In the ever-shifting mood of the ASX, small cap companies often find themselves at the mercy of market sentiment, which can be as fickle as the winds. One only has to look back at headlines within the past two weeks to see alarmist “bear” calls before the US interest rate hold decision.
Takeovers have been a real theme in 2023 for the beaten down ASX small cap sector.
We’ve covered a number of articles and topics in recent months as to why takeovers are occurring. We’ve also recently released a white paper outlining several ASX companies that we believe are prime candidates for a future acquisition given their strategic assets and current valuation. In this article we take a look at three company takeovers at varying stages. Stand still in the advertising and marketing space and you’ll be left behind.
Over the past quarter-century, the industry landscape has undergone a transformative journey, driven by the seismic shift from paper-based advertising to the digital realm. The advent of the internet, social media, and advanced technology has brought about a revolution in the way businesses connect with their audiences. In this dynamic era of ever-evolving communication channels, understanding the interplay between traditional print and the digital frontier is essential. A takeover offer is simply that, an offer. The acceptance and completion of that offer is another matter, just take a look at the difficulties continually disrupting Microsoft’s (NASDAQ: MSFT) attempted acquisition of Activision Blizzard (NASDAQ: ATVI).
In 2022, ClearView Wealth (ASX: CVW) was identified as a potential takeover target by TAMIM’s Ron Shamgar and, while the story did not eventuate as we would like thus far, the business has been evolving in a way that continues to make it attractive. Rising interest rates and inflation are significant tailwinds for ClearView. The company’s product is sticky with the ability to pass through inflation costs to policyholders, while higher rates result in higher investment returns on cash and fixed-income holdings. It was a pleasure to have Ron Shamgar, the head of Australian Equity Strategy chat with the Australian Shareholders' Association & Rask Australia about his entrepreneurial history, the rise of the Boat Fund and subsequently joining TAMIM, investment philosophy, views on EML, risk, media scrutiny, and much more.
As we reported last week, a key holding inside our Australian All Caps portfolio, Silk Laser Australia (SLA.ASX), experienced a significant increase in its share price due to a buyout bid from Wesfarmers Ltd (WES.ASX). Portfolio manager Ron Shamgar has been following the company closely and in a recent webinar he explained more about this opportunity.
Exciting news! TAMIM Australian All Caps portfolio manager Ron Shamgar has been talking about this small cap as a potential takeover with significant upside, and the story is playing out right now.
Investing in small-cap stocks during an economic recession can be challenging due to their high volatility, which leads to deeper downturns compared to larger companies. We recently discussed that tough times offer opportunities for patient investors in the small cap space and TAMIM portfolio manager Ron Shamgar believes that one holding currently has the potential for significant upside in the face of a potential recession.
One of the advantages of investing in smaller companies is that their share prices typically move less in line with the overall share market (i.e. they are less correlated). Instead, their performance is more driven by the individual company’s operations. Smaller companies also often have bigger share price movements when they report their earnings results, which for most companies in Australia, happens in February and August. Two such companies that had strong (negative) share price reactions in their previous earnings reports in August 2022, but have since generated solid results and may be on the verge of a rebound, are Aussie Broadband and DGL Group.
While the market attempts to navigate harsh conditions, we look into three ASX small caps that appear to be diamonds in the rough...
This week we will be talking about the recycling industry, a segment that we don’t believe is spoken about enough in this age of environmental reform. Similar to our recent article on tin, recycling seems to be a forgotten factor that investors are overlooking. We will highlight a recent recycling IPO that is growing fast and will be benefiting from industry tailwinds.
This week we will be talking about founder led businesses and why they tend to outperform. A number of the companies in our portfolios are founder-led; it is a factor we consider when assessing a company. So, we decided to dive deeper into what is driving their outperformance and, in doing so, we will highlight a founder-led chemical manufacture and waste management company that is beating prospectus forecasts, has a strong moat and is growing through an aggressive M&A strategy.
This week Ron Shamgar takes a look at an expanding healthcare services company that has traded well despite a tough operating period; a stock that could also potentially be interesting from an M&A perspective.
