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Ann: Change in substantial holding from IFL, page-4

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21/07/18

07:05

Post #: 34490496
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Originally posted by rodin ↑

How Perennial's microcap strategy made 50 pc in 2017-18
"We love growth, we just don't want to overpay for it," said Andrew Smith. James Brickwood
by Vesna Poljak
As most large cap managers will agree, the Australian sharemarket looks pretty fully valued.
But in the cut and thrust of microcaps, where performance can go from feast to famine, one of the best-performing fund managers sees opportunity almost everywhere.
"Even though the market's expensive, we're still finding plenty of value and growing companies that will deliver," says Andrew Smith, the portfolio manager of Perennial Value's Microcap Opportunities Trust, which returned 50.2 per cent after fees in 2017-18, which is 26 percentage points above the Small Ords Accumulation Index. Last year, big returns meant going small.
Two of the Perennial team's top 10 performers were junior miners: Galena Mining, and Avanco Resources, which was acquired by OZ Minerals.

But one of the most interesting finds by Smith was the $90 million HRL Holdings, an industrial stock that has acquired a New Zealand business, Analytica Laboratories, that conducts chemical testing in the food and agriculture, drug and environmental markets.
It is the market leader in honey testing, where it tests for quality in Manuka honey, and has a sizeable presence in dairy testing. In NZ, approval from a ministry for primary industries-recognised lab is required for honey and dairy export.
Smith recalls being the only fund manager sitting in a HRL presentation hosted by a broker years ago where no one else turned up. His interest was piqued because the directors had a large shareholding in the company, so he did some research and kept it on his watch list.
When the Analytica deal came around, Perennial Value was willing to back it.
"The fascinating thing about these guys is they've developed a test that was much cheaper," he says. The volume more than compensated for the drop in price, "and we still like it."
His six-person small and micro caps team sees 1000 companies a year, which is roughly half the universe of stocks to choose from.
"And it's really poorly covered. Finding those under-researched gems is really key to our process."

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Thanks for sharing.

HRL Price at posting: 18.5¢ Sentiment: Buy Disclosure: Held
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