Buy Hold Sell: 3 stocks on a tear and two the market is overlooking

With Livewire’s inaugural Growth Series kicking off next week, we’re bringing you a special series of Buy Hold Sell focused on growth stocks.

Against the backdrop of an incredibly volatile macro picture, punctuated by Trump’s flip-flop on tariffs, we explore how growth investing is being reshaped in real time.

Known for punching above our weight on many fronts, we also uncover the sectors and industries where Australia has a competitive edge.

That’s all before we deliver what Buy Hold Sell is best known for, running the ruler over three stocks that are on the move as well as two growth ideas our experts reckon the market is overlooking.

To help navigate this bumper episode, special guest host Tom Piotrowski from CommSec is joined by Ellerston’s James Barker and Ausbil’s Andrew Peros.

Don’t miss the insights as we set the scene for a journey through growth investing over the next couple of weeks. 

This episode was filmed 21 May, 2025

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Edited Transcript

Tom Piotrowski: Thanks for joining us for Livewire’s Buy Hold Sell series where we join hard-nosed market professionals to take a look at ASX listed stocks. Today, we are going to be focusing on growth stocks, and to do that, I'm joined by Andrew Peros from Ausbil and James Barker from Ellerston. Gentlemen, thank you very much for your time.

Now, why don't we just quickly frame up the conversation in terms of it has been a pretty difficult period the last couple of months. We've seen a double-digit decline and rebound for markets over the course of the last couple of months. A seismic event generally leads to that type of price action. Has there been anything in this that has shifted your thinking about the parameters, about the way you see stocks in general?

The current environment

Andrew Peros: Well, the macro is always very difficult to predict, Tom, as you know, and it's particularly difficult to navigate these uncertain times in the small and microcap space, which is a part of the market that I typically focus on. But for me, the process doesn't really change, irrespective of the macro environment, the macro conditions that we're in. I can only control what I can control, which is the rigorous bottom-up fundamental analysis, making sure that I continue to know my companies inside out, hopefully better than the market. That's something that we strive to do, and stay true to the investment process. So, for every stock that goes into the portfolio, goes through the same process, the same philosophy, and the same portfolio management style. I guess when I think about the macro, it's more about a tool that we use to assess risk. So, we're mindful of the macro and it just helps direct our research efforts to ensure that we can hopefully not land on any landmines or bombs.

Tom Piotrowski: James, Andrew makes a really good point there about process, about familiarity. You've run the filters over organisations, you probably know them better than they know themselves. Has there been anything that's shifted for you in the last couple of months?

James Barker: It's been a bit of a tumultuous time from a macroeconomic perspective at the moment. Obviously, with the tariffs, it created a fair bit of volatility out there. I guess what we'd say is that the market's pretty quick to price these sort of events into share prices and the potential earnings risks. If you think about growth stocks, we look at them and they're able to grow despite the macro environment they're operating in. So, if you think they might have a small market share in a big market or they might have high market share in a growing industry and therefore have pricing power benefits. I guess the only other thing we'd say is with the market now focusing on interest rate cuts here in Australia, the domestic cyclicals are a lot more resilient to external impacts such as tariffs. So, we've been looking at some of the housing names and the financials as a way to get exposure to those trends and we expect to see that come through in terms of activity and valuations.

Is there an Aussie edge?

Tom Piotrowski: Andrew, I suppose in terms of the picture as it relates to Australian companies, do we have an advantage of being out of the fray a little bit when it comes to the tariff conversation?

Andrew Peros: The ASX is a very narrow market when it comes to growth stocks. I guess if you're a global growth investor, it's probably not the natural place you would go hunting for growth investments. You've got the deep and liquid NASDAQ in the US, but our market, heavily dominated by banks and resources. But I guess if I was to identify one part of the market where we probably punch above our weight here in Australia, it'd be the healthcare sector, CSL, what better example to use? A company that listed in the early '90s, listed as a microcap and has grown to be one of the largest companies on the ASX with a market cap of $120 billion. Cochlear, similar example, ResMed in that medical device space. And then more recently we've got the likes of Pro Medicus, Telix, and Neuren who are showing all of those attributes of companies that can grow to be successful within that healthcare universe.

