Company Interview / Stocks to grab in the EOFY bargain bin

Key points

End-of-year tax-loss selling and index rebalancing are seen as powerful drivers of mispricingCatapult Group (ASX:CAT) is viewed as a quality growth name sold down indiscriminately and now attractively valuedDigiCo (ASX:DGT) is considered deeply discounted versus peers after index exclusion and IPO overpricing

Luke Laretive from Seneca Financial Solutions argues that end-of-financial-year tax-loss selling and index rebalancing often combine to create compelling opportunities in oversold stocks. Laretive suggests many investors sell losers purely to reduce tax, while ETF and index funds sell or buy on size and index membership rather than fundamentals, pushing some share prices well below what he views as reasonable value.

Laretive highlights Catapult Group (ASX:CAT) as a key example. He states the stock was heavily de-rated after its removal from the ASX 200 and broad tech selling, despite what he sees as strong fundamentals, including robust contract growth, high incremental margins and very strong revenue retention. Larative notes Seneca previously sold Catapult around $7 on valuation grounds and is now buying again near $3, with a view that the shares could potentially double or more over coming years if current growth persists.

DigiCo (ASX:DGT) is another target. Laretive contends its IPO was excessively priced and the share price collapse plus ASX 200 exclusion have left it trading at a steep discount to book value versus peers such as NEXTDC (ASX:NXT) and Macquarie Technology Group (ASX:MAQ). He views ongoing asset sales and capital rationalisation as catalysts that could narrow this discount.