The most satisfying stock picking outcomes are ones where you manage to buy it before it became popular with everyone else.
They're the shares that you would have picked up as a bargain, then sat back to watch the rise as the rest of the market realises the quality of the company.
The team at Firetrail recently profiled two ASX shares that fit exactly that mould.
They're not yet massive household names, but already have enough mass and momentum to really rocket ahead:
Australia conquered, now for overseas expansion
Technology company PEXA Group Ltd (ASX: PXA) debuted on the ASX middle of last year.
Founded in 2010 by the Council of Australian Governments, the outfit is responsible for facilitating digital transfers of real estate ownership. It has been described as the ASX equivalent for property transactions.
With Australia now conquered, the growth prospects for the now-publicly listed company seem to lay overseas.
According to a report from the Firetrail Small Companies Fund team, PEXA is due to launch in the UK next year.
"The Bank of England expects to revolutionise the UK property market by partnering with PEXA to implement its settlement technology," read the report.
"The UK presents an estimated $700m addressable market opportunity."
The first revenues from Britain are expected to be received late this financial year.
"PEXA will then launch a transfer settlement product in FY24, which is expected to materially boost earnings," read Firetrail's memo.
"We believe PEXA [has] a high probability of success in the UK and an opportunity to expand into other countries globally."
The PEXA share price is down 30% year to date.
"PEXA's share price today is reflecting downside risk from interest rates and housing turnover headwinds," read the Firetrail report.
"However, we expect a recovery in the property market, market penetration gains and higher near-term refinancing volumes to drive earnings through the cycle."
Resilient earnings well-suited to the current uncertain times
Meanwhile Firetrail's Australian High Conviction Fund team explained their high conviction in Lottery Corporation Ltd (ASX: TLC).
"Australian lottery revenues have grown at an average [annual] rate of 3.8% over the past three decades."
Due to the arbitrary nature of jackpots, there is some variability in revenue growth from year to year. But, according to Firetrail analysts, it has never gone backwards over any rolling three-year period.
"More importantly, revenues have shown resilience through periods of softer economic growth," read the report.
"During the GFC, revenues grew 7% in the year to June 2008, and another 8% in the year to June 2009."
A great boon for its future prospects is the online sale of lottery tickets, which accelerated through the COVID-19 pandemic and has increased engagement from younger customers.
"The Lottery Corporation has found that, on average, existing retail customers increase spend by 52% after they join the digital platform," read the Firetrail report.
"Given less commission is paid away to channel partners when customers use the digital platform, increased digital penetration is also accretive to gross margins."
The Lottery Corporation share price is down about 10% since its listing in May.
For Firetrail analysts, The Lottery Corporation provides stable returns akin to an infrastructure asset.
"Current cyclical softness creates an opportunity for us to increase exposure to businesses like The Lottery Corporation at more attractive valuations in order to maximise returns for our investors."
