Fund manager picks top performing Aussie small cap stocks
A fund manager from an investment management firm specialising in small caps has picked some top performing Australian stocks to watch.
Speaking to The Capital Network’s Lelde Smits, MHOR Asset Management co-founder and fund manager Gary Rollo went through a quartet of stocks on his radar: Smart Parking (ASX:SPZ), Topbetta (ASX:TBH) Alliance Aviation Services (ASX:AQZ) and LiveHire (ASX:KVH).
“The reason for picking that one is that we believe fiscal 2018 will be Smart Parking’s breakout year, ” Rollo says, explaining his first pick. “By that I mean its businesses are positioned to deliver on the promises that they have been making for the last couple of years.”
Rollo says that Smart Parking’s financial result in 2018 will be demonstrative of the efficacy of the company’s business model.
“SPZ has two divisions,” Rollo says. “It has a management services division, and that is the thing that is going to deliver the earnings over the course of the next couple of years. But, it also has optionality in its technology division. This is a division where SPZ’s technology is allowing councils that have scarce assets in their parking resources to be managed on a real-time basis. And, we think that is an option that should crystallise over the course of the medium term.”
Rollo describes Topbetta Holdings as a “real disruptor” that has the potential to be a “unicorn-type stock.” “Topbetta is a gaming platform that is disrupting some of the large incumbent gaming players here in Australia,” he added.
Moving on to his next pick, Rollo describes Alliance Aviation Services as “a classic value play”. “They are a FIFO (Fly In Fly Out) operator,” Rollo says. “And, we can all see that the commodity price regime for Australia has changed. This business has created a lot of value through the downturn by restructuring its operations. And, investors really haven’t reflected that in its valuation framework.”
Rollo ends his round of picks with LiveHire, a tech company that provides a talent community from which companies can recruit personnel. “It is more efficient and it costs less money,” Rollo says. “And they are taking that process global. That is another disruptive technology play here in Australia.”
According to Rollo, MHOR focuses on small caps because they are an under-researched and potentially undervalued area of the market which can unlock value for investors.
MHOR looks at three main factors when picking a small cap: “the what, the who and the how”. The “what” is concerned with the value a company offers. Meanwhile, the “who” examines the personalities involved and the “how” explores the company’s strategy, resources and outlook.
MHOR’s other co-founder is James Spenceley, the former CEO of Australia’s fourth largest telco, Vocus Communications. MHOR invests in a diverse portfolio of smaller companies listed in Australia and New Zealand.