Investor Insights

If I were to characterise the domestic small cap market in just one word, it would be ‘dynamic. ’ It is truly dynamic in the sense that it is constantly changing and evolving which creates exciting opportunities for astute investors.

To invest successfully in small companies, you really need to know the people running the businesses. And in Gary Rollo and Dominic Rose, the Montgomery Small Companies Fund has two highly experienced fund managers well equipped to assess the leaders of ASX-listed small companies.

Montgomery Investment Management is pleased to announce the launch of its first Small Companies Fund under a new joint venture that welcomes respected fund managers Gary Rollo and Dominic Rose to the firm.

The share price of Challenger Limited (ASX: CGF) – Australia’s leading annuities provider – has declined by almost 50 per cent in the past 12 months. While the firm is clearly out of favour, I believe its long-term prospects could be better than the market is currently pricing in.

Over the last four years property prices in Australia peaked and reversed, homes listed for sale have plummeted and the share price of REA Group, Australia’s online property classified portal, has… MORE THAN DOUBLED! Sounds strange perhaps, so I have included the chart from Bloomberg below.

Twelve months ago, we saw compelling value in Telstra (ASX: TLS). Since then, its share price has shot up 40 per cent, and it may have further to run. In a market where it’s tough to find value, we think the healthcare business, Healius, could be the next company to outperform.

Is that all there is to a housing slump? Well, yes, according to REA Group, which recently reported a decent set of numbers for the year, and expects a significantly better residential listings market in the months ahead.

Reporting season is now underway and there have already been a few notable share price moves – JB Hi-Fi (ASX:JBH), REA Group (ASX:REA) and James Hardie (ASX:JHX) leading the way for some larger companies. Each stock had something in common, which was a relatively large short interest active in the names.

Reporting season can be brutal for businesses affected by cyclical factors, like the current residential building slump. But experience tells me it’s also a great time for investors to take note of out-of-favour companies that should rebound when the cycle turns up. Exclusive Content This is exclusive content to subscribers on rogermontgomery. com.

The U. S. housing market, after having staged a solid recovery since the depths of the financial crisis, is starting to show some signs of moderation. On the face of it, now would seem like the wrong time to be considering an investment in a company leveraged to the fortunes of the U. S. housing market.

With the market on a tear, bargains are hard to come by. But patient investors might soon find some joy in businesses exposed to the residential construction sector – potentially firms like Bingo and Nick Scali – whose share prices could come off as construction activity softens. Exclusive Content This is exclusive content to subscribers on rogermontgomery. com.

Roger joined Patrick Poke on Livewire’s podcast The Rules of Investing to discuss what “quality” really means to him, some lessons on late cycle investing from Buffett himself, and two outwardly-similar companies with very different long term prospects.