Gerrish: Bullish on the ASX and three stocks that could surprise on the upside

"There's a lot of efficiencies that can be had from AI, particularly in high volume, low margin businesses and banks fit that bill. I know there's the negative rhetoric on lending growth and things in the economy being sluggish, but there is a real efficiency story there in the banks as well."

"I think the length of this cycle is going to be underpinned by what's playing out in AI," he says, "It's going to be underpinned by this huge amount of electrification of energy grid." 

"So there's a reason to remain positive on Australia. I think resources are probably central to that. In our own positioning, we're bullish on the resources side. We've got larger weightings across the resources space on the back of that view."

A new reality for investors

"At a top level, I think the market's changed materially over the last couple of years," says Gerrish. "Passive has gotten significantly more of the fund flow. We've had an increase in quantitative investing. We've got high frequency trading. We've got hedge fund pod shops." 

"We've got all of these things are suggesting that market volatility has increased and trends are going more than they ever did in the past."

"I think that the consumer's probably still going to be challenged," he says. "I'm not saying that they're not, but I think the market's so bearish around this expectation that interest rates are going to go higher. I doubt they will."

"Property prices are right in the news headlines at the moment. No one wants to own property stocks at the moment, but if interest rates don't go up and bond yields come down, then I can see a rally in property stocks. So I tend to be in the areas that the market's hating at the moment."

That also extends to the ASX's tech sector, which has been one of the major casualties of the new momentum-driven market. 

"Markets overreact," says Gerrish. "They rally too hard and they sell off too hard. Look at the semiconductor space in the last four months, the semis have doubled and then they've halved."

While many tech names have rallied 20-30% recently, it's off a low base and not even "touching the sides" of a genuine recovery. 

"The software space I think is probably a place to be accumulating stock. I don't think it's a place to be selling at the moment."

Three stocks James Gerrish thinks could surprise on the upside

In terms of specific stocks he's watching, Gerrish calls out the following businesses as candidates that could surprise to the upside:

• Reece (ASX: REH): Now generates ~60% of sales from the US housing market, which is starting to perform. Still trading on a premium multiple Gerrish believes earnings can ratchet up quite quickly. 
  
• JB Hi-Fi (ASX: JBH): The market has turned universally negative on consumer facing stocks. JB Hi-Fi continues to trade towards the lower end of its 52-week range. Gerrish believes the business is well positioned to defend margins with a product line that isn't as 'discretionary' as other retailers.
• Life360 (ASX: 360): The company was hit hard in the technology sell-off that swept the market at the end of 2025 and early 2026. Gerrish says the company's latest update was positive with the stock starting to regain positive share price momentum.

So while the bears may be justified, and the big selloffs on the ASX have certainly validated that view, it's also created an environment where there's opportunities aplenty on the ASX.  

"There's a heap that look really interesting here because they're all so depressed in share price," he said. 

"The worm will turn in that space and there'll be some big rallies to come on the back of it."

Watch the full interview below.