Investing in a stock pickers market

Funds Management

by Carolyn Herbert

Transcription of Finance News Network Interview with Antares Small Companies Fund Portfolio Manager, Paul Dewar
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Antares Small Companies Fund is Portfolio Manager, Paul Dewar. Paul, welcome back to FNN.
Paul Dewar: Thank you.
Lelde Smits: How have small company stocks been performing this year, and what factors have influenced their performance?
Paul Dewar: Small caps have performed quite well this year. The index is up around 7.5 per cent for the calendar year. We’ve seen a bit of a continuation of some of the trends that have persisted, since last year. Investors desire to chase yield, has seen stocks like the property trust stocks and other defensive type earners, continue to do well.
We’ve seen a little bit of a bounce back from low levels in the mining stocks. Although the mining services stocks have continued to find conditions pretty difficult. Outside of that there haven’t been any real strong central themes. So it’s been more about individual stock selection. So that’s good, that favours our investment process.
Lelde Smits: What are some of the major stock highlights for the Fund, so far this year?
Paul Dewar: A few of the highlights have been TPG Telecom (ASX:TPG), we’ve done quite well out of the telecommunications space. There’s been good organic growth in that sector and a lot of M&A (merger & acquisition) activity, which has really benefited TPG. Mantra Group Limited (ASX:MTR) has done well. That continues to benefit from a tightening in the domestic accommodation market, as more people look to travel domestically rather than abroad. And also Cover-More Group Limited (ASX:CVO) has continued to perform well also.
Lelde Smits: The Fund recently took a position in MYOB Group Limited (ASX:MYO). What is your rationale for taking a position in this stock?
Paul Dewar: MYOB is really all about migration to the Cloud. MYOB is the number one SME accounting software provider, in Australia and New Zealand. Also the number one Accountant Practice Management software provider, they’ve a large installed base of desktop software users. So it’s really about converting those users into a subscription base product, which puts them into a connected environment.
So there’s benefits to MYOB, as it improves their earnings quality. But there’re benefits for the small businesses as well, putting them into a connected environmenthelps them to manage their own business. And also helps them to do business with their own customers.
Lelde Smits: Eclipx Group Limited (ASX:ECX) was also recently floated. How has your exposure changed to the company and why?
Paul Dewar: We took an initial position in Eclipx, as we thought the stock offered good value, versus the other listed peers. Since then we’ve pretty much doubled our exposure to the company. We’re attracted to the growth prospects of the business. It has a new management team that have reinvigorated the offering. And we think it has some competitive advantages, versus other vehicle-leasing players. And we think that will help to drive growth into the future.
Lelde Smits: Could you give us an example of a larger stock you hold and explain how it’s supported your portfolio?
Paul Dewar: Well one of the larger positions in the Fund at the moment is Slater & Gordon Limited (ASX:SGH). They’ve recently made a very large acquisition in the UK. And it’s taking the market a little while to get a really good understanding, of the opportunities that that business brings to Slater & Gordon, and the dynamics of the UK personal injuries market.So we think there’s mispricing of this name currently. And we think that because of that mispricing, over time that will unwind and this will be a strong outperformer for the Fund.
Lelde Smits: Finally Paul, where is the Fund currently looking for opportunities?
Paul Dewar: There’s no strong thematic playing out in the market at the moment. So we’re really focused on bottom up fundamentals. We’re looking for opportunities right across the market. The IPOs bring some opportunities for us, but we’re also circling back over the rest of the index and trying to uncover opportunities, right across the market. So that really plays into our strengths, I think, in looking at individual stocks and the fundamentals. Understanding the businesses and the financials really well, and trying to find mispricing opportunities that we can exploit.
Lelde Smits: Paul Dewar, thank you for the update from Antares Small Companies Fund.
Paul Dewar: Thank you.

Carolyn Herbert

Finance News Network
Carolyn joined FNN in August 2015 as the Head of News and also presented the Market at Midday and the Market Wrap. With more than five years of broadcast journalism experience, Carolyn has worked as a finance anchor on the Sky News Business channel and as an anchor and reporter for ABC News. She is also a qualified corporate lawyer specialising in IPOs, takeovers and mergers and acquisitions.