8IP Australian Small Companies aims to outperform the S&P/ASX Small Ordinaries Accumulation Index over rolling 5 year periods. The Investment Manager will do so by seeking to invest primarily in companies with a multi-year competitive advantage, turnaround situations or under-researched companies.
April saw local and global equity markets rally with the fund returning 4.08%, +1.31% against the benchmark, which posted a return of 2.78%. Our best performers were Cettire, Telix Pharmaceuticals and Strike Energy. Cettire (CTT, +33.56%) returned to favour after a few of months of underperformance. There was no company specific news, although we did note an increase in web traffic which should bode well for the company’s top line growth. Telix (TLX, +47.10%) rallied after releasing an impressive March quarterly result.
Total revenues were up 27% YoY, of which ILLUCIX sales were up 31.1% QoQ. As a result, the market rebased their expectations upwards for the remainder of CY23 and as such the company experienced a well-deserved re-rate. Strike Energy (STX, +26.67%) traded firmer after advising the market of its completion of initial engineering at South Erragulla for its modular plant.
This will provide an initial 40 TJ/d to support production from its existing reserves. The company also announced the successful refinancing of its $153 million debt facility with Macquarie Bank. Our worst performers were our small positions in Nova Minerals, AMA Group and Hartshead Resources.
What is 8IP Australian Small Companies 8IP Australian Small Companies is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Small Cap Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The 8IP Australian Small Companies has Assets Under Management of 13.90 M with a management fee of 1.2%, a performance fee of 0.00% and a buy/sell spread fee of 0.8%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the 8IP Australian Small Companies has returned -5.04% in the last month. The previous three years have returned 2.22% annualised and 22.49% each year since inception, which is when the 8IP Australian Small Companies first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since 8IP Australian Small Companies first started, the Sharpe ratio is 0.12 with an annualised volatility of 22.49%. The maximum drawdown of the investment product in the last 12 months is -15.34% and -56.92% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The 8IP Australian Small Companies has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of -8.75% and -1.91% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. 8IP Australian Small Companies has produced Alpha over the Domestic Equity - Small Cap Index of -0.68% in the last 12 months and -0.2% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Small Cap Index category, you can click here for the Peer Investment Report.
What level of diversification will 8IP Australian Small Companies provide?
8IP Australian Small Companies has a correlation coefficient of 0.91 and a beta of 1.23 when compared to the Domestic Equity - Small Cap Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on 8IP Australian Small Companies and its peer investments, you can click here for the Peer Investment Report.
How do I compare the 8IP Australian Small Companies with the ASX Index Small Ordinaries Index?
For a full quantitative report on 8IP Australian Small Companies compared to the ASX Index Small Ordinaries Index, you can click here.
Can I sort and compare the 8IP Australian Small Companies to do my own analysis?
To sort and compare the 8IP Australian Small Companies financial metrics, please refer to the table above.
Has the 8IP Australian Small Companies been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in 8IP Australian Small Companies?
If you or your self managed super fund would like to invest in the 8IP Australian Small Companies please contact Level 34, 1 Eagle Street, Brisbane, QLD 4000 via phone +61 7 3184 9118 or via email enquiries@8ip.com.au.
How do I get in contact with the 8IP Australian Small Companies?
If you would like to get in contact with the 8IP Australian Small Companies manager, please call +61 7 3184 9118.
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the 8IP Australian Small Companies. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 March saw equity markets finish mixed with our local market softer. The fund returned -1.14% after fees, -0.42% against the benchmark which posted a return of -0.72%. Our best performers were Liontown, Westgold and Bellevue Gold. Liontown (LTR, +89.71%) increased substantially towards the end of March after the company announced it had received a non-binding indicative proposal from Albermarle (NYSE: ALB) to acquire the company at $2.50 per share (a 63.9% premium to last close). This followed prior proposed bids received in October 2022 and March 2023 at $2.20 and $2.35 respectively.
