Fairview Equity Partners talks small cap stock favourites

Funds Management

by Carolyn Herbert

Transcription of Finance News Network Interview with Fairview Equity Partners Senior Investment Manager, Leo Barry

Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Fairview Equity Partners is Senior Investment Manager, Leo Barry. Leo, welcome to FNN.

Leo Barry: Thanks very much.

Carolyn Herbert: Leo can you start by giving us an introduction to the Fund?

Leo Barry: The fund was established about 8 years ago we soley focus on the small cap stocks or the smaller, more un-discovered stocks. We are pretty much bottom-up in our stock selection. We’re mindful of macro environments and macro views and we really look for unidentified companies with material growth optionality domestically and also internationally.

Carolyn Herbert: How have small caps performed over the past 12 months and what were three key performing stocks in the portfolio?

Leo Barry: It’s been a great year for small caps in particular and versus the top 100, it was a fantastic year for small caps. APN Outdoor Media (ASX:APO) was one particular stock that performed extremely well. They’re obviously in the outdoor media space. You’ve seen a massive structural shift from traditional media, being television to either static and also digital, and digital screens. We still see some significant upside through M&A and also improvement in yields. The second one was Aconnex Limited (ASX:ACX). They’re a collaboration software business, which work in the construction industry; they’ve made the number one share globally. They’re winning huge contracts and they’ve recently just taken over their second largest competitor in Europe.

And the final one was Regis Resources Limited (ASX:RRL). You’ve seen a fantastic 12 months for a lot of the gold stocks. What really attracted us to Regis, obviously it’s highly leveraged to the Aussie dollar gold price. We still see significant upside in their exploration and also they’re at the lower end of all-in sustaining cash costs.

Carolyn Herbert: What’s your outlook for small caps for the next 12 months?

Leo Barry: We’re really confident small caps can continue their outperformance. You’ve obviously seen globally a lot of political and also economic uncertainty, but we’re still seeing significant pockets of opportunity. One of our strengths is finding those small companies that are relatively unknown, that can certainly grow on a global scale. Versus the top 100, we still think the small caps look really good value. They are on a valuation metric similar to the top 100, but we still see significant EPS growth optionality in the small caps.

We’re pretty confident; you’re still seeing a reasonably strong IPO market and also the market changes so quickly. So you’re still seeing significant disruption in a lot of the businesses that we look at. And a couple of examples are Freelancer Limited (ASX:FLN) and also Aconex.

Carolyn Herbert: How does that translate into stock selection?

Leo Barry: We’re very much bottom-up stock pickers. Aconex is a good example, Freelancer, APO. So obviously you’re mindful of what’s been changing in a particular market and that segment. So it certainly does have an influence on our final investment decisions.

Carolyn Herbert: Leo Barry, thanks for the update on Fairview Equity Partners.

Leo Barry: Thanks very much.


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.