Buy Hold Sell

Buy Hold Sell: Your 5 top small and mid-cap stocks for 2024 (and 2 big fundie buys)

Fri 09 Feb 24, 9:23am (AEST)
BHS Randall Primary
Source: Livewire Markets

Given the underperformance of small and mid-caps since 2021, and the fact that many are calling the end of the rate-hiking cycle, there is some expectation that a wave of capital could enter the smaller end of the market in 2024.

While small caps tend to outperform post-recession - and we haven't seen one of those - the Small Ordinaries Index has already rebounded around 16% since hitting a low at the end of October. So is there more where that came from? 

To find out, Livewire's Ally Selby was joined by T. Rowe Price's Randal Jenneke and Tribeca's Jun Bei Liu for their analysis of five of Livewire and Market Index readers' top-tipped small and mid-cap stocks for 2024. 

There's definitely a theme with this list - all of the stocks are either uranium darlings or biotech stars. In 2023, these five stocks delivered an average return of 90%. So there's high hopes that they can do the same over the year ahead. 

Plus, we also asked our guests to name two small stocks that they believe could outperform in 2024. 

Note: This episode was recorded on Wednesday 31 January 2024 and first appeared on Livewire Markets. You can watch the episode or read the edited transcript below. 

Edited Transcript 

Ally Selby: Hey, how you doing? And welcome to Livewire's Buy Hold Sell. I'm Ally Selby. Today, we'll be analysing some of your top-tipped small and mid-cap stocks for 2024. Plus, we've also asked our guests to name one small or mid-cap stock that they believe should have made your list instead. To do that, we're joined by Jun Bei Liu from Tribeca and Randal Jenneke from T. Rowe Price. Let's get straight into it. First up, we have uranium up-and-comer up Boss Energy. It's share price has risen a whopping 116% over the last 12 months – I wish I invested in that stock 12 months ago. Over to you, Randal. Is it a buy, hold, or sell?

Boss Energy (ASX: BOE)

Randal Jenneke (SELL): It's a sell. I think where uranium is today is where lithium was 18 months ago. So you've seen the uranium price up about 50%+ in the last three months for good reason, right? We know there's going to be increased demand, reactors coming back online, modular reactors are going to become part of the marketplace, but that's now in the expectation. The uranium price has now move to a level where new supply is going to come on. So for us, it's a sell given the share price performance we've seen.

Ally Selby: The majority of brokers actually disagree with you. 70% say the stock is a buy. It's quite crazy. Over to you, Jun Bei. Is it a buy, hold, or sell?

Jun Bei Liu (HOLD): I'm more in the hold camp because my view is that yes, uranium prices rally because of the disruption, but we have disruption from some of the largest mines in the world and uranium supply is very hard to bring on, so that's why there's so much price tension at this point. My view is ‘ride the wave’. We are seeing an increasing amount of projects coming on that require uranium, and I just feel you need to hold on to one of them because a lot of people say it's a sell 50% ago, just hold it until when we can physically see some of those disruptions being improved or whether Kazakhstan is coming back online or whether there's others that can do that. But physically, it's very difficult to actually bring those mines on back online.

Sigma Healthcare (ASX: SIG)

Ally Selby: Next up we have Sigma Healthcare, which has absolutely flown post the announcement that it would be merging via a reverse listing with Chemist Warehouse. Staying with you, is it a buy, hold, or sell?

Jun Bei Liu (HOLD): For me, Sigma is a hold. I think it's a great business. I love Chemist Warehouse. I think they do it incredibly well. For me, the business is a little bit mature and we are going into a retail slowdown and you paying bit of price for it. So for me, it's a hold.

Ally Selby: Okay. The majority of brokers rate the stock a hold or a sell. Randal, do you think the stock is overvalued now? Is it a buy, hold, or sell?

Randal Jenneke (SELL): I think it's a sell. I do agree that it is overvalued. The other thing to bear in mind is that the are some risks as well. So there's the risks that the ACCC doesn't allow the transaction to proceed because it has become a vertically integrated company and there's some challenges there. And then the second one is a regulatory risk around the interest it has in New South Wales pharmacies, because the law only allows you to have five, and he's got a complicated structure to try and get around that. So that's a real risk that I think people aren't pricing into the stock, so that's why it's a sell.

Paladin Energy (ASX: PDN)

Ally Selby: Okay. Next up, we have the ASX's biggest pure play uranium stock, it's Paladin Energy. Staying with you, Randal, is it a buy, hold, or sell?