The non-negotiables

Tom Piotrowski: James, when it comes to applying the various filters that you invariably do as a professional investor, what is one thing that you would offer to perhaps a less professional individual about just being really hard and fast on when it comes to looking at growth stocks when they're, I suppose, preparing for liftoff?

James Barker: So what we really like to look at is track record. So, have management been able to deliver over a long period of time? One stock at the moment that fits that for us is Nanosonics, so the ticker is N-A-N. This is a business that has its flagship Trophon device. It's been in market for about 15 years now. It's taken about 50% market share in the US, and it's still really profitable in that business. What the management team's been able to do is reinvest those profits back into research and development and establish a new product that goes after the much larger endoscope market and the disinfection there. So, the CORIS device that we've got recently FDA-approved, they're going into market next year and we expect them to replicate the success that they've had with the base business over time.

3 growth stocks

Tom Piotrowski: Let's have a look at three growth stocks that are on a tear and one that perhaps might have a little more of a question mark over it, but the first one, Life360. I'm sure both of you go to sleep dreaming of having this in your portfolio. If you don't, perhaps to a greater extent or just at least thinking about how great the performance has been over the course of the last couple of years.

Life 360 (ASX: 360)

Andrew Peros (BUY): The performance has been great, and despite the strong run it's had, it's still a very strong buyer from my perspective. I know it's quite a polarising stock. There's still a few doubters out there in the market. That's great news to me because I think in time they could be potential buyers of the stock. I'm still, absolutely. We're moving into a world where anything you care about, you're going to want to know where it is and you're going to want to track it. And Life360 is certainly well positioned in that space. The family safety and location sharing app was very much the Trojan Horse to build up its user base. Now, we've got advertising being laid into that. They're starting to monetise advertising. We've got pet tracking and elderly care. So, I think the market is really underestimating how big of an opportunity pet care and elderly care will be. I know the multiple looks high at the moment. On our modelling, we can see that multiple coming down pretty quickly in the fullness of time. So, strong buy.

Tom Piotrowski: Is there a risk that the moat around this stock is a little bit narrow? Is there a teenager in a bedroom somewhere coming up with this sort of technology that can displace this stock next week?

Andrew Peros: There's always a risk and we're always constantly thinking about risks. The good news for Life360, they've got the first mover advantage. Apple have come out with their AirTags. There was concerns that they were going to encroach on the Life360 territory, but it is more than just a tracking app. They're selling advertising. They're selling financial services. They're addressing a gap in the market in elderly tracking and care, pet care. So, sure, there's always going to be competition. Can they start next week? I highly doubt it.

Tom Piotrowski: James, this stock has almost tripled last year. It's up another 40% this year. Is this a bit rich for your blood?

James Barker (BUY): No. 360 is still a buy for us. It's one of the largest positions in the Ellerston Emerging Leaders Fund at the moment. So, if you look at that last quarterly, the first quarter was really strong, continued to exceed expectations from a consensus perspective and they look really well-placed to achieve their full-year guidance, if not above it. I agree with Andrew around the moat that they've built. So, they've got 84 million users at the moment on the platform, and if you think about the context of that, they're about 6% market share in the US. They're very low single digits globally, so there's still a long way to go from growing those monthly active users.

If you think about the app as well, just to put it in context of how under-monetised it is at the moment, they're the 13th largest app by daily users in the US at the moment. They made about $300 million of revenue last year. If you think in the context of the other top 20 apps that are out there at the moment, the next smallest made $3 billion of revenue. So, as they continue to grow things such as advertising, in-app advertising, and into pets and other expansionary things, we expect them to continue to grow strongly and continue to have a pretty good pathway there.

