The low-risk approach to Aussie small-cap investing

The Rules of Investing

Livewire Markets

Small-caps are often thought of as being high risk, but that doesn’t have to be the case. With the right approach, it’s possible to maintain a moderate level of risk, while still producing outstanding returns.

This is exactly the approach that Richard Ivers, portfolio manager at Prime Value, takes in managing the Emerging Opportunities Fund. By focusing on high-quality businesses with relatively few risks and strong competitive positions, he’s managed to outperform the market in 87% of the months that it fell.

“A shorthand method for working out quality is that if you can work out where the earnings will be and have a high level of certainty on where they'll be in three to five years, typically, that means that it's a quality business. Such a business will be able to withstand all the pressures and issues that may come at it," Ivers says.

In this episode of The Rules of Investing podcast, he explains how his experience in the corporate world helps inform his investment decisions, we discuss a range of Australian companies across the finance, media, and beverage industries, and he details his low-risk approach to Aussie small-cap investing.

Time stamps and discussion topics:

  • 1:52 - Richard’s favourite episode of The Rules of Investing
  • 2:38 - His experience of travelling and how this has influenced his investment approach
  • 5:00 - The inception of Prime Value and their investment strategy
  • 8:21 - Why use an absolute return benchmark as opposed to a market benchmark?
  • 11:19 - The focus on getting the price right for long duration stocks and a case study on City Chic
  • 17:18 - How to assess risks in prospective investments?
  • 21:37 - Can one-off special events affect decision making?
  • 23:12 - Opportunities in the media industry on the back of significant structural change
  • 27:07 - Richard’s favourite companies within media
  • 28:17 - What is attractive about the list funds management sector?
  • 34:40 - The (albeit delayed) reopening trade - Which companies are primed to benefit
  • 40:55 - Richard answers our 3 favourite questions.

Book recommendation:

  • The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder. Available at Amazon and Booktopia.

Don't have time to listen? Prefer to read? Check out my colleague Angus Kennedy's written summary of the interview below:

Education
Big opportunities in small companies with Richard Ivers

The Prime Value difference

Prime Value Asset Management is a multi-award winning, boutique Australian investment manager with an impressive history of building wealth with investors since 1998. To find out more about the Prime Value Emerging Opportunities Fund click here or the 'CONTACT' button below.

Disclosure: The author/host owns shares in UMG and GNC.

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The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...

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