Smaller companies have faced a wall of selling in the past 3 - 4 months as investors re position into banks and resources. Reporting season has provided an opportunity to assess the damage and to start scouring for opportunities. David Allingham from Eley Griffiths and Andrew Smith from Perennial share their views on the small companies universe following reporting season.
- It had been a brutal confession season leading into results so expectations were low and the low expectations were generally met
- Outlook statement suggest it is still pretty tough to 'make a buck' out there
- Small companies remain vulnerable to even the smallest 'misses'
- Mining services companies delivered the most positive set of outlook statements, there remain some pockets of value in this sector
- The volume of share price moves to the downside is throwing up opportunity to go looking at companies with beaten down share prices
- Potential for an inflation spike later in the year, high PE stocks will be particular vulnerable even if nothing changes with the business
- Balance sheets will come into focus as rates move higher. Avoid companies that are over geared
- The opportunity set in small companies has opened up following a swift rotation back to large caps (Bank/Miners)
To hear about some of the opportunities being identified in the latest episode of Buy Hold Sell. Watch Here