James Barker, Deputy Portfolio Manager of the Ellerston Australian Emerging Leaders Fund, recently shared his expert insights with Chris Conway from Livewire Markets, providing a comprehensive outlook for 2025 and some exciting stock ideas. As a bottom-up stock picker, James’ disciplined approach includes meeting companies in person (spending approximately one-third of the year on the road) and keeping fund capacity constrained, allowing the team to hold a stock for 3-5 years while varying the weights over that period.
Stock Highlights from James’ 2025 Outlook Insights:
📈 Growth Stock: QORIA (ASX: QOR)
A cybersecurity business where management has shaken up the balance sheet. The company currently has $125m in Annual Recurring Revenue (ARR), which is expected to grow to over $200m in the next 3 years, driven by a healthy pipeline and new international partnerships.
💻 Breakout Industry: Technology Sector with James’s pick being Dropsuite (ASX: DSE).
This is a cloud and recovery backup services company. With $45m in ARR and quarter-on-quarter growth, this is a scalable business which leverages reseller channels and is further developing its product to tap into compliance, backup, and security areas.
🤔 Contrarian Idea: Servcorp (ASX: SRV).
Unlike its peer WeWork, Servcorp is a profitable serviced office business. Management has focused on increasing occupancy and closing non-profitable offices. With a $500m market cap, approximately $125m in cash, no debt, and guidance of $65m profit before tax in 2025, it’s a compelling contrarian play.
🚫 Stock to Avoid in 2025: McMillan Shakespeare (ASX: MMS) & Smart Group (ASX: SIQ). Due to potential government changes to Fringe Benefits Tax exemptions for electric cars and plug-in hybrids, James is avoiding these novated lease groups in 2025.
⭐ One Stock for 2025: Myer (ASX: MYR)
James is optimistic about Myer, citing the potential for a merger with Premier Investments and the possibility of a rate cut, which would improve consumer sentiment.
Note: This interview was recorded on Tuesday 10 December 2024.