12 ASX stocks Seneca’s Ben Richards believes the market is mispricing

Please note, this interview was recorded Wednesday 4 March, 2026

Investing right now feels hard. Pockets of opportunity exist but can evaporate faster than a puddle in the outback heat, while at the same time, there do not seem to be any standout opportunities that are obvious in the way that tech was over the past few years.

Perhaps it is a moment in time, brought about by AI disruption and exacerbated by geopolitical events, or perhaps the old rulebook is being reshaped in real time.

That is the view of Seneca Financial Solutions portfolio manager Ben Richards, who believes rigid frameworks often lead investors to the same crowded trades and away from the most interesting opportunities.

“Rules based investing is a thing of the past. Anyone with a stock screening tool can filter for return on equity or growth. The alpha comes from looking forward, not backward.”

Instead, Richards and Luke Laretive, via the Seneca Australian Small Companies Fund, focus on identifying situations where the market narrative has diverged from the underlying economics of a business. That can mean overlooked small caps, misunderstood commodity exposures, or technology companies where fear has overwhelmed fundamentals. In each case, the goal is the same: find companies where the market is pricing the past rather than the future.

In the interview above, Richards outlines a range of opportunities he believes the market is mispricing today and he names several stocks he believes offer asymmetric upside if his thesis proves correct.

INTERVIEW SUMMARY

Finding opportunity when the market is looking backward

For Richards, the biggest investment edge comes from focusing on forward-looking fundamentals rather than backward-looking screens. He argues that many traditional screening tools have become commoditised.

Instead, Seneca focuses on identifying situations where widely used rules or market narratives have pushed investors away from potentially attractive opportunities.

“There is alpha in taking the other side of those rules.”

That philosophy often leads the team into overlooked sectors or companies where valuation and future earnings potential have become disconnected.

Australian Finance Group benefiting from structural change

One of Seneca’s core holdings is Australian Finance Group (ASX: AFG), a mortgage aggregator positioned to benefit from the structural growth of mortgage brokers in Australia. Richards believes the company delivered a particularly strong operational update.

“We thought that had a stellar result. Profit growth of 46%.”

Mortgage brokers continue to gain market share as borrowers increasingly rely on intermediaries rather than dealing directly with banks.

“More and more share of home loans are coming through mortgage brokers and not directly through the big banks.”

AFG also operates its own lending platform, which Richards says has been run conservatively.

“That lending has been pretty conservative in the last few years and they have had relatively few bad debts.”

With strong settlement growth and access to funding through residential mortgage-backed securities (RMBS), Richards believes the loan book has significant room to expand. At around 10 times earnings and with an attractive dividend yield, he views the current valuation as compelling.

XRF Scientific and the power of repeat revenue

Another company Seneca has followed closely for years is XRF Scientific (ASX: XRF), a small-cap industrial technology business supplying equipment used in mineral testing.

“This is a small-cap company, $250 million market cap. It is profitable and growing.”

The business has delivered strong earnings growth over time. “It has done 26% compound annual growth in profit over the last five years.”

The appeal lies in its recurring revenue model. Laboratories purchase XRF’s testing machines and then continue buying the consumables required to run them.

“You sell the machine and then you sell the ongoing consumables.”

Richards compares the structure to the classic printer and ink model, where the initial equipment sale drives a long tail of repeat revenue.

Despite this track record, he believes the stock still flies under the radar and trades at valuation levels that do not reflect its growth profile.

Resources: searching for value beyond the majors

While the large miners have rallied strongly, Richards believes the best opportunities lie further down the market capitalisation spectrum.

“Years of underinvestment married with high inflation and supportive policy out of Asia are working in favour of resources.”

In iron ore, Seneca has been watching Fenix Resources (ASX: FEX), a Western Australian producer expanding production capacity.

“We think it is one where there could be multiples upside if we are right.”

He also highlights Red Hill Minerals (ASX: RHI), which holds a royalty over Mineral Resources’ Onslow iron ore project.

“Red Hill is generating extra income without lifting a finger, essentially.”

Because royalties provide exposure to production growth without requiring additional capital investment, Richards believes the market may be underestimating the earnings potential.

Energy and commodities with asymmetric upside

Richards also sees opportunity in parts of the energy complex where supply constraints may support prices.

“There has been a lot of underinvestment over the last few years, which means supply growth is going to be relatively stagnant.”

One preferred exposure is Karoon Energy (ASX: KAR), which Richards describes as highly sensitive to oil prices. “Karoon is the most leveraged stock on the ASX to a rising oil price.”

Coal is another area where Richards believes pessimism may have gone too far. Seneca favours Stanmore Resources (ASX: SMR) and New Hope (ASX: NHC), both established producers with strong management teams.

“It [the opportunity] is low-cycle pricing combined with cheap equity valuations.”

In nickel, the firm prefers Nickel Industries (ASX: NIC), which operates directly in Indonesia. Richards believes production growth and improving nickel prices could drive strong free cash flow generation over the next year.

Technology and special situations

While commodities provide one source of opportunity, Richards is also watching parts of the technology sector where valuations have reset.

One example is REA Group (ASX: REA), which Richards believes remains a structurally strong business despite recent concerns.

“REA trades on about 30 times earnings, which is its lowest since 2018.”

He argues the slowdown has more to do with cyclical listing volumes than structural disruption. “REA is not going anywhere", he adds. 

Other technology names Seneca has been accumulating include Siteminder (ASX: SDR) and Qoria (ASX: QOR), where Richards believes share prices have become disconnected from intrinsic value.

Event-driven opportunities

Seneca also looks for situations where corporate events could unlock value. One example is Venus Metals (ASX: VMC), which owns a stake in ROX Resources (ASX: RXL) and a royalty over the Youanmi gold project in Western Australia. Richards has previously written about this opportunity on Livewire. 

Equities

Seneca's special situation

View

“VMC is trading significantly under the asset value.”

Because Rox Resources is progressing development of the project, Richards believes the value of those assets may soon become clearer to the market.

Why valuation still matters

Despite his interest in high-quality businesses, Richards cautions investors against ignoring valuation.

“Quality at any price is a myth.”

Many of the best businesses on the ASX have traded at extremely high multiples in recent years, leaving them vulnerable to even modest disappointments.

For Richards, that combination of quality and sensible valuation remains the key to generating long-term returns.

Managed Fund

Seneca Australian Small Companies Fund

Australian Shares

View