Catapult (ASX: CAT)

Tom Piotrowski: Andrew, Catapult feels like it's an old stock, but it continues to deliver the goods. It's actually just reported results this morning before we started recording, and those numbers have been very well received. The stock's up more than 10%. What stood out was the free cashflow. It's really hitting the right notes at the moment, isn't it? Are you a buyer of this stock?

Andrew Peros (BUY): Absolutely. It's a stock that's dear to my heart, Tom. When I was last on this episode, I think I pitched it as a ten bagger. It's up almost 100% since then, so arguably another nine bags to go. But on a serious note, sports tech is big business. It's a huge industry. Catapult is really at the forefront of that emerging space. Sports teams are spending 10s of millions of dollars on trying to sharpen their performance, ensure that they're at the cutting edge of the technology and they're constantly in the frame of winning competitions. So, Catapult can help these clubs, these teams, these players, achieve those outcomes. It's a company that is well and truly in free cashflow positive territory. Some of the metrics that they're delivering are quite phenomenal. So, look, there's plenty of room ahead of them to grow. I'm really excited about the outlook. So it's still a strong buy for me.

Tom Piotrowski: James, buy, hold, sell?

James Barker (BUY): Yes. The Catapult remains a buy for us as well. We've owned it since about a $1.50 in the portfolios. So, Catapult, what you're seeing at the moment is they're really being able to deliver very strong metrics, so over a $100 million in recurring revenue in US dollar terms, and that's growing consistently at 20% per annum. I guess the other thing is that at the investor day recently, they announced a next generation of wearables and video platform for their customers. So, they can now go and sell that into the existing customer base and with the video side of the business, take share from some of the larger incumbents out there. So, we still think there's a big opportunity in terms of the number of teams. We're at about 3500 teams at the moment. The addressable market's closer to 20. So, they continue to take market share there and therefore that should flow through under stronger revenue and earnings growth over time.

Tom Piotrowski: Is there a risk that it gets taken out before it can realise the runway of growth here?

James Barker: I think if you look at their market position in the wearable side of the business, they do have 3500 teams. So, it would be quite attractive for someone else to come and look at that. Obviously, that's a pretty dominant market share position. If you think about these professional teams, the churn that Catapult's experiencing at the moment's sub 5%. So, they are very sticky customers once you get them in, and especially if you can sell them both the wearables and video solutions. So, it would be quite appealing for someone looking to get it further into that market.

Kelsian Group (ASX: KLS)

Tom Piotrowski: The third stock on our list is an organisation called Kelsian. Now, some people would question its place in the conversation. It's recently had a little bit of an uptick, but it has had ... well, a challenging ride over the course of the last couple of years. Four years ago, this organisation was trading about $10 a share. It was on its way to $2 not long ago. Andrew, are you prepared to catch a falling knife here or has it fallen far enough?

Andrew Peros (SELL): Unfortunately, I'm not, Tom. It's still a sell for me. It's had a problematic or turbulent past couple years. It has all the hallmarks from my perspective to be a value trap. If I look at the top line, it's relatively anaemic growth over the next couple of years, still carrying a lot of debt. There's been a bit of management turnover. I know the bulls out there will be saying that the last trading update was probably the last downgrade and the valuation's looking really attractive. Not the knife that I'm willing to catch at this point in time, but I am keeping an open mind. Management have a bit of work to do to turn it around. So, for now it's a sell, but I'll keep it on the watch list.

Tom Piotrowski: James, they have some defensive qualities, I suppose, in terms of their public transport contracts that have got a reasonable life to them. Does that attract you to this organisation?

James Barker (HOLD): Yes. So, Kelsian's a hold for us at the moment. We do think there's value on offer there, but it's just a bit unsure on how they realise that over time. So, if you think about the business that's been impacted over the last couple of years by labour shortages, CapEx has blown out and that's impacted the balance sheet as well. So, net debt to EBITDA is over three times now, which is not great in the smaller end of the market where people do look at those gearing levels. Yes, they are sustainable contracts over time, the transport segment of the business, but we'd like to see that gearing come down.