Performance Commentary - February 28, 2023 February saw local and global equity markets correct with the fund returning -3.87% after fees, -0.17% against the benchmark which posted a return of -3.70%. Our best performers were AUB, HUB24 and Ridley. AUB (AUB, +17.44%) performed strongly after releasing an 8.5% beat against market expectations for their 1H23 net profit result and upgrading full year guidance for a second time. The result was assisted by positive trading conditions and the company’s recent acquisition, Tysers, which performed ahead of expectations.
HUB24 (HUB, +11.33%) continued its upward trajectory reporting a strong 1H23 result. Whilst the result was broadly in line with consensus expectations, top line growth surprised to the upside driven by higher-thanexpected Funds Under Advice (FUA). The company continues to deliver on its stated goals, and we remain favourable on the long-term growth thematic for the platform division.
Ridley (RIC, +13.70%) traded positively after releasing its 1H23 result. All metrics were a beat to expectations with Revenue (+25& YoY), EBITDA (+13% YoY) and NPAT (+21% YoY). The outlook for the business was also firm with 2H23 EBITDA expected to improve on the prior period. Our worst performers were Westgold Resources, PWR and Global Lithium.
Westgold (WGX, -21.81%) traded weaker on no company specific news, however, gold, was softer (-5.58%) and compounding this was the weakness in the AUD against the USD (-4.66%). These moves were somewhat driven by higher cash rate expectations being priced in to curb persistent inflationary pressures.
Performance Commentary - January 31, 2023 January saw local and global equity markets rebound strongly with the fund returning +5.46% after fees, -1.09% against the benchmark which posted a return of +6.56%. Our best performers were Pro Medicus, De Grey Mining and Boss Energy. Pro Medicus (PME, +20.97%) outperformed considerably throughout the month signing two new deals worth $A37 million. These contracts reflect increasing organic sales momentum within the business and further validate our view that the company is one of the highest quality growth investments in our universe.
De Grey Mining (DEG, +15.95%) traded strongly benefiting from a higher gold price (+6.52%) and weaker US dollar (- 3.42%). The company also released its December quarterly report which showed the company is on track to complete its DFS in mid-2023. Boss Energy (BOE, +20.66%) bounced after being sold off heavily the previous month helped by a firmer uranium price (~+4.38%). The company also released its December quarterly which showed that the restart of the Honeymoon mine is on time and on budget with first production targeted in 4QCY23.
Our worst performers were Austal, OFX Group and Jervois.
Austal (ASB, -20.19%) sold off heavily after announcing a disappointing and unexpected downgrade to earnings. The reduction was on the back of increased costs in the construction of US T-ATS vessels. Whilst the company is engaging in cost recovery, the probability of this occurring is difficult to quantify, and additional business is maturing which may see margin risk. Given this we have since exited our position.
Performance Commentary - December 31, 2022 December saw local and global equity markets (ex. Hong Kong) reverse November’s rally and end 2022 on a negative note. The fund returned -5.13% after fees, -1.40% against the benchmark which posted a return of – 3.73%. Our best performers were Chalice Mining, St Barbara and Red 5. St Barbara (SBM, +28.10%) and Red 5 (RED, +28.13%) both benefited as the U.S. Dollar Index continued to decline (- 2.53%) and the underlying gold price appreciated (+3.77%).
In corporate news, SBM announced the company will merge with Genesis Minerals (GMD). RED provided an incrementally positive update declaring commercial production at their King of the Hills (KOTH) operation and providing positive second half fiscal 2023 production guidance numbers. The company also announced high-grade drilling results at their Darlot mine. Chalice (CHN, +18.64%) continued to rally after announcing promising mineralisation at the company’s Hooley Prospect. Additionally, underlying commodity prices (Nickel +14.81%, Copper +2.31%, Platinum +3.37%) were all firmer. Our worst performers were Life360, Johns Lyng and Ioneer. Life360 (360, -22.24%) continued its poor share price performance selling off aggressively throughout the month. There was no company news to attribute the weakness, although, general risk off sentiment and marked increases in bond yields meant current loss-making companies such as Life360 suffered. John Lyng (JLG, -15.09%) was weaker following an unexpected management selldown which was taken poorly by the market.