Randal Jenneke (SELL): I think it's a sell. And again, I would come back to the point that uranium obviously is going to be part of the future in terms of moving to a zero carbon economy, but there's a lot of expectation now priced in. So uranium prices have moved high, Paladin has obviously done incredibly well. It's restarting its mine in Namibia. Now in the jurisdiction like that, there's always risks involved. So I just look at the risk reward at these sorts of levels, and it doesn't look attractive to me, so that's why it's a sell.

Ally Selby: Okay, share price has risen around 51% over the last 12 months. Jun Bei, over to you. Is it a buy, hold, or sell?

Jun Bei Liu (SELL): It's a sell. I much prefer to stay in Boss Energy. We love the management. And with Paladin, it's just a little bit high-risk to have exposure to uranium.

Telix Pharmaceuticals (ASX: TLX)

Ally Selby: Next up, we have Telix Pharmaceuticals, which is developing some really interesting oncology therapeutics. Staying with you, is it a buy, hold, or sell?

Jun Bei Liu (BUY): Telix is a buy. I think in terms of biotech, it's often very difficult for generic investors, but Chris is a fantastic manager for that business. He's very pragmatic, and he commercialises all the molecules. That company is a buy.

Ally Selby: Okay. It's had a fantastic run over the last 12 months. It's up around 61%. Over to you, Randal. Is it a buy, hold, or sell?

Randal Jenneke (HOLD): I think it's a hold. Share price has done well, as you mentioned, Ally. I think that obviously there's a lot of expectation they built in, but there's some prospect of approvals to occur in 2024, which I still think make it interesting, hence why it's a hold.

Neuren Pharmaceuticals (ASX: NEU)

Ally Selby: Okay. Next up, we have another biotech. It's Neuren Pharmaceuticals. Is that one a buy, hold, or sell for you?

Randal Jenneke (SELL): I think it's a sell. It's a stock that's up 200% in the last 12 months. So this is more of a valuation call. It's not about the products. There's good prospects for its products in phase two trials, but I just think given where the valuation's moved the last 12 months, it's a sell.

Ally Selby: Okay. Over to you, Jun Bei, do you agree? Is Neuren a buy, hold, or sell?

Jun Bei Liu (BUY): Neuren is a buy. The reason share price is up significantly is because it actually managed to commercialise all of its products, and it's actually making money. In December, they had a really positive read for another product of theirs, and then there's a couple more to come. My view is that the addressable market is enormous and this one certainly looks like it's got a strong cashflow coming through, and it's hitting some of the data points.

Ally Selby: Okay. We asked our guests to bring along the top small or mid-cap stock for 2024, one that didn't make the list but probably should have. Jun Bei, what have you brought for us today?

Light and Wonder (ASX: LNW)

Jun Bei Liu: I've got Light & Wonder. It is almost like a miniature Aristocrat – dual-listed in the US and here in Australia. Now, this is actually set up by a team that's ex-Aristocrat - previous Aristocrat management team who's highly regarded. They came through, and then they set up this business. One of the things we used to follow at Aristocrat in early days is that if they launch a title, they always launch it in Australia and it does well, and we know in America generally does well when they do launch it. And this one, Light & Wonder, has most of the top titles doing incredibly well here in Australia. And then in the US, we do think that they're up-and-coming and then they are gaining a lot of shares, and it's got a very high growth trajectory to come and the valuation is very reasonable.

Ally Selby: Over to you, Randal, your time in the hot seat. What's your top small or mid-cap stock for 2024?

Siteminder (ASX: SDR)

Randal Jenneke: My top stock for 2024 and mid-caps, small caps is Siteminder. And if you think about what they do, so they provide hotel management software to the hotel industry, more in the independent market in the large and smaller part of that market. And it's been a business that I would say's been a little bit sleepy for a while. They haven't engaged in a lot of product innovation, but now they are. So they're about to launch two new products and it's more in the revenue demand management space. So it's part of the market that they're not in.

And the reason why this is important is that it creates a whole new revenue opportunity for them and for their clients. It allows them to dynamically price their product real time, so it's really adding value to the client. And Siteminder will clip the ticket, so they'll now move to a revenue model that's more than on a percentage basis. So it gives them a greater revenue opportunity. And then if you look at the valuation for the stock, it's trading on seven times sales, which to us is very undemanding. Typically, these sorts of businesses that are growing at 20-30%+ trade on at least 10x sales. So we see decent upside in Siteminder.

Ally Selby: Some really exciting ideas there. I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our YouTube channel, we're adding so much great content just like this every single week.

Written By

Buy Hold Sell

Buy Hold Sell is a regular video series where Australia's leading professional investors share their views on Australian and Global Shares. This content is produced by Livewire Markets and has been syndicated to the Market Index website.

Get the latest news and insights direct to your inbox

Subscribe free