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Excerpt of an interview with Phil King of Regal Funds Management on LiveWire.

"We still own Appen, because we think the valuation's very attractive. We're looking forward a few years, and I think that's fine. If a company has got a very strong market position, I feel comfortable looking forward a few years to see where that stock will be in a couple of years. There are other similar growth stocks out there as well. I think one reason that we've been very successful this year is that we've focused very heavily on small growth stocks.

We're very much in a low interest rate, low growth environment. If we can identify earnings growth, organic earnings growth before the market discovers it, then not only will we benefit from that EPS growth, but we'll get a strong rerating in that stock as well.

We've had a number of stocks double or triple this year as the market discovers the EPS growth and rerates them. I think a lot of stocks, as I said earlier, will go up heavily as they enter the index as well. That's something we're very focused on, stocks before they get too big or big enough to enter the index.

Well, investment is all about making forecasts. Making forecasts always involves a little bit of uncertainty, but I feel a lot more confident forecasting Appen's future cash flows than many cyclical stocks in Australia. I think stocks that rely on the economy for earnings growth can disappoint, and I think there have probably been more value traps in Australia over the last six months than I've seen in a long time.

Whereas something like Appen, if we do the research, explore the competitive landscape, if we talk to suppliers, if we talk to customers, we talk to management, we get very, very comfortable. They're in a very strong spot, and their growth is almost accelerating at the moment. They've established themselves as the go-to for their customers, and the main criticism they used to get was that they were too reliant on one or two customers. They've very much diversified their customer base.

A few years ago, they took out one of their large competitors, and I think they've very much established themselves as the go-to for their machine learning speciality, as well as speech recognition.