If you've been a Eureka Report subscriber for a few years (and you may well be... we have the highest re-subscription rate in the business) you'll have noticed how we have become ever more enthusiastic about small cap stocks. In terms of making money in the Australian market we believe the greatest opportunity in listed investments is in this sector. On Wednesday this week (12 noon October 28) we are delighted to have in the studio one of the legends of the market: Michael Glennon.
You may or may not have heard of Michael but his track record as a fund manager specialising in the sector is truly remarkable – when they ruled off the books at the end of the last financial year the Glennon Small Companies Portfolio had returned 84 per cent since it started in 2010 – against 11.4 per cent on the All Ordinaries Accumulation Index. Mitchell Sneddon will be hosting this webcast – have your questions ready or better still, send them in advance here.
Alan Kohler, who earlier today interviewed Mark Fortunatow, chief executive of MGM Wireless (catch up on the video here), will be back in the studio also on Wednesday to chat live with Kris Knauer, chief executive of Medbio, the group that specialises in precision injection moulding and tooling for the medical device industry. Speaking of Alan, he joined our colleague Kirstie Spicer of brightday in a very well attended webcast last week on the lessons retail investors might glean from the Future Fund's exceptional performance. If you missed it, then you can find it here. Some of the issues raised by the success of the Future Fund also come up in our Inside Line today (watch the video here).
Finally, on Thursday our income analyst James Samson gets to talk live with the chief executive at one of his favourite stocks – Bryce Mitchelson of ARENA, the REIT that has a particular interest in childcare properties. James has recently added ARENA to his income portfolio and you can read why he choose this very impressive property stock in this recent feature (Adding Arena REIT, September 28).
Meanwhile, here’s what our analysts have been up to during the last week:
Growth First model portfolio
The Growth First model portfolio has banked another positive week. It stocks gained an average of nearly 2.5 per cent in the five days to Friday (October 23), outperforming the S&P/ASX 200 index by almost 1 per cent. With the portfolio 65 per cent invested, this is the kind of growth we would expect in a rising market.
The week’s gains were spread across the portfolio. In particular, DWS continued its strong run as investor sentiment improves toward IT services, while a market update spurred AMA Group to new highs.
Today we reiterate our buy rating on AMA Group and increase our valuation from 90 cents to $1.07. The firm is well placed to benefit as it consolidates the fragmented market for vehicle accident repair. You can read our update on AMA here.
-- Tim Dohrmann
Income First portfolio update
The Income First model portfolio has performed well as markets have lifted this week, with ARF, DWS and VRT continuing to post solid outperformance. That said, DSH continues to drag on the overall performance and is lacking a positive catalyst to break the poor sentiment. DSH is holding its AGM this week on Wednesday (October 28), and I will be watching closely for a quarterly trading update.
Overall, the portfolio is near a break-even point at present, in a market that is down around 2 per cent since the portfolio inception. Our intention is to continue to add to the portfolio in order to lift the expected yield on the initial investment.
In that light, we are adding an investment this week (based on the open price on Tuesday October 27), with an initial 6 per cent weighting in Tatts Group (TTS). The company offers a solid defensive gaming exposure providing the portfolio with a bit more balance. While TTS is fully valued by the market in terms of valuation, there are potential upside catalysts in the coming 12 months, and I maintain a buy recommendation and positive view on the company’s ability to lift its dividends in FY16 and beyond. Read more here.
-- James Samson
LIC model portfolio
At market open tomorrow the LIC model portfolio will add a further $5,000 (5 per cent of starting value) to its existing position in Thorney Opportunities Ltd (TOP). It appears the market has started to pay attention to the movements of the underlying stocks in the portfolio.
Despite the increase in TOP's share price it is still trading at a discount to the last reported NTA of $0.552 on September 30. TOP's higher weighted positions such as AMA, TPE and SSM have all performed extremely well since then, with growth in the share prices of 13.83 per cent, 22.5 per cent and 18.18 per cent respectively. Some holdings have pulled back but for the most part these have been smaller positions.
At this point in time I am anticipating further NTA growth when TOP’s next NTA update is announced mid-November.
-- Mitchell Sneddon
International model portfolio
There are no changes to the International model portfolio this week.