Earnings season rolls on and this week we take a look at one of our company’s results from the portfolio in Reckon Limited (ASX: RKN) and another who has been in the process of rebranding in FleetPartners Group Limited (ASX: FPR) formerly known as Eclipx Group Limited.
Viva Leisure Limited (ASX: VVA) a market leader in the personal wellness industry, announced last Friday an impressive set of full year 2023 results.
Despite cost of living and inflationary pressures, revenue increased 55% to $141 million and Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) increased by 429% to $29 million. The share market lapped up the numbers with the share price increasing 11.54% on the day to a 52 week high of $1.45. You can read up on our previous commentary around the business here. Despite facing a raft of challenges including higher interest rates, inflationary pressures and a cooling global economy, the share prices of technology companies have shot higher this year. Electric vehicle pioneer Tesla Inc (NASDAQ: TSLA) has more than doubled year-to-date, while chip-maker NVIDIA Corp (NASDAQ: NVDA) share price has tripled, owing to investor enthusiasm for artificial intelligence.
The financial world often stands still, watching behemoths like Apple Inc (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) manoeuvre. Given their gargantuan size, these market titans inevitably cast wide ripples across the broader investment landscape with every price fluctuation - particularly during reporting season. Yet, beyond the limelight and the vast echo of these large caps, there’s a realm of potential in the business performance of small caps where valuations remain grounded.
The mega cap technology companies have roared back to life in 2023, with the NASDAQ 100 rising 40% in the first half of the year. The “magnificent 7” (Apple, Microsoft, Tesla, Meta, Alphabet, Nvidia and Amazon) have performed even better, rising a staggering 61%. They now account for a whopping 27% of the S&P 500 index (which is weighted by market capitalisation, or put simply, market value), while the other 493 stocks in the index contribute 73%. Compared to their 61% return over the first 6 months, the remaining 493 of the S&P 500 were up about 6% (bringing the index return to June 30 of 16.9%).
As we discussed in an article just last month, Symbio (ASX: SYM) is the latest in a string of small cap ASX companies to receive a takeover offer.
We highlighted Symbio as a possible acquisition candidate because of its growing and profitable business (a rarity among small ASX companies), rock-solid balance sheet (with $30 million in cash compared to a market capitalisation of $150 million), predictable and recurring revenue, and high insider ownership among the Board of Directors. 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. The Wall Street Journal recently published a personal finance column entitled “America’s Retirees Are Investing More Like 30-Year-Olds'' that showed a marked change in the investment preferences of older Americans.
Symbio Holdings (ASX: SYM) dropped a stunning 37.5% in a single session following a trading update on 20 December 2022.
The communications software provider announced a sharp decrease in its expected FY23 operating earnings (EBITDA) with a decrease in the midpoint guidance of 25% to between $26 million to $30 million. The plunge in expectation was largely due to the Communications Platform-as-a-Service (CPaaS) division where US customers had been returning excess inventory as well as a number of deals with its Australian customers taking longer than expected to finalise. Bank of America Merrill Lynch (BofA) recently published a research paper showing that small cap stocks are now trading at a 20-year low versus their large-cap peers. In fact, the only other time in the last 50 years that small cap stocks were this cheap relative to large companies was during the dot-com bubble surrounding the year 2000.
The Standard & Poor’s Homebuilders exchange-traded fund (ETF), XHB, has increased by more than 30% in 2023 and 40% over the last 12 months. A number of homebuilder stocks such as PulteGroup (NYSE: PHM) and renowned value investor David Einhorn’s Green Brick Partners (NYSE: GRBK) have substantially outperformed even this lofty benchmark. Building supply stocks such as Installed Building Products (NYSE: IBP) have also performed strongly, outpacing even the rapid climb in technology stocks.
Australia’s unemployment rate has defied the doom and gloom predictions, falling to 3.6% in May from 3.7% in the prior month. Around 61,700 jobs were added across the country, most of which were full-time roles. The number of employed in Australia reached 14 million for the first time, and the participation rate also increased to 66.9% (meaning more people were looking for work).
Oftentimes, market fluctuations are a source of frustration for many. Given the frequency of noisy headlines about cost of living pressures, impending global recession and counterintuitive rise of markets in the first half of 2023 (particularly the S&P 500), it is understandable that investors may slip into watching share prices more than underlying business operations and performance.
For the best part of 2022 investors could have been forgiven for thinking technology stocks only went down.
From a previous sea of red, some green shoots have begun to emerge in technology stocks marking a notably positive beginning to 2023. Several factors contribute to this shift, including speculation regarding the US Federal Reserve's potential abandonment of its rate-raising strategy, mounting pressure on businesses to streamline expenditures and demonstrate a path to profitability, and the pervasive belief that artificial intelligence (AI) will dominate the global stage. Consequently, the downtrodden tech sector is now enveloped in an atmosphere of optimism. This week we are providing an overview of rare earths, a group of 17 elements critical to various industries including energy, defence and aerospace. Rare earths are a geopolitical battleground, with China’s iron grip over the supply chain causing apprehension amongst Western nations. Rare earths have also gained greater investor attention in recent years as they become a key cog in the race to decarbonise the planet.
Optimising Returns and Minimising Risks: The Importance of Asset Allocation in an Investor's Journey1/6/2023 Successful investing goes beyond making smart decisions; it requires avoiding mistakes and adopting a mindset of longevity and endurance. While taking risks and investing optimistically are important for building wealth, keeping your wealth also demands a mix of humility, frugality, and steering clear of catastrophe.
Crucial to successful investing is recognising the difference between price and value. In the 2008 Berkshire Hathaway letter to shareholders, legendary investor Warren Buffett wrote, “Long ago, Ben Graham taught me that price is what you pay; value is what you get.” This is an easy to understand idiom that people would be used to in everyday life, but often have difficulty applying in their investing life.
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.
With the world's growing reliance on alternative energy sources, the investment landscape is increasingly fixated on lithium. Lithium is integral to the batteries powering electric vehicles and much more. After steep declines in lithium prices to start the year, recent increased mergers and acquisitions activity has sent ASX lithium stocks higher.
In this week's article, we will explore a distinctive investment approach that has the potential to serve as a viable pathway for maintaining overall portfolio returns, regardless of the broader market conditions...
GhatGPT has set the online world alight and sparked debate over the future of almost everything. We look at a monumental battle between two behemoths of the tech industry...
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.
Electrical products distributor and services provider, IPD Group Ltd (ASX: IPG) was listed in December 2021 and is an ASX rarity: the company has seen sustained share price growth since its IPO despite the market turmoil of 2022, especially in small caps.
Last week our head of Australian Equities, Ron Shamgar held an investor briefing where he discussed IPD, below we share our write up and the video of his views on the business and its outlook over the next 12 months. |
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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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