The Aussie market is in a cool down period with the ASX200 index up a meagre 2.7% for FY25-26. Returns over the past year are modestly below the 10-year annualised return of 5.31% according to S&P data. The biggest drags on performance have been sectors with historically strong growth profiles, such as technology and healthcare.

The beauty of long term investing is it mitigates some of the worries investors face when trying to time the market through the economic cycle. Additionally, high quality growth profiles matched with wide moats and proven capital allocation from management provide greater earnings visibility to investors over the long term.

Our best growth stocks to buy for the long term share a few qualities:

  • They land in the growth portion of the Morningstar Style Box.
  • Companies on this list have wide Morningstar Economic Moat Ratings. This means that our analysts believe that the company can sustain their competitive advantage for at least 20 years. This is particularly important when looking for stocks to buy for the long-term.
  • They are run by management teams that make smart capital-allocation decisions, with either an exemplary or standard capital allocation rating.

WiseTech Global (ASX.WTC)

  • Fair Value Estimate: $130 (75% discount at 14 July)
  • Rating: ★★★★★
  • Moat: Wide
  • Morningstar Capital Allocation Rating: Exemplary

WiseTech develops cloud based logistics software that enables the efficient movement of goods across international supply chains. CargoWise, its flagship software, is deeply embedded in the daily operations of freight forwarders. It essentially acts as the primary operating system instead of a supporting software.

WiseTech’s long-term strategy centers on becoming the operating system for global trade and logistics as the industry digitizes. We expect the logistics industry to digitize rapidly over the next decade. WiseTech provides logistics companies the technology for this transition. WiseTech’s core product suite, CargoWise, provides the best-in-class software solution for international freight-forwarding by air and ocean, and customs and compliance. We see logistics companies that use the CargoWise international freight-forwarding solution significantly outperforming their peers due to the efficiency and productivity improvements the platform provides.

We therefore expect this solution to become the industry default, either through increased customer adoption or through WiseTech’s customers taking market share. We expect WiseTech to leverage its already dominant position in international freight-forwarding to move into downstream adjacencies, which consist of, in order of functional proximity, road and rail and warehousing.

WiseTech’s wide moat is based on switching costs and network effects in its core CargoWise product suite. CargoWise’s switching costs are most clearly evidenced by its annual gross retention rates, which have stood over 99% per year since 2013, despite WiseTech pushing through notoriously steep price increases over this period.

WiseTech has an Exemplary Capital Allocation Rating, reflecting our assessment of a sound balance sheet, excellent investment efficacy, and appropriate shareholder distributions. WiseTech’s balance sheet is sound. Financial risk is low given high operating margins and forecast positive cash flows. Shareholder distributions are appropriate and have allowed WiseTech to build cash reserves while starting to return funds to shareholders.

Auckland Airport (ASX:AIA)

  • Fair Value Estimate: $7.80 (7% discount at 14 July)
  • Rating: ★★★★
  • Moat: Wide
  • Morningstar Capital Allocation Rating: Standard

As the primary gateway to New Zealand, Auckland Airport is set to benefit from rising air travel to the island nation. Auckland Airport is the largest airport in New Zealand, and Auckland is by far New Zealand’s most populous city. No other airport in the country is likely to outdo Auckland as an international hub. We expect the airport to capture good medium-term growth from further airline capacity expansion to and from New Zealand. We forecast total passengers handled by Auckland to grow to more than 20% above pre-covid levels over the next decade.

Auckland Airport has carved a wide economic moat, thanks to its near-monopoly position in a stable regulatory environment. We don’t think a second major airport is likely to emerge anytime soon, given Auckland Airport’s expansion potential to accommodate continued growth in passenger numbers, protecting its position for decades to come. Aeronautical and non-aeronautical operations each contribute about half of revenue, with profitability typically higher in the non-aeronautical business.

While airports are regulated assets, regulation in New Zealand is relatively accommodating. Auckland Airport is free to set fees with airlines for passenger movements, aircraft landings, aircraft parking, check-in facility usage, and security expenses, to earn a suitable return on its “regulated asset base”, which includes prior capital expenditures and some revaluations.

Auckland Airport can benefit from its dominant position through its unregulated businesses, notably retail (including duty-free), car parking, hotels, and industrial property and land development. The company contracts out most of its retail store space and collects minimum guaranteed rent, much of which is on an annual escalator. Profitability in the retail and property segments is typically higher than in the aeronautical segment.

We assign Auckland International Airport a Standard Morningstar Capital Allocation Rating based on our assessment of balance sheet risk, investment efficacy, and shareholder distributions. Shareholder distributions are appropriate. The company covers its dividends with free cash flow—adjusted for capital spending needs. Temporarily slashing distributions to zero in 2020 when earnings were curtailed by the pandemic was an appropriate response. Distributions were reinstated in the second half of 2023, in line with the recovery in international travel, which we also think is reasonable.

The Lottery Corp Ltd (ASX.TLC)

  • Fair Value Estimate: $5.40 (5% premium at 14 July)
  • Rating: ★★★
  • Moat: Wide
  • Morningstar Capital Allocation Rating: Standard

The Lottery Corporation should continue to dominate lotteries in Australia. Regulation limits competition through compulsory licensing, thereby bestowing on Lottery Corp a near-monopoly over long-dated licenses in all Australian states and territories except Western Australia. No significant licenses are set to expire before 2050. Competition at license renewal is likely, and we anticipate a good chance that exclusivity may not be retained. Still, this risk is immaterial to our fair value estimate. We do not expect any significant regulatory changes, given the government and community’s dependence on Lottery Corp’s revenue.

Lottery Corp has a few digital-only competitors with an estimated combined market share of less than 5%. None of the digital competitors has the same brand strength as Lottery Corp, with its 50-year history, physical retailers, range of games, and televised lottery draws all contributing to its brand equity. We think a lack of brand recognition will prevent digital competitors from gaining sufficient market share, given their relative obscurity.

We assign The Lottery Corporation a Wide Morningstar Economic Moat Rating by virtue of its intangible assets, including brand equity and regulation that limits competition via compulsory licensing. We forecast return on invested capital to remain above 30% over the next decade—comfortably exceeding the firm’s 7% weighted average cost of capital.

We assign The Lottery Corporation a Standard Morningstar Capital Allocation Rating based on our assessment of balance sheet risk, investment efficacy, and shareholder distribution. The Lottery Corporation’s balance sheet is in sound condition. Earnings have proved relatively resilient through economic cycles, including the global financial crisis and the COVID-19 pandemic. Shareholder distributions are appropriate.

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