Look at quality before valuation

Chris Prunty

QVG Capital

When we started the Ausbil MicroCap Fund in February 2010, we missed the bottom by about 12 months but in hindsight, it was still a fantastic time to start a smaller companies fund. Valuation multiples ranged from 8-12x PE and earnings were recovering so growth looked better than it does today. Fast-forward six years and earnings multiples are now in the high teens with growth as scarce as any time in the recent past. With the cash rate under 2%, it’s not hard to argue there’s plenty of scope to pay more for assets. Despite this, when approaching a new opportunity, we tend to think valuation should be one of the final, not first, steps in the investment process. First, you have to decide whether it’s a good business, whether management is capable, honest and aligned and what the future looks like for this business. If it’s a bad business with C-grade management or has a challenging outlook, we’d rather not play regardless of price.


Chris Prunty
Principal & Portfolio Manager
QVG Capital

Chris Prunty is a co-founder and Portfolio Manager at QVG Capital; a boutique investment management firm specialising in smaller companies. QVG manages money on behalf of high net worth individuals and institutions in a 'best ideas' portfolio of...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.