Share market: Leading Australian fund managers name 10 stocks to buy on the dip
Some of Australia’s leading stock pickers have focused on AI, data centre and computer chip as the best bets for investors to profit from the market’s current dip and create long-term wealth.
A horror share market sell-off in companies considered vulnerable to competition from artificial intelligence means hundreds, or thousands of stocks, are now trading at steep discounts compared to their prices just a couple of months ago.
The six-month slide in valuations across much of the technology and services sectors also means professional investors are now finding many stocks they think have an excellent chance to deliver strong capital growth over the next three to five years of booming demand for services linked to AI.
The Nightly asked some of these leading stock pickers to reveal what businesses they’ve used the market dip to buy into and reckon could create long-term wealth for investors.
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Ellianna Campbell is an investment and equities analyst at Frazis Capital Partners, which often focuses on opportunities in the high-growth tech sector.
Ms Campbell still backs computer chip manufacturer Nvidia as a long-term winner from the decade-long boom in demand for new technologies linked to AI.
“At $US190 per share it’s only down 10.5 per cent from its all-time high of $US212, but on a forward profit multiple of 20x it’s the cheapest it’s been in years relative to earnings with its five-year average at nearly 70,” said Ms Campbell.
“Every major hyper-scaler is spending hundreds of billions on Nvidia computer chips to power the AI buildout, and a large part of that will be with Nvidia, which is the only supplier who can deliver at scale.
“There are competitive threats from new entrants and customers designing their own chips, but Nvidia is not standing still and (its) Blackwell ( graphics processing unit (GPU) microarchitecture) is up to 3-5x more efficient for inference than (rival) Hopper, and they’re updating their flagship designs each year.”
Ms Campbell also thinks New York Stock Exchange-listed software and AI business Samsara Inc is now relatively cheap given its shares at $US27.23 are now half the price they were this time last year.
“(Despite the sell-off) Samsara is still growing revenues at 30 per cent,” she said. “Samsara bridges the physical and digital world with Internet of Things sensors, AI dash cams, and fleet software, connecting real-world operations to a cloud platform. We like beaten down software that has a connection to the physical world and is most likely to be a beneficiary of AI.”
Travel and data centres
Elsewhere, Chris Stott, the chief investment officer and founder of fund manager 1851 Capital, believes in leisure and corporate travel business Flight Centre. “We think the recent sell-off in shares is a good buying opportunity,” he said. “It’s also a beneficiary from rival Corporate Travel Management falling on troubled times.”
Mr Stott made his name as an expert stock picker at Wilson Asset Management before launching the 1851 Emerging Companies Fund, which has made investors a 131 per cent total return after fees and since its launch in January 2020.
He also likes ASX-listed small cap SKS Technologies. “We like it over the medium to longer term, they’re an electrical contractor primarily in the data centre space, so they’re tapped into the growth of data centres and AI over the next 10 years, so we like it,” he said.
Property and high income
Other fund managers like Daryl Wilson the chief executive officer of Affluence Funds Management believe income-seeking investors now also have more opportunity to buy stocks on big yields at a discount.
Mr Wilson says he thinks the ASX-listed Metrics Real Estate Multi-Strategy Fund is being overlooked by investors. The fund invests in a portfolio of commercial Australian real estate assets and returns the income earned to investors.
It offers an income in excess of 5 per cent and on February 5 the stock traded at $1.98 at an 18 per cent discount to the net value of all its assets of $2.42 per share. “So, the underlying value and yield, it really looks attractive to us,” said Mr Wilson.
The investor also likes construction and real estate management business Lendlease.
Its shares have tumbled 30 per cent over the past 12 months, but Mr Wilson thinks this makes it a great opportunity to create wealth as the business turns itself around.
“Everybody hates it, but we quite like it, if you put it (shares) in the bottom drawer for two or three years we think you’ll do very well out of it,” he said. “They’re going through some strategic changes and there should be a couple of catalysts to rerate the share price. One is selling down some assets, and the other one is taking care of some past mis-steps.”
AI services and Aristocrat Leisure
David Berthon-Jones, the joint chief investment officer of Aequitas Investment Partners says he thinks much of the six-month sell-off in tech and software stocks is justified due to AI’s ability to rapidly create software code for almost free.
“Most of the secular growth stocks were trading at (profit) multiples that far exceeded the kind of earnings growth that they could realistically generate over the coming decade,” he says.
In turn Mr Berthon-Jones says Aequitas has taken advantage of the dips in pokie machine manufacturer Aristocrat Leisure and data centre investor Goodman Group to buy shares after their valuations tumbled over the last few months.
“Aristocrat has been caught up in the secular growth de-rating and that’s made its valuation more attractive,” says Mr Berthon-Jones.
“It was also pricing (in a) US recession but that’s now looking less and less likely, the US macro data has been consistently good and gambling has historically been pretty recession-proof anyway. It also has a very strong balance sheet, is taking market share, and is growing at about 9 to 10 per cent per annum.”
While shares in market darling Goodman Group have fallen 14 per cent over the last six months and Mr Berton-Jones thinks this is also an opportunity to buy a high-quality infrastructure business that should benefit from booming demand for services linked to AI.
“It’s come back to a much more reasonable valuation and it’s probably one of the few unambiguous beneficiaries of AI as the desire for computing power is going to be strong via data centres and Goodman is superbly positioned to be secure on that demand,” he said.
On February 9, Goodman shares changed hands for $30.75, despite having reached as high as $38.12 in January 2025.
Small-cap opportunities
Founder of the Under the Radar stock market research report, Richard Hemming said the small-cap end of the market is the best place to find winners that offer massive financial windfalls for investors.
“It’s a good time to invest in value, specifically where much of the market isn’t looking,” he said.
Two businesses Mr Hemming has bought recently are Fluence Corporation and DUG Technology Ltd.
“They have strong proprietary technology, improving fundamentals, as well as strong demand tail winds for their products and services,” he says.
Mr Hemming adds that DUG Technologies sells tech and proprietary hardware to the oil and gas industry. It has a record order book and has just completed major growth investments. However, Mr Hemming warns that free cash flow, defined as operating cash flow minus capital expenditures, is still negative.
Fluence Corporation he says is a turnaround story slowly gaining momentum. It delivers wastewater solutions around the world for industrial, commercial, and municipal clients.
