What the Fund Managers are buying
We have identified some of the best mid-cap and small-cap fund managers and what they hold. We did that by searching on the Morningstar website the best performing mid and small cap funds over various periods. 10 funds turned up as some of the best performers over three and five years. They were also filtered for a 5 star Morningstar rating. They are listed again below with their biggest ten (or more) listed Australian equity holdings. The holdings are listed by size of holding in the fund, biggest holdings first. We have also added a few other fund managers of high repute:
- BT Wholesale MicroCap Opportunities – ISU, RCR, BBN, RWH, CGL, IMD, IFM, HUO, LIC, GTK
- Ausbil MicroCap – ISU, SIQ, HSN, IMD, MLX, CAJ, BIN, RCR, MNF
- OC Dynamic Equity – BAP, SGF, UPD, WEB, BLA, BIN, SUL, SDA, A2M, QMS
- Forager Wholesale Value – MAH, EGG, CDD, NZM, JIN, SSM, DDR, GNG, PEA, GBT
- OC Microcap – UPD, MX1, PAC, NVL, KGN, AMA, JIN, EML, QMS, AXL
- SGH Emerging Companies – BRB, LVH, COE, APT, GSC, CMP, TON, XF1, ZNT, SPZ
- Pengana Emerging companies – CHC, BAP, NHF, WEB, SIQ, MFT.NZ, FRE.NZ, NCK, LVH, CTD
- Macquarie Australian Smaller Companies – BIN, CNU, SGM, RWC, NXT, PEP, SSM, MTS, SM1, ING
- Macquarie Australian Microcap – TGR, HSN, MSF, EPW, BRU, RXM, DRK
- Investors Mutual Small Cap – TOX, PGH, FLT, ANN, ZEL, FBU, CYBG, MYX, SCP, GWA
- Wilson Asset Management – CCP, AUB, NCK, RKN, CL1, IMD, SMX, CAJ, ONE, NBL, ISU, 3PL, SIQ, VRT, SXE, EPD, SW1, KBC, REF, IPE
- Wilson also invests money with a lot of other fund managers including - HHV, TGG, PNI, ENN, CTN, WDE, WIC, CIW, HHY, AUP, AIB, CYA
- Paradice Mid Cap Equities – ILU (buying), SGM (selling), BAP (selling), CNU (selling), SIG (selling), BPT (buying), SIQ (buying), WSA, BDR, MLD, SKB, SXY, PPS
- Thorney Opportunities (TOP) and Thorney Technologies Fund (TEK) – Hard to find their holdings but this is what is held by the Thorney Investment Group - SSM (biggest holding - have been selling this month), ADA, WEB (have been selling recently), MSB, HUB, RFG, MNY, ANG, FRI, OVH, UPD, SHV, DCG, LGD, EPD, MDL, SXE, MCP
- Cadence Capital (Karl Seigling) – MLB, MQG, RFG, JHG, RIO, ECX, IGO, ANZ, WPL, IPH, MND, NAB, SHV, CBA
- Greencape Capital (big $7.5bn fund) – A2M, VOC, IRE, SDA, RWC, SGM, GEM, AUB, EML, AMA, TOX, IFM
To make sense of this and to try and identify some stock picks I have listed in tables at the bottom of this article all the stock picks in order of performance over one year and have highlighted in black boxes when there is more than one fund manager that has picked the stock. This is stock picking by being a sheep, but still, interesting lists. These are the stocks that more than one specialist fund manager or analyst have done the work on and, in agreement with the other analysts, have decided to buy.
There are a few observations – the codes on the charts are in the top left hand corner:
- Stocks picked by 4 fund managers: SIQ
- Stocks picked by 3 fund managers: UPD, IMD, SGM, SSM, WEB, BIN, ISU, BAP
- Stocks picked by 2 fund managers: LVH, A2M, CAJ, JIN, EPD, SXE, RWC, AUB, IFM, NCK, TOX, SDA, EML, CNU, QMS, AMA, HSN, SHV, RFG.
- Bingo (BIN) a recently listed skip business is interesting. Obviously some fund managers think this is a long term buy (the liquidity isn’t there for it to be a short term buy).
- One fund manager that stands out is SGH with their $44m Emerging Companies fund. The fund has outperformed the benchmark (ASX Emerging Companies Accumulation Index) by 17.02% pa over 3 years and 11.97% pa over 5 years (and it has a 20.5% performance fee). SGH is SG Hiscock, Steve Hiscock. He used to be a fund manager with HSBC when I was institutional broking for Burdett Buckeridge and Young 23 years ago. He was in charge of the property trust sector. The Emerging Companies fund run by Adrian Di Mattina has some of the best performing stocks in our list over 1 and 3 years including: LVH, GSC, BRB, ZNT, COE. They also have a Microcap fund. They obviously do their own research and are independent minded, few other fund managers hold the stocks they hold, stocks that have performed well. Note they also hold Afterpay (APT) which we hold.
- Their recent fund report is interesting in the comments about tax loss selling and the rebound post financial year end…it said: “After a disappointing June quarter, it is pleasing to report that our Fund rebounded sharply in July, increasing by 6.69% and outperforming the S&P/ASX Emerging Companies Accumulation Index which gained 3.01%. As we wrote last month, part of the reason for a poor June was tax loss selling in a number of our smaller stocks. This month, however, we benefited from the bounce back effect, which saw these stocks affected jump in price. There has also been a significant number of emerging company, and micro cap fund managers, start up in recent months which have been sitting on a lot of cash. And now, in the new financial year, these funds are looking to get invested - bidding up share prices. Although this increases competition, it does nevertheless have the benefit of improving overall liquidity in the market. In any event, as we have strictly limited our FUM capacity, which we see as part of our competitive edge, we still think there will be plenty of investment opportunities for us going forward. Moreover, it's worth noting that some of these new funds do not invest in resource stocks. To that end, we also benefited in July from strong performance in several of our resource company investments - particularly Auris Minerals (AUR) which we think has made a significant copper discovery in Western Australia. Please note, owning resources stocks increases the volatility of the returns in the short term, but over time we do not consider that it increases portfolio risk. Overall, we continue to believe that the weakness in emerging companies last financial year, as well as a decline in IPO activity, should mean better prospects to make money this year.”
A fund manager to watch.
THE TABLES OF STOCK PICKS