in which it places slot machines on casino floors and shares in the revenue) is akin to an infrastructure business. 

If the content remains popular, Aristocrat can dominate this sector for another decade at least. 

Meanwhile, all three companies have zero net debt. This is a pretty extraordinary situation as these companies have huge equity capitalisations. 

Therefore, the optionality is enormous. All three companies have active buyback schemes and could do more buybacks next year. They could make bolt-on acquisitions and possibly large-scale M&A (our least preferred option). 

In our view, the market is poor at recognising and rewarding companies with very strong balance sheets – until they use that option.