No lithium, no worries for this outperforming small cap manager

When volatility rattles markets, micro caps and small caps typically suffer the biggest drawdowns. But markets have a reliable habit of reverting to the mean sooner or later. That’s arguably very good news if you’re investing in small caps now.

This week’s guest is Matthew Booker, portfolio manager and co-founder at Spheria Asset Management. Matt’s managed small company portfolios for over 15 years, consistently outperforming the index.

The Spheria Australian Microcap Fund has outperformed the S&P/ASX Small Ordinaries Accumulation Index by over 7% per annum since inception, while the Smaller Companies fund has outperformed that same index by over 3% per annum. Just as importantly, they’ve managed to preserve capital, outperform the benchmark through the volatility of the past year, and achieved this feat without lithium stocks!

In this episode of The Rules of Investing, Booker and Livewire's David Thornton discuss:

• where we are in the small cap cycle;
• the opportunities Spheria are targeting;
• capital preservation; and
• the former market darling that’s back in business.

Note: This interview was recorded on Wednesday April 19, 2023. 

Timestamps

• 1:50 - Where we are in the small cap cycle
• 3:30 - Lessons from the past year
• 5:30 - Preserving capital
• 6:50 - Outperforming without lithium
• 10:00 - Why the best is ahead for small caps and microcaps
• 11:00 - Filtering down an enormous universe of stocks
• 12:40 - "Inverse broker" indicator
• 14:00 - Investing in "legitimate growth"
• 16:55 - Red flags
• 21:20 - Takeovers
• 23:00 - Outlook for M&A
• 28:00 - Return of an unloved market darling?
• 35:30 - A bottom-drawer stock (from New Zealand)

Managed Fund

Spheria Australian Smaller Companies Fund

Australian Shares

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Managed Fund

Spheria Australian Microcap

Australian Shares

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