Microcap Manager Review March 2019

Mark Tobin

Coffee Microcaps

The majority of microcap funds continued their good start to 2019 and the majority of managers appear to have recovered some of the losses suffered in the final quarter of 2018. However, as a group microcap managers are trailing both comparable indexes and the performance of large-cap stocks in 2019.

The large drawdown in the last quarter of 2018 has pulled the majority of the funds negative on a 1-year basis or left them only marginally positive despite the good recovery exhibited in the first quarter of 2019.

The S&P/ASX Emerging Companies Index was within a bear's whisker of entering bear market territory for the calendar year 2018 with the index down 19.94% in 2018, but it was up a healthy 2.8% in March 2019 and up a total of 12.3% for the first quarter of 2019. Outpacing the performance of large-cap indexes but still trailing the S&P/ASX Small Ordinaries Index by a mere 0.3% over the quarter.

Winners & Losers

Some notable standout performers for March 2019 were OC Funds, Cyan and Saville Capital who all posted 3%+ returns for the month, handily outpacing their respective benchmarks. Indeed, the OC Micro-Cap Fund posted a return of 4.0% for the month of March 2019 which was well ahead of the indexes and other managers.

Some funds who didn’t quite fair as well. Most notably was the entire fund range from the Microequities Asset Management stable which saw negative returns across its 4 funds for March 2019. Given the team at Microequities employ a long term investment strategy these occasional poor months will occur over the course of their investment horizon.

Now, the usual caveat applies here in that looking at a single month performance figures in isolation a hard and fast metric to evaluate a fund managers performance. One needs to look at each manager's longer-term track record and indeed be cognizant of the strategy being employed by the manager given the current market dynamics. For example, a value strategy versus a growth strategy or the market’s appetite for large-cap stocks over microcap stocks as both these themes wax and wane over time but an adept fund manager should demonstrate alpha over a full market cycle.

Thus the accompanying table gives some more context to how various fund managers have performed over longer time periods.

Some Points To Note

Some data points for particular time periods may reflect as "N/A" or there is no data at all displayed for the following two reasons;

1. Some funds have not reported performance figures via their newsletters or website by the 15th of the following month which is our deadline for inclusion in this report. Even though all funds are daily dealing I might add.

2. Some funds do not report performance figures for that particular time period in their performance reporting.

I would advise readers to contact the relevant fund themselves should they wish to obtain the relevant data.


Mark Tobin
Analyst
Coffee Microcaps

I focus on ASX listed microcap and nanocap​ stocks which is​ anything from $10mil to $300mil market cap and everything​ in between. This truly​ is the under-researched​ part of the ASX. My hope is to bring you interesting microcap stocks and news.

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