MoneyTalks: In a tough market, these are John So’s ASX buying opportunities

Markets might be rocky but there are still good opportunities worth looking at, according to VP Capital’s John So.

John So is taking a step back to look for value in a tough market. Pic: Getty Images

MoneyTalks is Stockhead’s drill down into what stocks investors are looking at right now. We’ll tap our list of experts to hear what’s hot, their top picks, and what they’re looking out for.

Today we hear from VP Capital co-founder and portfolio manager John So.

With the US markets, and by extension Australian markets, trading at historically high multiples for quite some time, investors have been anticipating a catalyst for a correction since rate rises began in 2022.

But from John So’s point of view, the catalyst that they’ve now got (the tariffs) are more than just an excuse at this point, with implications reverberating across European and Asian economies, two major trading networks of the US.

“My near-term feeling is that we are going to see more bounce side volatility in the US and Australia,” he said.

“Over the next few months, I think we can expect more downside to come for tech stocks and there will be question marks around mining stocks, given a lot of what happens there is driven by China.

“That said, considering Australia has stronger links to China than the US, I think we’ll be a little more protected."

Chinese stimulus and a restructuring of trade in the Asian economic ecosystem could deliver surprises to the upside, So said.

“We’ve already seen that happen with Japan, South Korea and China a few weeks ago, when they all agreed to jointly respond to the tariffs," he noted.

“It was a historic moment – these three countries haven’t cooperated, let alone made joint announcements in the same way the G7 does, for around five years. So that goes to show what the gravity of the situation is.”

Stock picks

All companies will fall victim in one way or another to the current downtrend volatility, yet there are a few standout stocks that have caught So’s eye.

REA Group (ASX:REA)

One of them is REA, which owns and operates the realestate.com.au website.

While it hasn’t ever been a particularly inexpensive stock, So says it has retraced by 15 to 20% over the last few months, following a takeover play by a North American company for Domain Holdings (ASX:DHG).

“There’s concerns that Domain Holdings, under the new US ownership, will increase its marketing spend and compete with REA but what we generally find is that there is usually only ever one dominant player,” So said.

“If you look at the music industry for example, Spotify is the dominant player. If you look at global e-commerce, despite how big the market is, Amazon is dominant and within the video streaming sector, despite how big the global population is, there is only place for a winner takes all type of platform and that is YouTube.

“From my perspective, just because Domain has a cashed up owner from America, it’s not going to displace REA that easily and given it has retraced by 20 per cent, I think it’s a good time to buy,” he said.

“There’s also another tailwind given that rates are expected to come down further – we’ve already seen one rate cut by the RBA, but I think with these tariffs coming on, we can expect three to four more rate cuts this year.

“And that will stimulate volumes for housing transactions as well as prices, especially in Sydney and Melbourne – both of which have been relatively quiet markets in the last 12 months.”

Life360 (ASX:360)

Life360 is a tech-service as opposed to a product, and its share price has held up quite well over the last few years, So said.

“It is principally a US-based app that you can download on your phone with the purpose of it being to track where your kids are,” he said.

“It has expanded its capabilities now so that elderly people can use it, with the app providing functions such as health checks and reminders.

“There are two models of the app, a free model and a pay version – around 4% use the pay version but we are seeing those numbers grow about 20% year on year.

“The interesting thing about it is that they have rolled out ads on their free model, which tend to operate on a per click or per view basis, so in short, the general metric is that for each user viewing the add, the company gets around $1 to $1.50, adding a significant amount to its bottom line,” So said.

“You can quickly see the net profit revenue re-rate and multiply several times. Their share price has run quite hard but it has plenty of liquidity.”

Aeris Resources (ASX:AIS)

So is a big fan of copper – it is electrification, computing, data centre and EV driven and the supply story hasn’t changed for several years.

Many of the high-grade, shallow deposits have already been depleted, driving M&A interest in mid-tier players.

“Aeris is a relatively short mine life company but it's trading at around four times cashflow, is very inexpensive and has a lot of gold as well with its Cracow gold mine in central Queensland,” So said.

“Their main copper mine is Tritton (in NSW) and it only takes the copper price to re-rate around 20% for its four times cashflow to fall to around 1.5 times or so.

“That’s because – like a lot of small caps – they aren’t low cost producers so a slight increase can double their profits due to operating leverage.

“This is a stock to watch out for, especially if we see a re-rating in the copper price, which will be tied to the Chinese economy, and I wouldn’t be surprised to see the Chinese Government's hands being forced to provide stimulus in the next little while.”

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

REA Group is part-owned by News Corporation, publisher of Stockhead.

Originally published as MoneyTalks: In a tough market, these are John So’s ASX buying opportunities