16 July 2025
Elston Quarterly Portfolio Update Q325
In this video, Portfolio Manager Alastair MacLeod provides his perspective on the current macroeconomic environment, its implications for markets, and what it means for portfolios. Read more
This article was originally published on LivewireMarkets.com on April 26th, 2024
There’s something to be said about discovering a gem of a stock the rest of the market missed. Like uncovering a musician before the world does, or being the first to watch a TV series before everyone else’s eyes are glued to the same screen. It’s a great feeling – and one that may leave you asking, ‘Am I better than everyone else?’
In most cases, probably not. But to help you on your way, this episode is dedicated to covering under-covered and undiscovered stocks. This anonymous writer is in the camp that everyone deserves a little confidence boost right now – particularly you, my dear reader.
Today’s hunting ground is small-cap stocks – given these are typically less covered by analysts. The stocks in this episode have market caps between $500 million and $850 million, so they are also less likely to be in the playing fields of the big fund managers and are more likely to not be on investors’ radars.
Livewire’s Ally Selby was joined by LSN Capital Partners’ Nick Sladen and Elston Asset Management’s Justin Woerner for their analysis of these under-the-radar stocks.
Plus, they also each name an overcrowded small-cap darling that could be due for a sell-off from here.
Note: This episode was filmed on Wednesday 24 April 2024. You can watch the video, listen to the podcast or read an edited transcript below.
Edited Transcript
Ally Selby: Hey, how’re you doing and welcome to Livewire’s Buy Hold Sell. I’m Ally Selby and today we’ll be taking a look at three under-the-radar stocks as well as two that have run far too hard. To do that, we’re joined by Elston’s Justin Woerner and LSN Capital’s Nick Sladen.
Okay, first up today we have Navigator Global Investments – a Brisbane-based alternative investment management company with an $822 million market cap. Nick, I’m going to start with you today. Is it a buy, hold or sell?
Navigator Global Investments (ASX: NGI)
Nick Sladen (BUY): It’s a buy from our perspective. We think it’s the cheapest way to access alternative investments on the ASX. The new CEO, Stephen Dark, came on board in October of last year. He’s doing a really good job in terms of getting the business performing quite well. Its largest stake in the manager, a business called Lighthouse, has actually just gone back above its high water mark so it’s in the performance fee zone. It’s averaged $65 million in performance fees over the last five years. It’s got a hundred million dollars in capital available to grow via M&A. So we think there’s organic and inorganic opportunities for growth. And for all that, it’s on a single-digit PE, which is well below many global competitors.
Ally Selby: That said, it still is yet to recover from the COVID crash and its share price is still in the red since then. It has had quite a good 2024 at share prices up 50%. Justin, can it keep going like that? Is it a buy, hold or sell?
Justin Woerner (HOLD): Ally, for us, this one’s a hold. So I’d agree with a lot of the points that Nick said. There are a lot of things to like about this business. But I think really for us, we’ve probably just got a few more concerns around the medium-term ability to drive that AUM growth. And then in the short term, we’re probably a bit more concerned about the OPEX growth as well, which has been quite strong of late. So for that reason, we’re probably more of just a wait-and-see with this business.
Monash IVF (ASX: MVF)
Ally Selby: Okay, next up today we have Monash IVF. It has a market cap of $580 million. And of the five brokers who cover the stock, all rate it a buy. Justin, do you agree? Is it a buy, hold or sell?
Justin Woerner (BUY): We do agree. For us, this is a buy. We really like this business. We’re attracted to businesses that operate in industries with structural tailwinds and we think IVF definitely has that. Management operates really good, high-quality facilities. We think that goes towards better patient outcomes. Its two main competitors are both backed by PE, which we think creates uncertainties for their specialists in the long term. Monash, on the other hand, has been doing a really good job of recruiting specialists and growing their network and we think this business can just continue to take market share over the medium and longer term.
Ally Selby: Monash’s share price is up around 16% since the beginning of the year. Nick, can it keep going high? Is it a buy, hold or sell?
Nick Sladen (SELL): Trading on 20 times earnings at 52-week highs, we’re happy to sell it at this price. We think IVF is expensive, and in this cost-of-living pressure environment, people will scrutinise that, and there are alternative options out there. We also have some concerns about doctor-listed models. We’ve seen that in the past, and Monash is not immune from this itself given that some of the doctors do leave and they do take patients. So that’s just an element of risk and at all-time highs, we’re happy to sell it.
Bravura Solutions (ASX: BVS)
Ally Selby: Okay. Last up, today we have Bravura Solutions, which provides licensing, development and software services to the wealth management industry. It’s had a ridiculously good 2024 after an already fantastic 2023. Its share price is up 73% since the beginning of the year. Last one for you today, Nick. Is it a buy, hold or sell?
Nick Sladen (HOLD): It’s a hold from our perspective. The new management team has done an outstanding job of re-cost sizing the business. They’ve taken $40 million of costs out it and they’ve got a line of sight to $65 million, driving the business back in terms of return to profitability. The top line’s actually not growing – they’ve guided FY24 to be in line with FY23. So we’re happy to hold at this point in time while management works on growing the top line and see how it all plays out.
Ally Selby: Okay. Three brokers cover the stock, two rate it as a buy, and one rates it as a hold. Justin, what do you think? Is it a buy, hold or sell?
Justin Woerner (SELL): For us, it’s a sell, Ally. I think this is one actually that we did previously have in the portfolio at one stage. I think we underestimated the amount of structural change that was occurring within the industry and probably overestimated the amount of competitive advantage that we thought the business had. I’m not sure if much has changed. I agree with Nick. The new management has definitely improved profitability, but most of that’s been through cost-cutting so I’m not sure what impact that’ll have on the business longer term. And then outside of that, I think we’ve just got ongoing concerns about the potential for management to drive client activity, pricing and that top-line growth, which I think the valuation is really calling for.
Overcrowded darlings
Ally Selby: Okay. We asked our guests to bring along one overcrowded darling that they think is due for a pullback. Justin, I’m going to start with you. What stock are you selling right now?
Lovisa (ASX: LOV)
Justin Woerner (SELL): For us, it’s Lovisa. So once again, this is another one that we had in the portfolio. We sold out mid-last year just on a valuation basis. So, we pushed our financial models very hard. We were very aggressive. We couldn’t really make the valuation stack up. We couldn’t get an adequate level of return out of this business. And on that note, we have concerns going forward. So we think it’s priced for absolute perfection and we’ve got concerns about the quality of the store network. It’s really easy to just pump stores out to outgrow that store network. I think it’s harder to maintain the quality so we wouldn’t be surprised if over the medium to longer term we see a deterioration in the quality of the store network and the underlying store economics.
Ally Selby: Okay. Nick, your time in the hot seat. Which stock do you think has become way too hot, it’s overcrowded and you’re selling right now?
Gentrack (ASX: GTK)
Nick Sladen (SELL): We’re happy to sell Gentrack. The market cap is around $800 million. Like Bravura, management has done an amazing job turning the business around, delivering six upgrades since the middle of 2021. There is a really good market for cloud-based utility building systems, but we think it’s captured in the current market valuation. We’ve recently seen several brokers initiating buy reports on it after the stock’s risen 600% in the last 12 to 18 months, which perhaps might give some investors an opportunity to exit that position. It has a valuation of over 30 times EBITDA, so we’re happy to sell it at this point in the cycle.
Ally Selby: Okay, I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our YouTube channel. We’re adding so much great content just like this every single week.
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