Where is the value on the ASX? 3 fund managers name their best ideas

There's no question the ASX 200 is in a bit of a pickle. At the aggregate level, valuations are stretched, with the market on a 12-month forward PE of about 17x against a long-term average of 15x. Growth is limited, bond yields are trading vertically and consensus expects more rate hikes to come.

Australia has one of the highest central bank interest rates, the highest real bond yields and some of the highest core inflation in the developed world. The result is an ASX 200 that's flat year-on-year before dividends, while over the same period the S&P 500 is up 12%, South Korea about 60% and even Europe around 7%.

Livewire Live's "Where is the value on the ASX?" panel put that question to three fund managers who come at the market from different angles:

• Dushko Bajic of First Sentier Investors, a small-cap manager
• James Hawkins of L1 Capital, who runs a concentrated portfolio of about 10 stocks
• Arden Jennings of Ausbil Investment Management, a growth investor

All three expect gains to come from well below the top 20, but they didn't agree on much else, including how many more rate rises are coming and whether the market finishes next year higher or lower.

So where is the value?

Bajic likes picks-and-shovels exposure to AI and electrification through contractors such as:

• Genus Plus (ASX: GNP)
• Southern Cross Electrical (ASX: SXE)
• NRW Holdings (ASX: NWH)
• Tasmea (ASX: TEA) 

He also likes defence, including long-time holding Codan (ASX: CDA), and companies tied to WA mining capex and the Queensland Olympics build.

Hawkins runs the L1 Capital Catalyst Fund, which maintains a strict hard cap of around 10 stocks, and each one fits into one of three buckets. The first two are built for earnings growth, and Hawkins expects the companies in them to be earning materially more in two years. The third is defensive and makes up about a third of the portfolio.

• Companies earning heavily in the US, such as Light & Wonder (ASX: LNW) and James Hardie (ASX: JHX), to tap growth in that economy
• Commodity producers with volume growth, such as key holding Mineral Resources (ASX: MIN) and Alcoa (ASX: AAI)
• Fully franked dividend payers, because "doing business in Australia is tough”

Jennings sees the most value in beaten-up Australian software.

On rates, oil and what to avoid

Bajic expects a rate rise this month (the RBA hiked by 25 bps on Tuesday) and another after that. He's avoiding debt-heavy, capital-intensive and unprofitable companies as the cost of capital climbs, and prefers capital-light businesses that fund their own growth.

Hawkins expects a couple more hikes, but it all depends on whether oil holds above US$100 a barrel and diesel spreads stay elevated.

Jennings thinks Australia can only absorb a couple of hikes. We lack the productivity growth that lets the US handle another three or four. He thinks the hikes are already priced in, as over the past 40 years there have been  12 occasions when oil rose 20% and long bonds sold off 30 basis points at the same time. In every case, the US market's return over the following 12 months ranged from 14% to 28%. Unless the hikes come in harder than expected, he sees a buying opportunity.

Three picks: Software, electricals and the lotto

Bajic pitched WiseTech Global (ASX: WTC). In December 2025 it moved from seat-based to transaction-based pricing, and 95% of clients switched within a month. Organic revenue growth has slowed from 15-20% to about 8% this year. Ausbil forecasts a low of 6% in the first half of FY27, then a recovery from the second half.

He compared WiseTech to Autodesk, Microsoft and Adobe. When they switched to subscriptions around 2013 to 2015, their revenue went flat for two to three years, and that proved one of the best times to buy them. WiseTech trades on 22x earnings, against more than 100x in the past, and is down 64% from a year ago. Xero (XRO) is down 57% over the same period.

Hawkins picked Lottery Corporation (ASX: TLC), which hit a 12-month low the morning before the panel. Sales hold up in recessions and there are no licence renewals due before 2050. It recently extended its Victorian licence at about 9x EBIT, while the business trades on almost double that. A new CEO nearing 12 months in the role could cut costs and add new games.

The near-term drag is a run of jackpots going off early, a sequence Hawkins put at one in 45 years. Sales jump when jackpots build to $50 million or $100 million, so he expects earnings to recover as that normalises.

Jennings went with Genus Plus (ASX: GNP). Founder Dave Riches owns more than 40% of the electrical contractor, which builds transmission lines and battery storage. It trades on about 18x earnings, roughly in line with the market. Organic growth runs at 10% to 20%. Including acquisitions, revenue is up more than 60% and earnings more than 80%. It's just joined the ASX 300, and Bajic thinks it could make the ASX 200 in time.

Where will the ASX be in 12 months?

Asked where the market will be in a year, the three fundies gave three different answers.

Jennings expects the ASX to be up by double digits, arguing the rate rises are already priced in. Bajic didn't pick a direction for the index. He thinks active managers will outperform, unless resources keep surging in small caps, which would work against his focus on quality industrials.

Hawkins was the only one to call the market lower. He thinks the top 20 is overvalued, and the market can't escape it, as those stocks make up nearly two-thirds of the index and have delivered 80% of its return over the past five years.

This session was recorded on 22 September 2026 at Livewire Live.