Small-cap fund managers believe these stocks have greater earnings certainty and are undervalued at current prices.The litigation funder is akin to a fund manager in that it manages a portfolio of funds that have been raised from external investors to back legal cases.
Biddle sees it differently. He believes Autosports will continue earning elevated profits until car supply normalises. “There is no doubt that its profits will normalise at some stage,” he says. “But the strong profitability of the company enables debt reduction, corporate activity and the payment of strong dividends.”He says Autosports’ dividend remains compelling. In August, Autosports declared a 9¢ fully franked dividend for a total dividend of 16¢ for the year.
At 60¢ a share, Lindsay trades on a forward price-earnings multiple of about seven times. “Lindsay looks undervalued given its potential for higher earnings growth in the next few years,” says Ivers. “The business is in an earnings upgrade cycle.”The printing and marketing communications company bought Salmat’s catalogue-distribution business in 2019 and recently acquired Ovato, a printing business competitor, after the Australian Competition and Consumer Commission approved the deal.
Black is not deterred by Propel’s high trailing PE of about 30 times. “Investors shouldn’t be afraid of high PEs for companies that can sustain high earnings growth. Propel can continue to deliver double-digit earnings growth each year through acquisitions, in what is still a fragmented funeral market.”Investors who expect the frequency of natural disasters to increase during climate change could consider Johns Lyng Group.
“Hurricane Ian, one of the deadliest US storms in years, could prove a record catastrophic event for Johns Lyng given the extent of property damage,” says Arden Jennings, co-portfolio manager of Ausbil Australian SmallCap Fund.After rallying last year, Johns Lyng has fallen from a 52-week high of $9.37 to $6.52. Ausbil used this price weakness to add to its position in the stock.