Four Value Stock Picks From Two Top Managers For Q2 2025

Forbes

22-04-2025

Value stocks bounced in the second half of last year, and several experts are saying the day of value is returning. However, BlackRock is warning that investors might be underweight value stocks at a time when the markets could start shifting. Additionally, history has shown that savvy stock picking is a better way to gain access to value stocks rather than by tracking one of the value indexes.
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Here are four value stock picks from two leading managers as the second quarter goes into full swing.
In a recent interview, Judson Traphagen of Plough Penny Partners chose Lesaka Technologies (NASDAQ:LSAK) and Veon (NASDAQ:VEON), which are trading at around $4.50 and $45 a share, respectively. Meanwhile, Alyx Wood of Kernow Asset Management selected Card Factory (LON:CARD) and Kistos (LON:KIST), which are trading at around GBX90 and GBX129 a share.
Plough Penny Partners is a long-biased, fundamental growth fund that prefers to target holding periods of between three to five years. The fund typically holds a concentrated portfolio of 10 to 20 long positions with a handful of opportunistic shorts. Plough Penny specifically targets high-growth technology companies, investing globally in fintech, software and internet companies.
Kernow Asset Management uses a long/ short equity strategy in search of contrarian alpha from U.K. equities. The firm pairs fundamental analysis with catalyst-driven mean reversion investments. Kernow seeks market inefficiencies and tries to determine how they work and how valuation gaps might be closed.
Traphagen describes Lesaka as an under-the-radar small-cap fintech company undergoing secular growth and in the early stages of a multi-year trajectory. The company's business is largely in southern Africa.
Comparing Lesaka to StoneCo and Nubank in Latin America, Traphagen believes it's perhaps the best way for U.S. investors to target Africa's largely untapped growth market for fintech. In the same way Square serves U.S. customers, Lesaka provides digital financial solutions to consumers and merchants in southern Africa.
Traphagen was initially drawn to Lesaka Technologies because he's always seeking companies with great management, rapid revenue growth, and expanding margins that are operating in massive total addressable markets. He also seeks companies with solid unit economics and that have 'barely penetrated their target markets.'
'We have made money in emerging markets fintech stocks like Nubank and StoneCo in Latin America and had read that Africa was the next big market in fintech, so we looked for a stock to benefit from that trend,' Traphagen explained. 'LSAK is that stock.'
In the short term, he believes Lesaka Technologies is worth $7.50 a share, but he suspects it might end up being a multi-bagger in the long term.
Veon is a telecommunications company that operates in frontier markets, providing traditional telco services and newer digital products and services. In recent years, it has sped up its digital products and services and now generates a sizable share of its revenues from digital products and services.
Like with Lesaka, Traphagen believes the opportunity in Veon exists because it's still largely unknown to U.S. investors, operating in markets that are essentially alien to U.S. investors, although it trades on the Nasdaq.
Traphagen was initially attracted to Veon because of its valuation, but then he discovered its 'compelling' total addressable market and opportunity for digital products in an area where competition by U.S. technology companies is lacking. He also was attracted to Veon because the company is ambitiously de-levering, selling off non-core assets and repurchasing shares.
Card Factory is a top greeting card retailer in the U.K. that also sells gifts, party supplies and related products. The company was founded based on the opportunity to sell greeting cards at much lower price points than competitors via a vertically integrated business model that includes manufacturing cards in-house.
Interestingly, Wood was initially drawn to Card Factory as a potential short position during the COVID-19 pandemic. At the time, the company had high debt and was facing the possibility of bankruptcy. However, after Wood ran the fundamentals and conducted the people and strategy work, he found the company to be of higher quality than he had expected.
'This made it a long idea as soon as they started growing profits and the debt was cleared by cashflow,' Wood explained. 'The business is trading at a distressed price. This is at odds to the great balance sheet, and profits are set to double. It's a hidden quality growth stock. So we did more work and linked our trade journey to the partnerships, which are free growth centers.'
Management expects to double their profits over the next three years, although Wood said the market is skeptical because of the seemingly untested partnerships and international expansion. However, he added that they're 'comfortable with being paid to take the risk for free.' Those partnerships are basically new places where Card Factory's cards are being sold on stands within stores rather than just on the High Street.
Kistos is an independent, integrated energy company that has both upstream and midstream operations that span international markets.
Wood was initially drawn to the stock by the 350% gap with their valuation in the Kernow Valuation Framework, which begins with valuing companies using their proprietary fundamental bottom-up process. He feels Kistos has a clear edge over other oil and gas companies because it extracts value from overlooked assets 'more efficiently than almost anyone else.'
Wood estimates the company's intrinsic value at £350 million, although its market cap is only a mere £100 million currently. He said the company's production is set to almost double this year to 15,000 barrels of oil equivalent per day, and the market is ignoring this potential.
According to BlackRock, growth stocks accounted for 37% of the S&P 500 as of the end of November, versus the historical average of 24%. This was due to the heavy favoritism assigned to growth stocks in the first half of 2024 as investors widely preferred mega-cap technology stocks.
However, that high concentration could unintentionally leave many investor portfolios coming up short in the diversification department, meaning a greater chance of missing out on the upside from rallies in value stocks like the one that started in July 2024. Thus, investors might want to take a closer look at their portfolios to see where they stand in the value-versus-growth.