Why this fundie is taking a contrarian view on a “clear recovery candidate”

When a company is struggling and its price is falling, there are ultimately just two potential outcomes: it continues to drop or it turns things around.

It sounds pretty simple, but determining which path it will take is the tough part.

When it comes to Bapcor (ASX: BAP), which is down almost 80% in 2026 alone, Spheria Asset Management Portfolio Manager Matthew Booker has taken the optimistic view.

In this Q&A, Booker explains why Spheria is bullish on the vehicle parts provider, where he is looking while the market is showing “extreme irrationality”, and shares why new investors shouldn’t get used to frothy markets when it comes to valuations.

What’s your most recent investment and why?

We used the recent equity raising and on-market purchases to build a significant position in Bapcor. It reminds us of our recapitalisation of Bravura (ASX: BVS) a few years ago, which paid off handsomely for our clients.

Despite near-term macro headwinds and a May profit downgrade, we see attractive value despite it being a terrible investment on paper to date. 

New CEO Chris Wilesmith (ex-Supercheap) is making a solid start on the turnaround, with positive supplier feedback. The standout Trade division (~35% of sales, ~$800m revenue) operates in a duopoly with Repco and, at a conservative 10% mid-cycle margin, could alone be worth +$1bn - far exceeding the current ~$450m group enterprise value.

The business is a clear recovery candidate and potential takeover target but is not without risk given challenging macro-economic conditions and a tight balance sheet.

Which investment did you add to your watchlist this week?

The market is displaying extreme irrationality - the most I’ve seen in a long time - driven by the economy being steered toward recession and record debt levels across households and governments, compounded by an extraordinary increase in passive and quantitative flows that treat price as value. 

This has created significant valuation dislocations, particularly in small and micro caps.

We had Tuas (ASX: TUA) on our watchlist after an unimaginable share price retracement and have recently initiated a position based on a valuation that looks attractive relative to downside risk.

What is the most recent investment you have trimmed or sold and what drove this decision?

Despite fundamental valuation upside we have trimmed some Sims Metals (ASX: SGM) given relative valuation opportunities elsewhere. We still believe the market is undervaluing its metals recycling operations, which are property backed and whose economics will continue to improve as electric arc furnace capacity expands in the USA, which means greater domestic demand for scrap steel in that key market.

What’s your favourite chart or data point from this week?

As the chart title suggests, the rise of passive investing is reshaping price discovery in the market. This is particularly relevant for smaller listed companies where valuation inefficiencies are creating great long-term buying opportunities for those that can be patient.

What was your weekly high - a standout market moment or highlight?

This week feels a bit like early 2007 when there was a quant bloodbath led by the Goldman Sachs’ Global Alpha fund which got trashed when crowded quant trades unwound simultaneously. For fundamental investors, this sort of rotation might be wishful thinking… and hopefully we are not headed into another GFC.

What was your weekly low - a market disappointment or challenge from the week?

San Antonio Spurs losing two home games to be 2-0 to the New York Knicks in the NBA Finals. It’s a long road back from there, feels a bit like my portfolio but there is always hope when the fundamentals are strong.

What first drew you to markets or this sector and what continues to keep you inspired today?

Reading about Warren Buffett’s success ignited my interest in markets. His quote “Be fearful when others are greedy, and greedy when others are fearful” keeps me going.

What’s one piece of advice you’d give to new investors?

In frothy markets, valuations don’t matter but when everything goes pear-shaped you want to make sure there is valuation backing. Markets can change quickly, so understanding free cash flow, surplus assets, balance sheets, and competitive advantage is important.

How do you unwind when you’re not thinking about the market?

Like most people these days, make sure to get a lot of exercise. Back playing touch footy again on Sundays at Queens Park after a long break. My eldest daughter – Evie – now playing on my touch footy team which is the ultimate.

What is your favourite investing book? 

The Warren Buffett Way by Robert G. Hagstrom. Buffett makes the complex simple. Pure genius.

What is your favourite investing or finance/markets related podcast? 

Sorry, not a podcast person. Read Atlas Shrugged by Ayn Rand last year. Absolutely brilliant book written 70 years ago and so uncannily relevant to now.

What’s the first thing you read each morning? 

I go for a swim in the morning rather than read. Great way to start the day.

What is your favourite restaurant? 

Beach Street General Coogee – best breakfast around, cool vibe and family owned/run.

What’s something people are surprised to learn about you? 

Ruptured an Achilles a few years ago but can still play sport. The only thing that holds me back is my DOB. 

Think there’s a better pick? Prove it. Share your rapid-fire book, podcast, and daily read in the comments.

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Spheria Australian Smaller Companies Fund

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