Outlook from Matthew Booker - Small Caps Manager

We are finding opportunities in sectors and companies that have been left behind because they are unpopular due to share price under performance or simply because they are unfashionable – objectivity is one of our key competitive advantages. We think the low valuation multiples provide protection as does the cash generative nature of many of these businesses. We have no inkling which direction the market is headed in the short to medium term although we remain concerned with systemic overvaluation in many sectors and the fact that generous liquidity underpinning many of these sectors might be tightening. We have seen a glimpse of this with Westpac withdrawing funding from the pay day lending sector and banks reducing lending to the investor housing market. This in addition to headwinds in the resources sector may have a run on impact on the broader economy and present challenges for earnings in the industrial sectors, albeit it is early days. To read more from Matthew Booker, Senior Portfolio Manager, Australian Smaller Companies click the (VIEW LINK)