Buy Hold Sell: 5 ASX disruptors taking on the giants

While the top end of town tends to steal the spotlight, real innovation often happens in the small and mid-cap space. From nimble fintech redefining how we bank to next-gen healthcare firms disrupting traditional delivery models to tech-savvy logistics players streamlining operations, there’s a new wave of challengers taking on the incumbents.

These companies may not yet be household names but many are leveraging technology, unique business models, or sharp customer focus to punch well above their weight. And in a market where growth is increasingly hard to come by, they offer investors a compelling, if sometimes risky, alternative.

So, how do you sort the genuine disruptors from the hype machines? Which companies have the vision, execution, and balance sheets to go the distance, and which are more likely to fizzle out?

Joining Livewire's Chris Conway to break it all down are Emanuel Datt from Datt Capital and Michael Steele from Yarra Capital. Together, they put three emerging challengers under the microscope.

For good measure, they also name their favourite disruptor they are backing right now. 

Please note this episode was filmed on 7 May 2025.

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Edited Transcript

Chris Conway: Hello and welcome to Livewire’s Buy Hold Sell, my name is Chris Conway. While the ASX's big names dominate headlines, a new breed of small-cap innovators are chipping away at established players across sectors from fintech to healthcare to logistics. This episode spotlights companies using technology, business model innovation, or customer-centric strategies to outmanoeuvre the incumbents. Helping to do that is Datt Capital's Emanuel Datt and Yarra Capital's Michael Steele. Gents, we've got a lot to get to so we're going to dive right in. What makes for a successful disruptor in today's market? Michael, I'm going to come to you first.

Successful disruptors

Michael Steele: A successful disruptor has a product or service that is significantly better than the alternatives. And that can come through in a number of different factors whether the pricing is materially lower, the functionality is significantly better than what's available in the market. It can have some externality benefits such as benefits to the environment. It's also produced by a company, typically, that has very high levels of reinvestment back into their product as well and they're constantly innovating.

Chris Conway: Emanuel, what about for you? What does disruption look like?

Emanuel Datt: I think Michael nailed it basically. The main aspects are that the company should be able to provide a product or service that's cheaper, faster, and ultimately a better proposition for its own customer base. That's ultimately what disruption's all about.

Chris Conway: So what characteristics, Emanuel, do companies that are disrupting things have opposed to companies that are just doing things well versus their competitors?

Emanuel Datt: I think at the crux of it all comes down to innovation and execution. Just these two factors are the main ones.

Chris Conway: Michael, what about you? Anything to add to what Emanuel said there?

Michael Steele: In terms of disruptors, they really need to bring something that's very different to what's in the market; so pricing that is dramatically lower than current competitors, at the extreme examples, they're bringing a product that just doesn't exist in the market, there's major benefits such as lower carbon emissions. It's a business where it's being backed by an innovator that's pushing very hard. And they're not focused on profitability they're focused really on the consumer with a very compelling product that really is disrupting what everyone else is doing in the market.

Stocks

Chris Conway: All right, let's focus on some of these disruptors. First up we've got Generation Development Group, it used to be Austock Group, of course. Provides tax-effective investment bonds. Michael, buy, hold, or sell?

Generation Development Group (ASX: GDG)

Michael Steele (HOLD): Generation Development is a hold. There's no doubt they've got a compelling product set. When you look across managed accounts, the investment bonds, and also research. And across all three markets, clearly, there's some structural growth elements. But the company is a hold from our perspective. We also compare Generation Development to the investment platforms so comparing it to a company like Netwealth. Netwealth has a much greater level of technology in its core IP. And our view is, a company like Netwealth will have lower customer churn over time and yet you're paying a very similar valuation multiple for Netwealth compared to Generation Development. In terms of other factors, Generation Development has moved to being a very well-liked stock and there's an element of crowding. Arguably it's one of the most crowded small caps in the market. And we also see risk around where earnings expectations have got to, there's not a margin of safety there. And also very elevated valuation metrics.

Chris Conway: Yeah, it's a good point Michael. The stock is up around 70% so far this year, trading at all-time highs so some element of crowding perhaps. Emanuel, buy, hold, or sell for you?

Emanuel Datt (BUY): Generation Development is a buy. As Michael identified quite correctly, they have these three divisions. And I think that with the Lonsec acquisition, that was a pivotal transaction for the group. What that effectively gave the company is a platform to launch a whole new suite of products and massively increase their TAM from our perspective. So even though correctly Michael identified that the trade does feel crowded, I think it might be crowded for a very good reason. But also notwithstanding, there's also the very substantial externality of potential changes to the superannuation system which could greatly benefit the company going forward if they do happen.

Imdex (ASX: IMD)

Chris Conway: Next up we're going to talk IMDEX. IMDEX develops cloud-connected sensors and drilling optimization products. That's a mouthful. It basically makes mining exploration more efficient. Emanuel, buy, hold, or sell for you?

