Ausbil MicroCap Fund, Portfolio Manager Mason Willoughby-Thomas & Co-Portfolio Manager, Arden Jennings provide an overview of 1H18 reporting in the mid to small cap segment, an update on their fund, and major holdings.
Jessica Amir: Hi, I'm for the Finance News Network, joined by AusbilMicroCap Fund, Portfolio Manager, Mason Willoughby-Thomas, and Co-Portfolio Manager, Arden Jennings.
Jessica Amir: For new investors, just tell us about the fund and your performance.
Mason Willoughby-Thomas: The AusbilMicroCap Fund is a fund that focuses on companies outside the ASX 200. The core of our philosophy is that earnings drive share prices. So we focused on neither growth nor value. We're looking for companies that have the opportunity to either increase earnings or revise their earnings positively over all states of the market.
Fund performance for the six months to the end of February has been very strong, returning just under 25 per cent, net of fees, exceeding the benchmark by 3.3 per cent. March has also started well. The fund is ahead of its benchmark and continues to perform well.
Arden Jennings: The fund currently holds 38 stocks with roughly 10 per cent cash.
Jessica Amir: Now to the first half 2018 performance. How did the fund perform?
Arden Jennings: Over the course of February, the fund was up 2.1 per cent, when the benchmark was slightly down. This was attributed to the mining contractors and infrastructure space.
Mason Willoughby-Thomas: The tech sector was also a good one for us. Our investments in Nearmap (ASX:NEA) and Appen (ASX:APX) in particular were notable strong performers.
Jessica Amir: How did your largest positions perform?
Mason Willoughby-Thomas: That was actually one of the most pleasing aspects of reporting season. In fact, they performed very well. In particular, the likes of Nearmap delivered a strong result and highlighted very strong traction in the US. This was a key catalyst for the market and has sent the stock up 29 per cent over February.
Arden Jennings: Infrastructure service company Service Stream rose 22 per cent after its results. The company defied expectations of a drop-off in NBN activations, however the company did deliver strong activations and also demonstrated a transition to maintenance revenue.
Jessica Amir: And what else can you tell us about your portfolio changes?
Mason Willoughby-Thomas: A key change has been increased portfolio concentration, with stock numbers reduced to 38 from more than 45 six months ago. This has helped us raise the liquidity in the fund.
We've also taken the opportunity to exit some of our largest positions in the fund following strong run-ups in their shares. AWE (ASX:AWE), one of the largest positions in our fund, has performed exceptionally well following a takeover approach from Japanese group Mitsui. We've also exited our position in Pilbara Minerals following what can only be described as an extremely strong performance over the last 18 months and its ascension into the ASX 200. And following a stellar ASX debut, we've exited our position in Netwealth Group (ASX:NWL) on valuation grounds.
Arden Jennings: We've recently added to our top 10 positions. We participated in an equity issue with Smartgroup (ASX:SIQ), also a sell down in Ausdrill (ASX:ASL), and also topped up the position in Service Stream (ASX:SSM) following a very strong result.
Jessica Amir: Last question, gentlemen. What's the outlook for the next six to 12 months?
Mason Willoughby-Thomas: Interest rates remain relatively low, economic growth is quite strong and synchronized and continuing to strengthen.
Arden Jennings: So while we remain broadly positive on the outlook for equities, we believe that we maintain a strong position to take advantage of potential opportunities with our increased levels of cash.
Jessica Amir: Well Arden Jennings, Mason Willoughby-Thomas, thanks so much for the update.
Mason Willoughby-Thomas: Thanks for having us.
Arden Jennings: Thank you.