Where IML's Lucas Goode is finding value in small caps and 4 ASX picks

Note: This interview was taped Tuesday 10 December 2024.

Whilst IML's Lucas Goode has a positive outlook for markets in 2025, he's not quite prepared to say that he's outright bullish. 

Doing so, in his words, "would imply that I think the overall market's going to rip 20% again, and that's not necessarily the case".

Goode adds that the rally we've seen in recent years has been quite narrow and has the potential to broaden out which would create a "great market for stock pickers, those willing to return to fundamentals". 

That's good news for those who still love hunting stocks, rather than abdicating responsibility to a passive product. For good measure, Goode named a handful of stocks as part of the 2025 Outlook Series. 

Please note that the commentary below is direct quotes from Goode. 

#1 growth stock set to explode - Cyclopharm (ASX: CYC)

"Recently Cyclopharm was awarded pass-through designation by the FDA. I won't bore you with all the details, but effectively what that means is not only is this a clinically superior method of imaging lungs, but it's, crucially, economically superior for hospitals. 

We do think that eventually, Technegas will dominate the market for functional lung imaging, and that implies annual recurring revenues well in excess of the company's current market cap".

Sector set for a breakout and the stock to play it:
Sector: Defence, stock: Austal (ASX: ASB)

"In Australia, the Australian government effectively appointed Austal as their sole source shipbuilder for smaller and medium-sized naval boats.

We think they're going to have an order book approaching $30 billion by the end of next year, and yet the company trades at a material discount to its net asset backing. I mean it's just a clear mispricing to us. We think it's one of the best opportunities on the ASX".

Contrarian call that may just surge in 2025 - Kelsian Group (ASX: KLS)

"We think that the market's really thrown the proverbial baby out with the bath water with this stock.

The core Australian bus business remains a fantastic business. It's high returning, it's capital efficient, and infrastructure-like in nature. You've got these long-term, stable, recurring, inflation-protected revenues. That business is actually still performing well".

A stock on the avoid list for 2025 - NextDC (ASX: NXT)

We all know that the demand for compute is growing exponentially, but unfortunately, so is the amount of capital being thrown at this sector.

A sleep at night stock to weather any storm - Cuscal (ASX: CCL)

"Cuscal effectively provides the plumbing for non-major banks, neobanks and fintechs to access the Australian payments networks. 

They enable services like Pay ID that we use day to day and really benefit from a fantastic economic moat because their customer base don't have the scale themselves to build this kind of functionality. 

And so they rely on Cuscal to provide that for them - it's just a really beautiful infrastructure like business". 

Watch the interview

Make sure to watch the full interview for Goode's review of 2024 and outlook for 2025, as well as more detailed insights about the stocks mentioned above.