Buy Hold Sell: CGT changes be damned, we're hunting ASX growth stocks

To finish off, I think one of the most important things when we speak to management and the boards through periods like this is to really have faith on your balance sheet and not do silly things, and we've seen so many examples over the years. There might be companies that were looking to acquire a company in a different market, and fast-forward, it's a tougher market and they still go through that acquisition, put the balance sheet under pressure. So they're the things we're looking for, but ultimately if the company still fits our investment process, we look through periods of uncertainty like this and invest for the longer term.

The other one, of course, and Oscar hit on it there, is just the management side of things. We want these people running the business, of course. We want them cognisant about the capital decisions that they make. We also want them cognisant on what sort of decisions they're making around interacting with investors and putting their best foot forward as well.

Praemium (ASX: PPS) 

Then they have done something reasonably remarkable in the small cap world. They have reduced the tech spend into next year by about $9 million that we have seen disclosed so far. That $9 million is very meaningful to the profitability of this reasonably small business, and those savings have already taken place and so we should see that flow through into the next financial year.

On top of that, there's an acquisition made a couple of years ago, that acquisition should also start to contribute into this coming year as well. So lots of positives there for the business and lots of reasons why we think it can rerate closer to the valuations of some of the larger peers.

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Regis Healthcare (ASX: REG) 

But what we think the market misses on this stock is the company has no debt. It has around $200 million of cash on the balance sheet, but it has a cash inflow of around $400 million coming in from RADs. And so effectively it's got a $600 million war chest set it can use for acquisitions, which as the largest player in the country, when all its competitors are indebted, gives it an advantage for acquisitions, and you've got one of the best long-term stories around the ageing population in the country. So key pick for us, and while the share price has fallen, the business continues to do well and we keep buying shares. 

Nanosonics (ASX: NAN)

Your starting point here are decent margins on that business, and with those high incremental margins, consumables are about an 80% or above gross margin. We should really see that Trophon only, which is that core business margin, continue to climb over time. Then independently, they have spent the last six years and 150-odd million dollars developing a similar device for the disinfection of endoscopes. It's a lot of time, it's a lot of money, but it seems like it's finally coming to fruition. So we should see the first revenues from that over the next little while, and it should hopefully cement for investors that there is five-plus years here of growth still to come on this business.

Megaport (ASX: MP1)

But effectively or simplistically, what does Latitude do? It provides computing power, and as you know, there's a shortage of memory that we're seeing globally. And so you're seeing customers looking to lock in long-term contracts, and we've just seen two meaningful contracts that Megaport's announced and we think this is the start of many. The traditional Megaport business, the connectivity business will continue to do well and grow double digits. So putting that all together, we think that the stock can strongly rerate from here and can be hopefully Australia's artificial intelligence beneficiary.

Hipages (ASX: HPG)

Now we're at a stage wherever business is trying to build an ecosystem around the tradies that they already have. So that last acquisition was of an insurance business that they can then use. They can then use their existing set of tradies and distribute that insurance to them. The revenue growth here is also coming with some pretty healthy operating leverage. So the business actually has a target now, 40 to 50% of incremental revenue should be flowing through to pre-tax free cashflow. Those are very strong numbers. You're already starting from some pretty healthy cash generation. So over time, we should really see that cash generation improve and add to the already pretty large pile of cash on the balance sheet which is about $30 million.

IPD Group (ASX: IPG)

But the real kicker to own the business is it's got a significant data centre exposure. It's around sort of 20% of the business, it's growing very strongly, and the outlook for data centres and data factories, as we all know, is very, very strong. So we think there's a great organic growth profile there. Again, it's a founder-led company, balance sheet's very strong, close to net cash. So we do think that they'll potentially acquire as well in a creative fashion. So we think the business is a good chance of seeing that share price rerate over time.

Chris Conway: There you have it, ladies and gentlemen, six stocks for your watch list. I know I'll be adding a few of those to mine as well. If you enjoyed this episode, make sure to give it a like and don't forget to follow our YouTube channel. We're adding lots of great content every single week.