Small-cap investing expert Luke Winchester from Merewether Capital joins Owen Rask for this exclusive investing discussion on management teams and ASX small-cap share investing.
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In this Investor Bootcamp episode on The Australian Investors Podcast, Owen and Luke dive into the exciting and often volatile yet fascinating segment of small company investing. After that, Owen and Luke talk about the importance of assessing management teams.
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Owen asked Luke to prepare his 5 favourite reasons why small company investing is compelling and the 3 questions he always asks management. Here’s what Luke Winchester said:
Luke’s 5 reasons to look at small caps:
- Less coverage from analysts and media commentary
- Simpler business models, usually only one product/service and geography
- Companies are usually underearning, so classic valuation metrics (P/E, DCF) don’t work well, forcing you to think deeper about business and valuation
- There is a bigger variance in outcomes, which means analysis can add more value (when correct!)
- It’s easier to access management, as most small-cap CEO’s are happy to chat about their business even with small retail shareholders.
Luke Winchester’s key questions for management are:
- Who are your competitors and why would customers choose them?
- What are the biggest challenges facing the business over the next year or two?
- How are you judging your performance internally and how can I track that externally?
Resources:
- Luke’s first appearance on The Australian Investors PodcastĀ
- Visit Merewether Capital
- Follow Luke on Twitter
- Follow Owen on Twitter
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Date recorded: 17th of May 2022
