Beats, misses, ASX sleeper stocks - and the double-down no one saw coming

"You wouldn’t be earning your money if you weren’t tired.” 

That was my line to Joel Fleming when we caught up for a rapid-fire review of reporting season with Yarra Capital Management’s equities team. It’s fair to say, exhaustion aside, the gents are feeling good, having successfully navigated the volatility. 

Back in February, Marcus Ryan, Michael Steele, and Fleming all joined me for a look at earnings season – and a little fun. 

Each manager picked a stock, with the “winner” securing bragging rights and the “loser” footing the bill for a steak dinner. Six months on, Block (ASX: SQ2) surged 31% and handed Ryan victory, Capstone Copper (ASX: CSC) delivered nearly 20% for Steele, while Fleming’s pick, Dimerix (ASX: DXB), still managed a respectable 8%. Steak or no steak, all three landed positive returns.

This time around, we dug into the big surprises (both good and bad), the sleeper stocks the market may have overlooked, and the biggest risks and opportunities ahead. 

From NextDC’s (ASX: NXT) rip-roaring 17% move to Baby Bunting’s (ASX: BBN) shock rebound, through to James Hardie’s (ASX: JHX) painful slump, the team didn’t hold back.

We wrapped with fresh steak dinner picks – and some bold calls on where value is hiding. Check out the video above for the full experience, or read a short summary below. 

INTERVIEW SUMMARY

Biggest surprises

For Marcus Ryan, the standout was NextDC, which soared 17% on results day. 

“It definitely saved the best till last. A very strong update on demand, de-risking around earnings, and a new JV to accelerate growth,” he explained.

Michael Steele pointed to Baby Bunting, which stunned with a 50% rally.

“That increase was due to the stronger-than-expected result, better guidance for FY26, and encouraging signs from the new store format.”

Biggest misses

Joel Fleming didn’t hesitate: Reece (ASX: REH). 

“Once a market darling, having a really, really tough time out there.”

Marcus stayed in building materials, nominating James Hardie. 

“The stock was down 35% in two days. Trading volumes in the US were weak, cost pressures were above expectations, and the new decking acquisition is underperforming.”

Sleeper stocks

Joel’s under-the-radar pick was XRF Scientific (ASX: XRF). 

“They sell into the global laboratory sector. More products coming, better distribution, strong end-market demand – looks like a really good one.”

Michael’s sleeper was Maas Group (ASX: MGH). 

“They’ll benefit from a cyclical recovery and market share expansion in renewables and residential. Hidden value in the property portfolio, founder-led, and significant upside.”

Outlook: How are we feeling?

Michael summed it up as “overall positive, in particular small companies have a very attractive outlook.”

Joel admitted to being “tired” but “optimistic,” while Marcus kept it simple: 

“We are feeling positive around the outlook, particularly around select opportunities.”

Opportunities and risks

Michael highlighted domestic cyclicals and named Centuria Capital (ASX: CNI) and Baby Bunting as attractive.

Marcus flagged risks in the banks: 

“The inevitable unwind from some of the loved and very expensive parts of large-cap is probably one of the key risks. The banking sector trading on a 60% PE premium is a concern.”

The steak dinner bet

The February picks all delivered gains, but Marcus’ Block was the runaway winner, leaving Joel to pick up the tab. 

Despite that, Joel doubled down on Dimerix (ASX: DXB) for the next round.

Michael went with Cuscal (ASX: CCL), a wholesale payments company. 

“High barriers to entry, low-teens earnings growth, and 25% upside from acquisitions – and it’s only on a PE of 16.”

Marcus chose Treasury Wine Estates (ASX: TWE).

“Penfolds accounts for 60% of earnings and is growing double-digit. The business is simplifying, there’s a $200m buyback, and valuation at 12 times PE is attractive.”

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