Smallco Investment Fund
Investment Objective:
Smallco Investment Manager (Smallco) operates a smaller company managed equity fund, the Smallco Investment Fund (SIF). Smallco aims to provide good performance in SIF through actively looking for high quality, smaller companies whose share price is significantly less than what Smallco considers to be the true underlying value of the shares.
Investment Universe:
Smallco invests mostly in smaller Australian listed companies, but may invest up to 20% of the fund in larger Australian listed companies and some cash. The manager classifies a smaller Australian listed company as a company outside the S&P/ASX 100 Index at the time the fund makes its initial investment.
How to Invest:
You should consider the Product Disclosure Statement (PDS) for SIF before deciding to invest. You can either download the PDS or request a hard copy by mail.
| Return as at: 28 FEB 2010 | |
|---|---|
| 1 month | 3.2% |
| 3 months | 4.2% |
| 6 months | 14.4% |
| 1 year* | 72.6% |
| 5 years* | 2.8% |
| Since inc.* (31/10/2000) | 9.9% |
*Returns annualised. Returns calculated after all fees and expenses and based on exit price and reinvestment of distributions. Past performance is not a reliable guide as to future performance. Returns are not guaranteed.
Latest Update:
31 December 2009
The Smallco Investment Fund continued to perform well in the quarter ended 31 December 2009 with a return of 6.0% (53.7% for the last 12 months).
In world markets, the first three months of the 2009 calendar year continued on the same extremely negative mood as 2008. Since then, however, equity markets around the world have rebounded strongly. Looking forward, assuming the Australian economy performs solidly as most economists expect, the prospect is for corporate earnings to strengthen as 2010 progresses.
One of the significant contributors to the performance of the Fund over the last year has been Southern Cross Media Group (SXL – formerly Macquarie Media Group). SXL is a major regional television and radio broadcaster. About a year ago when we were buying the stock, the market didn’t like SXL’s total debt level or its “Macquarie” structure and accounting. In its panic, the market over looked the fact that while SXL’s share price was around $0.80, the parent company had $1.60 of cash and all the debt was at the subsidiary level and non-recourse to the parent.
One year later and SXL has reduced debt to acceptable levels (issuing equity at prices well above what the market was previously fretting about) and is also changing its holding structure to a standard corporate model with internalised management. The stock is now trading around $2.00 and while no longer extremely cheap, SXL not only provides significant leverage to an emerging turnaround in advertising spend, it also remains one of the cheapest traditional media companies.
In September, carsales.com listed and the fund purchased a position. Carsales.com is the dominant website for Australian automotive classifieds with over 50% of the market. Over the last few years there has been a strong move from print classifieds to online classifieds with online automotive classifieds forecast to grow at over 20% compound to 2012. As the dominant website owner we anticipate that carsales.com will continue to grow its earnings strongly and the market forecasts exceed 15% EPS growth over the next three years.
The Fund has re-opened to new investors. Historically we have strictly managed capacity to ensure that the size of funds-under-management does not hinder performance. We will continue to monitor this and will re-close the Fund at a size that ensures it remains nimble.
Please note that along with providing regular 6 Monthly Newsletters we are available during business hours to discuss any relevant issues or provide ongoing updates. Please feel free to contact Craig Miller, one of our investment managers, on 02 8256 1004.