Five small caps punching above their weight

We’re heading into a tougher market climate, which can spell all types of challenges for companies struggling to manage margin compression. However, it’s also an opportunity, particularly on the small-cap companies front.

“The margin compression theme that we saw in reporting season means that you want to back businesses that have a dominant market position that can drive pricing power,” says James Nguyen, portfolio manager.

At Tyndall, we look for mispriced stocks – the same characteristics apply whether a company is a small-cap or a large-cap – but we also add a greater emphasis on quality when it comes to small-caps.

Reporting season uncovered several high-quality small-cap stocks we think are punching above their weight and James and I discuss five of these in detail in the video below. We also explore the positions we added to and the positions we sold out of in the last quarter.

Timestamps:

• 0:00 – Key themes and earnings outlook
• 0:58 – The companies to look for in periods of margin compression
• 1:17 – Stock example: Siteminder (ASX: SDR)
• 1:58 – Stock example: Alliance Aviation (ASX: AQZ)
• 3:07 – Surprises in the consumer discretionary sector
• 4:01 – Stock example: Ardent Leisure (ASX: ALG)
• 4:19 – Stock example: Jumbo Interactive (ASX: JIN)
• 4:41 – A few consumer discretionary companies we don’t hold and why
• 5:01 – How to identify mispriced small cap companies
• 6:02 – Why we are overweight defensive financials, industrials and emerging companies
• 6:46 – Where we bought and sold
• 7:15 – The outlook for small-caps

Great and small

Our Australian Small Companies Fund invests in a diversified portfolio of Australian small cap companies that we believe are undervalued and will provide consistent risk-adjusted returns with strong capital growth. Find out why it pays to start small here.

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Tyndall Australian Small Companies Fund

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