The stock that got away: An ASX software stock Cinderella story

Even the world's greatest investors have their fair share of misses, but what's important is what you learn as a result. 

But it takes a brave investor to share those stories, and an even braver one to let it be published for a wider audience and help other investors improve their own decision-making. 

In this series, we speak to some of Australia's leading fund managers on the investment opportunity that slipped through their fingers and the lessons they took from it.

In his own words, Nick Guidera, portfolio manager at Eley Griffiths, shares his first-person account of why he didn't pull the trigger on a stumbling software stock that went on to forge a big comeback. 

What was the investment idea?

In late 2021, Gentrack (ASX: GTK) stood out as a laggard in a booming tech market. A brutal earnings downgrade in early 2020 had pushed the stock below its IPO price. 

The company had history — including a downgrade six weeks after listing in 2014 — and the market had moved on. 

But change was underway: a full executive overhaul followed the downgrade, with Gary Miles, a seasoned software operator from Nasdaq-listed Amdocs, appointed CEO in October 2020. 

FY21 saw a return to profitability, but with management “investing for growth,” the stock stayed rangebound. 

With interest rates rising, we screened for defensive tech — and Gentrack resurfaced. The signs were there: a new LTI scheme, earnings rebased, and a platform with potential. 

The 2022 Salesforce partnership hinted at upside, but traction remained elusive. Then, just over three years into Miles’ tenure, the strategy was unveiled at an Investor Day following a landmark Genesis Energy win. 

I was in the UK at the time, meeting industry participants who validated the critical role Gentrack could play in the digital transformation of utilities.

What was your reasoning at the time?

Major leadership changes, rebased earnings, and a stock trading below IPO often suggest a turnaround opportunity. 

The new LTI scheme, published in late 2020, showed strong alignment. CEO Gary Miles appeared focused on execution, keeping early engagements brief. 

FY22 earnings went backwards due to reinvestment, so I assumed I had time. In September 2022, the Salesforce partnership caught my eye, but customer wins hadn’t yet landed. 

Then came the Genesis Energy deal — one of NZ’s largest gentailers, adopting Gentracks G2.0 platform. 

Gentrack had all the hallmarks of a reshaped company with a path to relevance: strategic focus, modern architecture, and a platform ready for scale.

Why didn’t you pull the trigger?

While I acknowledged there was a large shift underway, I wasn’t fully convinced. 

I questioned the speed of execution and whether Salesforce was a silver bullet. I thought there was more time. 

Despite three meetings with management, reviewing results, and validating the traction they were gaining, I hesitated. 

I’d seen a similar arc before with Bravura. After signing a lighthouse deal with Fidelity in 2013, Bravura went on a tear. Implementation revenue soared, new logos followed, and the stock tripled. 

Then momentum faded. Customers moved to steady state, revenues declined, and product innovation lagged. Bravura unravelled. That scar shaped my view of Gentrack. 

Despite key differences — a global partner in Salesforce, a refreshed board, and credible leadership — I was anchored to the fear of déjà vu. 

I was sceptical of new wins, and that the transition from implementation revenue to recurring revenue would be smooth. 

I discounted the early stages of the turnaround and underappreciated the opportunity for early-cycle upgrades. I was too focused on pattern recognition and not enough on first principles analysis. 

Ironically, I was waiting for a broader set of confirmations — and by the time they came, the stock had already moved. Gentrack wasn’t Bravura 2.0 — but I didn’t look hard enough to see that.

What happened next? How did it perform?

We bought a peer in search of “defensive tech,” only to watch Gentrack outperform. 

Through 2023 and 2024, the company delivered sequential earnings upgrades and rerated significantly. My critique — that non-recurring implementation revenue shouldn’t be valued like ARR — didn’t resonate with the market. 

From its pre-FY22 lows, the stock rallied nearly 600%, even as FY22 earnings declined. 

The turning point was clear in hindsight: Slide 11 of the FY22 result deck, titled “Why our global expansion will be successful,” laid out the strategy and TAM clearly. 

I simply didn’t give it due weight. 

The combination of rebased earnings, a scalable product, and strong customer validation created a virtuous cycle. Market confidence grew, and with it, the valuation. 

Meanwhile, the peer I had backed lagged, struggling to generate upgrades or momentum. I’d missed the better story — and the better stock. 

Despite being close to the facts, I was emotionally distant from the opportunity. I let caution override conviction.

Were there any lessons you took from it?

Markets are forward-looking, and so should we be. 

My past experience with Bravura gave me confidence in one framework — but it also blinded me to what was different this time. I applied my learnings too rigidly and failed to reassess in real time. 

Gentrack had the elements we look for at Eley Griffiths: aligned management, a clear product-led strategy, a sizeable addressable market, customers under pressure to modernise, and earnings already rebased. 

As execution improved and upgrades came, the market leaned in. I stayed cautious. The lesson is to respect history but not be shackled by it. Anchoring bias can disguise itself as insight. 

When old wounds influence new ideas, we risk missing true change. In this case, I failed to take a fresh look, despite all signs pointing to a turnaround. If I had re-framed the story — not through the lens of Bravura, but through the fundamentals of Gentrack — I might have acted. 

The cost wasn’t just missing the stock but missing the evolution of a business from underperformer to leader.

Managed Fund

Eley Griffiths Emerging Companies Fund

Australian Shares

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