Matthew Kidman: The two best times to make money in markets are coming

Matthew Kidman says we’re in one of the two best times to make money in markets — and he’s backing small caps to lead the charge.
James Marlay

Livewire Markets

When Centennial Asset Management’s Matthew Kidman presented at Livewire Live in 2024, he argued that markets were deep into a structural bull run. A year later, he’s standing by that call – and he’s still bullish.

In this conversation, Kidman explains why he believes we’re in one of the best times to make money in markets, what could bring the rally undone, and how he’s positioning Centennial’s Level 18 Fund to stay nimble. He also shares the story behind his first 10-bagger and the standout management teams on the ASX he’s backing to keep delivering.

“The first six months of a recovery after a huge fall is better than the last six months of a bull market. They’re the two best times to make money – the top and the tail.”

Why the bull market still has legs

Kidman has looked closely at the history of markets to understand how long major uptrends typically last. His analysis shows that structural bull markets tend to run for around 14 to 15 years on average. With this one now well past that mark, he believes we’re in the late innings – but not at the end just yet.

“Equity markets are exploding all over the world,” he says. “The NASDAQ’s up 24%, the small ordinaries are up 20%, Europe’s even stronger, and Japan’s in the high teens. That’s what happens at the back end of a bull market.”

He points out that exuberance isn’t limited to equities. Gold and crypto are both rallying as investors chase momentum rather than fundamentals. 

“People are not buying gold on fundamentals, they’re buying it because they think it’s going to go up,” he says. “That’s classic bull market stuff.”

Kidman sees the key ingredients of a bull market still firmly in place: falling rates, steady government spending, and a powerful thematic to drive investment – this time, the AI boom. 

“You always need a story where people say it’s different this time,” he says. “AI has accelerated activity and driven a global CapEx boom, especially in data centres.”

Governments are helping too. “Everyone talks about restraint, but very few are doing it,” he says. “There are billions and trillions more being spent. That’s all positive, and the next couple of years look very, very good for equities.”

He concedes valuations are stretched but says they rarely matter at this stage of a cycle. “Valuations only really matter after the fall,” he says. “They’ll keep you out of the market when it’s still running.”

Kidman believes we’ve entered what he calls “party mode.” Investors should enjoy it – but know it won’t last forever.

Matthew Kidman, Principal and Portfolio Manager, Centennial Asset Managemen
Matthew Kidman, Principal and Portfolio Manager, Centennial Asset Management

From 90% cash to fully invested

In the Level 18 Fund, Kidman has the flexibility to move up and down the market-cap spectrum, hold cash and go short. That agility is central to how he manages risk and opportunity.

“In 2021 and 2022, when rates went through the roof and small caps got belted, we migrated into larger caps,” he says. “Now it’s the opposite. It’s a risk-on market, so we’re back into mid and small caps.”

He’s especially focused on sectors benefiting from domestic spending: defence, energy transition, and infrastructure in the lead-up to the Brisbane Olympics. "Now, people underplay the Olympics because it’s not in their face yet, but as of the middle of next year, contracts are going to be handed out.”

Kidman also sees signs that housing has quietly stabilised. “There’s a housing shortage, and the cost pressures that made development unprofitable are slowly easing,” he says. “That’s another reason to like the domestic economy – and small caps are the best way to get exposure.”

During COVID, the fund was almost entirely in cash. Today, it’s nearly the reverse. 

“We were the equivalent of 90% cash,” he says. “Now we’re about 90% invested. In bull markets, we’ll run 90–95% long with very few shorts.”

He’s also watching the IPO market start to stir. “We think there are five or six lined up before Christmas, maybe more,” he says. “As prices rise, sellers reappear.”

Kidman’s first 10-bagger

Every investor remembers their first big winner, and for Kidman, it came from an unexpected corner of the market.

SKS Technologies (ASX: SKS) was a little commercial electrical company out of Melbourne,” he recalls. “They’d never really made any money. Then we realised data centres require a lot of electrical work.”

After meeting CEO Matthew Jinks and his team, Kidman saw a clean balance sheet, improving cash flow, and a structural tailwind few were paying attention to. Centennial backed them early, and the stock went from a $35 million microcap to roughly ten times that size. “I’ve never had a 10-bagger,” he laughs. “SKS is as close as I’ve come. They’ve done a fantastic job.”

He says that kind of execution – disciplined, adaptable management – is what defines the best small caps. Among the teams that stand out to him:

  • SRG Global (ASX: SRG) – “They’ve done a great job transforming from a cyclical contractor to a recurring-revenue business.”
  • ZIP (ASX: ZIP) – “Cynthia Scott rebuilt the business after a near-death experience and executed brilliantly.”
  • Codan (ASX: CDA) – “They’ve worked their balance sheet hard and evolved into a stronger industrial tech story.”
  • Generation Development Group (ASX: GDG) – “Grant Hackett and his team have evolved that business and continue to innovate.”
  • Pinnacle (ASX: PNI) – “Ian Macoun has built a distribution powerhouse in one of the toughest environments for active managers.”

Kidman says this recent period has produced an unusually strong crop of small-cap leaders — management teams that execute well, adapt quickly, and ultimately drive the kind of performance that makes small caps such fertile ground for stock pickers.

Stay bullish but stay close to markets

Kidman’s optimism doesn’t mean complacency. He’s quick to remind investors that markets can turn faster than they expect. “The first six months of a recovery after a huge fall are better than the last six months of a bull,” he says. “But it happens overnight – you’ve got to stay close to the market.”

That flexibility is built into his process. “We can go big cap, defensive, to cash, or even short,” he says. “Our analysis shows we only capture about 31% of the downside in a fall. That’s the benefit of being nimble.”

The bigger risk, he warns, is complacency about central banks. 

“Most people now think there’s a backstop – that they’ll step in whenever things get shaky,” he says. “That kind of thinking breeds complacency.”

While Kidman agrees that liquidity has softened market cycles, he doubts it will last forever. “If there’s a misstep, things could go very wrong,” he says. “The trigger might be government debt, leverage, something else – you never know. But there’s always something.”

For now, Kidman is happy to stay invested, but he’s keeping a watchful eye. “I’m bullish,” he says. 

“History says this phase can run longer. But when it turns, it can last a long time. Stay long, stay close, and be ready.”

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James Marlay
Co Founder
Livewire Markets

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