Shine: good chance of a significant positive catalyst
Listed law firm Shine Corporate (SHJ) has been a good performer in recent months, and we think is approaching a potential positive catalyst event. Firstly, to briefly cover the company’s background for those unfamiliar, it operates in two segments: Show More
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Upgrade cycle continues for Codan
Technology company Codan (CDA) has been in an upgrade cycle for the last two years. Last week it announced yet another upgrade to guidance, which was ahead of previous expectations as well as consensus. Even after a big price move, it trades on an undemanding multiple, and with multiple drivers... Show More
Growth vs Value in Australian Small Caps
Growth vs value is a well-documented discussion in stock investing. It describes two fundamental approaches or styles to investing where in a basic sense, the growth approach seeks to invest in companies that exhibit strong growth characteristics (whether this be in the sales, earnings and/or cash flow of a company),... Show More
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Resource stocks haven't run their race yet
Over the past quarter, much of the small-cap index outperformance over large caps has been due to the excellent returns of small resource companies. Given their cyclical nature, is that a reason to look elsewhere? The following note makes it clear that we think not. Show More
Hi AD. Flinders does hold a position in SHJ in our Emerging Companies Fund. Given the size of the class action and the several years that it has been running for, I would estimate about $20-30m is tied up in WIP and disbursements (all fully funded by SHJ, as opposed to a disbursement funder or litigation funder). So in a positive scenario, they would recoup this amount fully. Additionally, SHJ would enjoy a cut of the total proceeds of any damages awarded, whatever that may be, as payment for their services. As I mentioned, a number of similar cases globally have started to settle in the tens of millions of dollars.
Rudi, thanks for your note. I’ll have to respectfully disagree with you here on several fronts. Firstly, I think it’s incorrect to say that the charts are ‘full of noise’ as they are constructed by a reputable and well credentialed provider of indices globally (MSCI). Secondly, while you are correct that there are small cap resources and mining services companies in the Growth index, they also exist in the Value index. I cannot explicitly talk to the composition of those indices as I don’t have access, but to give you an idea, I do have access to the S&P/ASX Small Ordinaries universe and the ‘Resources’ component of that index is currently around ~23% of the index. In fact, when you add other ‘domestic cyclical’ sectors such as media and retail to the mix, cyclical companies make up ~60% of the index! That is, the small cap universe is heavily populated by cyclical companies. As an Australian small cap manager, I believe your suggestion to exclude those stocks to get a more accurate picture is incorrect. As I mention in the piece there are several drivers of growth (organic, acquisitive, and cyclical), all legitimate – we just have to be acutely aware what type of growth we’re dealing with and value these companies appropriately. As you invest in ‘non-cyclical growth’ companies only, of course your returns look different to these charts. Hope the above details clarify a few things for you.