In response to this, management has announced a strategic review of the tourism assets. It did get a bid for them back in the day at over 10 times EBITDA, so it would be accretive, but I think the world's changed a little bit on the tourism side of the business versus pre-COVID. And additionally, it is the more cyclical and capital intensive side of the business. So, we're just not sure how that value gets realised and whether there's a buyer willing to buy those assets that would unlock value for the greater Kelsian and group, and so we're sitting on the sidelines for now.

Guest picks

Tom Piotrowski: So, gentlemen, you have each brought in a growth stock that you find particularly attractive at the moment. Can I ask you to reveal yours, Andrew?

Smart Parking (ASX: SPZ)

Andrew Peros: Today, I'm going to be pitching Smart Parking, ticker SPZ. It's a business that operates in a world where paying for parking is becoming more the norm than the exception. I know we all don't like to pay for parking. Smart Parking is certainly at the forefront of the technology evolution there. They've got some license plate recognition technology is proprietary built in-house. They're rolling out these systems to private operators, whether it's the local supermarket, the local hotel or the local general practice, helping those people monetize the space that they have there through metered parking and then infringements if someone stays above their allowable time limit.

It's a great company with some really impressive metrics. The return on capital is north of 25%. Each one of these systems costs about 20 grand. They're getting a one to two year payback, so free cash flow is really good. It's founder-led. Chris Morris sits on the board as the chairman, owns roughly 26%. Top line growing exceptionally strong, and they've recently undertaken a highly accretive acquisition in the US, giving them a great platform to grow in a very large and highly fragmented market. So, valuation at the moment, at least in my eyes, is quite undemanding. I think it's fallen through the cracks, and I think in the not too distant future, it's going to come on the radar of a lot of small cap managers.

Tom Piotrowski: It's got a whiff of a Buffett-style stock about it, doesn't it?

Andrew Peros: It does a little bit.

Tom Piotrowski: James, reveal your pick.

Megaport (ASX: MP1)

James Barker: Our pick that the market is underestimating at the moment is Megaport with the ticker MP1. So, Megaport is a provider of network as a service. So, it's effectively for businesses that want to on-demand connectivity between clouds and data centres. The business was a market darling, back in the day. It was growing revenue at all costs. It was burning a lot of cash. At the time, that was okay, but then when the revenue growth and the unit economics started to deteriorate, people got worried about the balance sheet position. The boards come in, they've executed a cost out. This did two things. They put through a price rise that reduced customer demand for the product because the pricing was out of sync, but they also improved profitability of the business over time.

So, in the last two years, Michael Reid, the CEO, he's come in, he's fixed up the existing business, he's got the existing customers spending again, and it looks like that's stabilised at the moment. He's working on new products to sell to the existing customers and then hired a bunch of salespeople to go after new logos out there in the market. So, this is a business that's doing 200 mill of revenue at the moment, has 30% EBITDA margins now. It's generating cash. We're really looking to see that existing customer spend re-accelerate with the help of new products coming online and also going after new logos over time. So, we think it's got more to go.

Tom Piotrowski: And the fact that it's generating most of its revenue in the US is pretty attractive under these circumstances, isn't it?

James Barker: Yeah. It's quite hard to find Australian growth stocks that do have that US exposure. And if you look at it from a tariff impact or something, there's no impacts there. And the customer spend on a relative basis is quite small. So, in terms of its a bit more defensive from an existing customer's spend on big fluctuations from the macroeconomic environment.

Tom Piotrowski: Gentlemen, thank you so much for your insights today. They will serve the viewer well today. James, Andrew and indeed, of course, to the viewer, thanks very much for tuning in to Livewire’s Buy, Hold, Sell.