No lithium, no worries for this outperforming small cap manager

When volatility rattles markets, micro caps and small caps typically suffer the biggest drawdowns. But markets have a reliable habit of reverting to the mean sooner or later. That’s very good news if you’re investing in small caps, arguably, now!

This week’s guest is Matthew Booker, portfolio manager and co-founder at Spheria Asset Management. Matt’s managed small company portfolios for over 15 years, consistently outperforming the index.

The Spheria Australian Microcap Fund has outperformed the S&P/ASX Small Ordinaries Accumulation Index by over 7% per annum since inception, while the Smaller Companies fund has outperformed that same index by over 3% per annum. Just as importantly, they’ve managed to preserve capital and outperform the benchmark through the volatility of the past year. And he’s done it without lithium stocks!

We discuss:

where we are in the small cap cycle;
the opportunities Spheria are targeting;
capital preservation; and
the former market darling that’s back in business.

Timestamps

1:50 – Where we are in the small cap cycle
3:30 – Lessons from the past year
5:30 – Preserving capital
6:50 – Outperforming without lithium
10:00 – The best is ahead for small caps and microcaps
11:00 – Filtering down an enormous universe of stocks
12:40 – “Inverse broker” indicator
14:00 – Investing in “legitimate growth”
16:55 – Red flags
21:20 – Takeovers
23:00 – Outlook for M&A
28:00 – Return of an unloved market darling?
35:30 – A bottom-drawer stock (from New Zealand)

Note: This interview was recorded on Wednesday April 19, 2023.

Rules of Investing

Apr 21, 2023 • 38m

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