Buy Hold Sell: 5 stocks rallying hard

It’s an age-old debate - technical or fundamental analysis to source stock ideas. Or put another way, do you prefer charts or balance sheets? 

The chartists out there will tell you that everything is captured in the price, so that and volume are all you need to pay attention to. On the other side of the debate, those who employ them will tell you that fundamentals drive prices and help you to determine intrinsic value. 

Ultimately, both methods are used to research and forecast future trends in stock prices and, increasingly, investors are using both to determine whether a stock is up to muster. 

In this latest edition of Buy Hold Sell, we’re putting a handful of stocks to fund managers that are top-right on the chart and have been rallying hard.

Should they be there and, more importantly, can they keep going or are they overcooked? 

To answer that question, we’re joined by Ben Rundle from Hayborough Investment Partners and Will Granger, from Airlie Funds Management. 

Note: This episode was recorded Wednesday 26 July 2023. You can watch the show, listen to the podcast, or read an edited transcript below. 

Edited Transcript

Chris Conway: Hello and welcome to Livewire's Buy Hold Sell. My name is Chris Conway. Today we're putting a handful of stocks to fund managers that have some serious momentum behind them, but can they keep rallying or are they overcooked? To answer that question, we're joined by Ben Rundle from Hayborough Investment Partners and Will Granger from Airlie Funds Management.

REA Group (ASX: REA)

Let's dive in with REA Group. For anyone unfamiliar, it is the digital advertising company that operates Australia's leading property website, realestate.com.au, as well as websites in Asia and Europe. Will, let's start with you. Is it a buy, hold, or sell?

Will Granger (HOLD): We think REA is a hold here. REA is clearly one of the best businesses listed on the ASX, and we do think there is a lot of scope for further price increases and for them to capture more of the economics of each house transaction. However, it's a lofty multiple and we think you can get cheaper exposure to REA through News Corp. So it's just a hold for us.

Chris Conway: Ben, it's up around 40% since the start of the year. Cracking performance. Is it a buy, hold, or sell for you?

Ben Rundle (HOLD): I think it's a hold as well. Very high-quality business, I think listing volumes have improved and they've obviously got pricing power. I just think you'll get a better opportunity to buy it at some point. So it's probably not here.

SmartGroup (ASX: SIQ)

Chris Conway: Ben, we'll stay with you. Next up we have Smartgroup, the salary packaging business. Is it a buy, hold, or sell for you?

Ben Rundle (BUY): I think Smartgroup's a buy. I think it's a pretty reasonable valuation. I think the EV demand that's coming through novated leases is real and will drive earnings growth. Good returns on capital and well run, so I think it's still a buy despite the run.

Chris Conway: Talk about an absolute bolter. This one is up around 70% year-to-date and has one of the best looking charts on the ASX. Will, for you, buy, hold, or sell?

Will Granger (HOLD): We think it's a hold. We really like the capital-light model and we think the recent changes to the fringe benefits tax for EVs will drive further uptake, but we think after the recent run, you're not getting as much compensation as we'd want for the sort of inherent opaqueness of the operating model.

WiseTech Global (ASX: WTC)

Chris Conway: Next up, we're talking WiseTech. Strange to think that this one was the target of a short report in 2019. It's probably one of the best businesses on the ASX. Will, we'll stay with you. Is it a buy, hold, or a sell?

Will Granger (SELL): We think it's a sell. It's been a great success story and there are a lot of attractive attributes about the business that we really like, but it's hard for even the highest quality business to justify 25 times sales. So it's a sell for us.

Chris Conway: Year-to-date WiseTech is up around 67%. Over the last five years, almost 380%. Ben, for you, buy, hold, or sell?

Ben Rundle (HOLD):

That's a hold for me. I'm a little less bearish on the company. I think they've started to produce some really good cash flows and I think that'll increase. And I think that the current valuation is probably a little bit stretched, but it's a very high-quality business. So, a hold for me.

Chris Conway: We've asked the gents for their opinion on a handful of stocks. We've also asked them to bring one along that has had pretty solid performance so far this year and tell us whether they think it can keep going or, again, whether it's overcooked. Ben, we'll come back to you. What's your pick, and can it keep going?

PSC Insurance (ASX: PSI)

Ben Rundle: My pick's PSC Insurance. It hasn't had a great run this year, but it's had a great run over the last couple of years. I don't think the valuation is too demanding at the moment for a business that has such a sticky recurring earnings base. Plus, they have a very strong management team too. There is a risk that it gets used as a bit of a funding trade, but I think that's short-term. I think it'll continue to do well over the next couple of years.

Chris Conway: Ben, it was up 16% over the last year, so not too shabby. Will, can you top that? What have you bought for us?

Mader Group (ASX: MAD)

Will Granger: We like Mader Group. We think it's still a buy here. There's a lot to really like about the business. It's a founder-led business with a great long-term track record. It's a market leader with some scale advantages in the business, and importantly, it operates in a part of the mining services market, which we think is a lot less cyclical than the rest of the market. And for that reason, it deserves a higher multiple than the market probably gives it credit for. So we think Mader Group is a buy.

Chris Conway: If you enjoyed that episode of Buy Hold Sell as much as I did, make sure to give it a like. And don't forget to follow our YouTube channel, because we're adding lots of great content every single week.