Fundamentally, the company has reiterated earnings guidance, and by all accounts the business is still performing strongly. Ioneer (INR, -33.91%) sold off strongly primarily because of the correction in underlying lithium benchmark prices. The sentiment towards the sector continues to gyrate, the current negative sentiment historically has provided an attractive point to add to our holdings in those companies which are being indiscriminately sold.
Performance Commentary - November 30, 2022 November saw local and global equity markets continue to rally. The fund returned +2.24% after fees, -2.69% against the benchmark which posted a return of +4.92%. Our best performers were Bellevue Gold, De Grey Mining and PWR.
Bellevue Gold (BGL, +48.65%) and De Grey Mining (DEG, +21.70%) benefited as the U.S. Dollar Index declined (- 4.96%) and the underlying gold price appreciated (+7.27%). Both companies also released positive news at their respective mining projects. BGL provided an update of its grade control drilling with a +17% increase in overall ounces and a +25% increase on overall grade. DEG reported significant positive results from drilling within the ‘Great Hemi Corridor’ in Western Australia. PWR Holdings (PWH, +16.52%) continued to perform strongly after announcing the appointment of Mr Kym Osley as a non-executive director. Mr Osley has deep experience in the defence industry, indicating PWH’s increased focus on the vertical. Additionally, the company also held its Annual General Meeting (AGM), although, no new information was released.
Our worst performers were Elders, Select Harvests and Life360. Elders (ELD, -20.62%) sold off aggressively after reporting a strong Fiscal Year 2022 result. The result was in line with expectations; however, the market was focused on the unexpected announcement that longstanding and very highly regarded CEO Mark Ellison will retire by November 2023.
Performance Commentary - October 31, 2022 October saw local and global equity markets (ex. HK/China) rebound following a weak September. The fund returned +5.28% after fees, -1.17% against the benchmark which posted a return of +6.46%. Our best performers were Life360, HUB24 and PWR Holdings. Life360 (360, +39.60%) traded positively throughout the month, particularly after announcing price increases on their premium monthly plans. Whilst the benefit is not expected this calendar year, demonstrating pricing power with limited churn is impressive in the current environment. HUB24 (HUB, +21.48%) reported strong numbers for their first quarter of fiscal year 2023. The company recorded $3.0bn of net flows, outperforming peers. The result was impressive given it was delivered during a volatile period for investment markets. Additionally, the company was able to negotiate better than expected terms with new cash deposit partner Bank of Queensland. PWR Holdings (PWH, +18.65%) recovered after being sold off late the previous month, ostensibly on currency volatility. The main perceived headwind was a depreciating British pound (GBP); however, this volatility has stabilised, and we note that the company hedges its exposure. The core business remains strong.
Performance Commentary - September 30, 2022 September saw risk off sentiment return to both global and local equity markets. The fund returned -8.31% after fees in September, +2.89% against the benchmark which posted a return of – 11.20%. Our best performers were Megaport, De Grey Mining and Select Harvests. Megaport (MP1, +7.3%) recovered after considerable underperformance last month. News flow was light, and the current share price movement suggests the market is waiting to digest the Q1 2023 update, which is scheduled for release towards the back end of October. De Grey Mining (DEG, +6.12%) performed strongly after releasing a better-than-expected Pre-Feasibility Study (PFS) for their Mallina Gold Project located in the Pilbara region of Western Australia. The PFS saw improvements over the original scoping study, particularly in the production profile. The company’s economics and size of resource are attractive which may entice an outside group to pay up for control of this asset. Select Harvests (SHV, +6.05%) traded positively after releasing a crop and pollination update. The company noted weaker crop production in both California and Spain have resulted in stronger market pricing for almonds and importantly the company has been able to optimise bee pollination of their orchards for their 2023 crop. Our worst performers were AUB, HUB24 and Johns Lyng.
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