What if positive absolute returns could be made from the falling share prices of small companies?
The well-established First Sentier Investors Australian Small and Mid Caps team has extended its small companies long short strategy to retail investors for the first time
The strategy aims to make positive absolute returns from rising as well as falling share prices with the introduction short selling
Short selling involves borrowing shares and selling them, with the intention of buying them later at a lower price and returning them to the lender
Proceeds from selling the borrowed shares are used to reinvest in the team’s most favoured existing long positions as well as select micro caps with the potential for strong growth
The team’s preference is for resilient and highly cash generative companies with strong management teams who have a focus on long term value creation remains consistent
Revenue and earnings growth are typically expanding at their fastest point in the company’s formative lifecycle, which more mature companies can find difficult to replicate from a higher base.
On the flip side, there are also many poor-quality listed small companies that will fall victim to unfavourable market conditions or poor management decisions.
Breaking the shackles of the long only constraint means our experienced team can generate returns in stocks that may be over-valued and expected to underperform, at a time when market conditions are variable and unpredictable.
Investors should be aware that the use of short selling creates additional risk compared to a long only strategy.
Curious to learn more about opportunities in Small and Mid Caps?
This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website.
This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation.
The product disclosure statement (PDS) or Information Memorandum (IM) (as applicable) for the First Sentier Australian Small Companies Long Short Opportunities Fund ARSN 658 022 238 (Fund), issued by The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) (Perpetual), should be considered before deciding whether to acquire or hold units in the Fund(s). The PDS or IM are available from First Sentier Investors. The target market determination (TMD) for the Fund is available from First Sentier Investors on its website and should be considered by prospective investors before any investment decision to ensure that investors form part of the target market.
MUFG, FSI AIM, their respective affiliates and any service provider to the Fund do not guarantee the performance of the Fund or the repayment of capital by the Fund. Investments in the Fund are not deposits or other liabilities of MUFG, FSI AIM, their respective affiliates or any service providers to the Fund and investment-type products are subject to investment risk including loss of income and capital invested.
Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors.
To the extent permitted by law, no liability is accepted by MUFG, FSI AIM nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that FSI AIM believes to be accurate and reliable, however neither MUFG, FSI AIM nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of FSI AIM.
Copyright © First Sentier Investors
All rights reserved.