Emanuel Datt (BUY): Imdex is a buy for me. It's a company that's been around for many years. Mining technology has become increasingly important as the depth of mineral deposits has increased. The ore bodies have gotten harder which requires greater technological sophistication and instrumentation. Imdex are effectively the market leader. They are priced, I think, on a fairly modest multiple given their importance to the industry and that's why I think they're a buy.

Chris Conway: Very good. Michael, up 24%, had a solid past year. Buy, hold, or sell for you?

Michael Steele (BUY): Imdex is still a compelling buy for us. Imdex has cyclical earnings upside. We've seen quite weak exploration markets over the last two years and those volumes are down over 30%. When you look at the lead indicators of higher gold prices and higher copper prices, our views you'll see that cyclical recovery come through. As referenced in the intro, they do have compelling technology. Technology across their censors but also across their consumables. And that supports a very strong market share opportunity globally, supported by that product set. They've also got upside earnings from their margins. Margins are cyclically depressed at this point, and margin upside from selling those higher value technology products. They've also got a business that's quite capital light and you see that in the strong free cash flow generation. And the business will move to being net cash over the next six months.

Chris Conway: There you go, ladies and gentlemen, a double buy for you there. Next up we're going to talk about Judo Capital. They have the subsidiary Judo Bank which focuses on servicing small and medium enterprises. Michael, I'll come to you first. Buy, hold, or sell?

Judo Capital (ASX: JDO)

Michael Steele (BUY): Judo is a buy. Judo has significant growth potential in their loan book both from growth in the SME market but also significant market share growth from... they've only got 2% at the moment. And that market share growth is supported by their superior service proposition. Judo has also got margin upside. Net interest margins are at cyclically depressed levels. And they've got the ability to improve their cost to income as they roll out productivity opportunities. The business has underperformed of late, its back around book value, so it screens as highly attractive from a valuation perspective, in particular when you compare it to the other major banks which are trading at large premiums to book value.

Chris Conway: Definitely cheaper than the CBA that's for sure. This one's down around 20% year to date. Emanuel, how's it looking to you? Buy, hold, or sell?

Emanuel Datt (HOLD): Judo is a hold for us. Judo is a specialist SME lender. During periods of economic uncertainty the SME sector tends to suffer disproportionately. We also think that Judo's more concentrated loan book, when compared to other sort of major financiers, is high-risk proposition effectively. But also you have challenges around costs of funding, et cetera that could eat into its margins. So for us, that's why it's a hold.

Guest picks

Chris Conway: Fair enough. All right. My favourite segment of any buy hold sell episode, we ask the gents to bring along some stock picks. We're asking for their favourite innovator or disruptor. Emanuel, big question, what have you got for us?

Superloop (ASX: SLC)

Emanuel Datt: I like Superloop. So Superloop is an Australian new age telecoms company if you would. I think that the model is a tried and proven model here in Australia in terms of a telecoms challenger. Ultimately, the case we find interesting here is that the vast majority of capital expenditure, we think, is already behind us for the company and now it's just all about acquiring as many customers as possible. We've seen the company actually do that quite successfully through a deal with Origin Energy which is a very significant direct-to-consumer business in its own right. I think that was an innovative strategic deal. But also we've seen the company subject to corporate action in recent years. It's ultimately a game of scale, so it probably won't be the last time that someone comes knocking on their door.

Chris Conway: Superloop for you, Emanuel. Michael, have you got something that can top that?

Megaport (ASX: MP1)

Michael Steele: Megaport is a disruptor, and it's a great buying opportunity at the moment. In terms of how Megaport is disrupting, they're bringing a product set that is faster, it has greater functionality, and a much lower price than the traditional legacy telcos. You've also seen a step change level of innovation in the product set. A lot of new products coming out over the last 18 months. In terms of the revenue growth outlook for Megaport, it is supported by that high-growth end market, in particular when you look at cloud computing and AI, so it's a high growth market but they're also gaining significant market share. They're bringing in a lot of new products, they've improved their go-to market strategy. And a number of their competitors are facing major challenges at the moment creating a market share opportunity.

Megaport also stands out compared to a number of technology companies in that the revenue is 100% recurring, so it's high-quality revenue. And customer churn is very low as well. The cost base is sustainable. They've invested significantly over recent years, in particular across product and the go-to-market so you've got confidence there around the margins. The business is clearly generating sustainable free cash flow now and that'll lead to net cash continuing to build on the balance sheet.

Chris Conway: There you have it ladies and gentlemen, two very compelling innovators slash disruptors. That brings to a close this series of Buy Hold Sell featuring Emanuel Datt from Datt Capital and Michael Steele from Yarra Capital Management, I'd like to thank them both. If you enjoy that episode make sure to give it a like. And don't forget to follow our YouTube channel because we're adding lots of great content every single week.