With reporting season now over, investors can take the time to review the results. Stocks will often take time to rerate after the release of a good result as they can get lost amongst hundreds of others. This week we will talk about IGL’s results and why we believe it was one of the best on the ASX. We will also dive into CAJ’s results and look at why they should do better in a normalised environment.
This week we will continue looking at reporting season with a look at two companies that saw challenging trading conditions in the half as a result of Covid-19 impacts and explain why their outlook for FY22 is strong. Many companies saw tougher trading conditions but not all were able to navigate through the half without a severe impact on operations. Further, January has been impacted by omicron but, looking forward, we are starting to see a more normalised trading environment.
Continuing on with our reporting season notes, we will cover a few more of our key holdings across TAMIM’s Australian equity portfolios. There has been increased uncertainty across markets as geopolitical tensions in eastern Europe have come to a head alongside hawkish central bank commentary. Any company even remotely connected to the word ‘growth’ is apparently tainted and has been sold down accordingly.
Over the next few weeks we will be providing commentary on half yearly results for some of our key holdings. During February companies report their half yearly results for the period ending December 31st while also providing an outlook for the full year results. Companies will typically host a conference call with investors and you'll hear just about every analyst asking management to “provide more colour” to the results in the Q&A section to get as much commentary as possible on why the numbers came out the way they did and what to expect for the next set of results. This week we will discuss the results of MNY and SWM.
2022 hasn’t started like most people were hoping with January being the worst start to a year on record, the S&P500 being down -11%, at one point. The ten largest stocks on the index were down -20% at one point and the average Nasdaq stock was down -50%. In Australia, the tech index hit an intra month low of -25% while the Small Ords was down -13% at one stage. This week we have seen a bounce back in equity markets but one could argue that we are in bear market territory based on some of those figures, yet there’s no global recession in sight.
Ron Shamgar lays out the investment thesis for a stock he believes will soon be the subject of a takeover offer.
This week we are looking at a small cap company that is providing software solutions to the hospitality sector while also expanding into overseas markets with huge addressable opportunities. The company has a market cap of only $100m and has mostly gone unnoticed to date, without any media coverage, even though they have been growing quickly, making acquisitions and are now EBITDA positive. The events and hospitality industry are clear post lockdown winners and the companies that provide the sector with services will benefit accordingly.
This week we will be writing about one of our core holdings, one that the market hasn’t been very optimistic about. In doing this we will look at why we think the market has this one wrong. Sometimes the best opportunities come from running toward the fire and figuring out if the situation is quite as bad as everyone thinks. Often in investing, if you find yourself on the same side as the majority that’s when you should be asking yourself all the questions.
Over the past few weeks we have been covering stocks we believe are poised to benefit from the ongoing reopening of Australia and New Zealand. This week we will be writing about a small cap payments company that should be a huge beneficiary of this reopening thematic.
This week we’re looking at a small cap retail stock that is offering investors a concentrated bet on the reopening theme. In 2020 we saw a huge shift in sentiment towards stocks that were benefiting from a covid-19 environment. Companies such as Pushpay (PPH.ASX) and Redbubble (RBL.ASX), we bought both heading into the pandemic, were huge beneficiaries. Heading into Christmas, the covid winners and now the covid losers and retail stocks are starting to grab more attention. With Australia exiting lockdowns there is a lot of pent up demand for retail spending, what we like to call revenge spending.
This week we are writing about a pair of financial services companies that are growing, have tailwinds and are trading at what we believe to be bargain prices. In the wake of the 2019 Royal Commission we have seen huge changes in the Australian financial services industry. There has been a structural shift away from banks by consumers, igniting the fintech scene in Australia. Non-bank lenders have also been beneficiaries but we feel it is a sector that has been overlooked by investors and offers some quality businesses that are growing their loan books at attractive margins.
This week we will be writing about a small cap education stock that has undergone a huge structural change as a result of a major partnership that is transformative to the business. We believe the market isn’t giving due credit for the magnitude of this partnership and the stock is presenting as a compelling opportunity for investors.
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.
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