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Speaker 1: Welcome to Fear and Greed Q and A, where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm Sean Aylmer. Small caps have bounced back in a

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Speaker 1: big way this year, well a reasonably big way this year.

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Speaker 1: So what should investors be looking for beyond the large

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Speaker 1: caps and household names on the ax? Remember this is

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Speaker 1: general information only, and you should seek advice tailored to

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Speaker 1: your circumstances before making investment decisions. And Andrew Mitchell is

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Speaker 1: co founder in senior portfolio manager at O Fear Asset Management. Andrew,

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Speaker 1: Welcome to Fear and Greed Q and A.

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Speaker 2: Thanks very much, Sean, pleasure to be here.

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Speaker 1: Is it finally the year of small caps? Because I

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Speaker 1: think we've been thinking about a bit a few years now.

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Speaker 1: We've been saying it's small caps year, But it looks

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Speaker 1: like might finally have arrived.

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Speaker 3: Well, I think I think we've seen a lot of it.

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Speaker 3: Small caps are going crazy and you're seeing you're seeing

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Speaker 3: money really up the risk curve. Obviously, drones and anything

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Speaker 3: military rarer Trump opens his mouth and companies that didn't

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Speaker 3: didn't we none of us knew existed at all of

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Speaker 3: a sudden big big index weights in the small caps index.

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Speaker 3: So there's certainly a lot of greed that's creeping into

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Speaker 3: small caps. In the US, I think a lot less so,

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Speaker 3: but yeah, in Australia there's a lot of money flowing

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Speaker 3: into small caps at the moment.

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Speaker 1: Okay, I mean I think you were alluding them to

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Speaker 1: drain Shield, which I think is actually the best performing

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Speaker 1: a SX two hundred stock over the past year or so?

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Speaker 1: Is it sexral Is it kind of just the favor

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Speaker 1: of the month, is it? I mean there are things

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Speaker 1: like Life three sixty drain Shield miles away from each other,

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Speaker 1: but both doing really well. I'm wondering whether there's common

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Speaker 1: themes or not.

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Speaker 3: Well, yeah, like I don't know enough about drone Shield

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Speaker 3: to really give a proper analysis of it. But there's

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Speaker 3: other companies like iperian X, Eos. These companies have been

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Speaker 3: given huge valuations and it's up to them to show their.

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Speaker 2: Deserve it. Now.

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Speaker 3: Chances are, i've been around, there'll be a couple of those,

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Speaker 3: maybe not in that list, but you know, the list

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Speaker 3: goes on and on that don't live up to the height.

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Speaker 3: Because there's huge expectations. I'm hoping these companies do, because jeez,

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Speaker 3: won't it be great for Australia that we have some

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Speaker 3: more leaders in these fields? And you know, Jron Shield

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Speaker 3: has revenue, it's winning contracts, so I can't tell you

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Speaker 3: it's it's not real, but there's a lot of expectations

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Speaker 3: building in for a few of these sort of sectors

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Speaker 3: around battery technology and magnets like the rareers, also military,

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Speaker 3: and you know, the spending. A lot of this really

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Speaker 3: just comes coming from Trump, you know, like it's the

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Speaker 3: world has to turn on its head when he speaks effectively.

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Speaker 3: And now there's a new agenda.

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Speaker 1: Okay, so let's run through a small caps or mid

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Speaker 1: size caps that you that you like. Give me the

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Speaker 1: first one.

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Speaker 3: Look, you know, I think probably about eighteen months ago

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Speaker 3: i wrote I was asked by the AFR what I

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Speaker 3: think the next ten bagger is on the AX and

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Speaker 3: I said Life three sixty. And I got a lot

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Speaker 3: of phone calls about it because it was already up

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Speaker 3: fifty percent at that stage, from just from different brokers

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Speaker 3: saying are you serious, and yeah, other fund managers like, oh,

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Speaker 3: why'd you say that sort of thing? It's now I

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Speaker 3: think up three times since I said that, and sort

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Speaker 3: of only has to do that again and we're at

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Speaker 3: the ten times. This is a platform business. Right now,

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Speaker 3: they're launching their pet tracker and to give you an

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Speaker 3: idea of what a platform business does, They've got eighty

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Speaker 3: million users around the world. They know people who go

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Speaker 3: to dog parks, who go to pep barn all. People

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Speaker 3: have just uploaded their pets onto the tracking device they

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Speaker 3: have so you can keep should say what three C

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Speaker 3: three sixty does, I'm sure most of your listeners know,

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Speaker 3: but so people can see where their friends, their family

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Speaker 3: and their children's and their dogs, their children and their

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Speaker 3: children are and now they've got GPS tracking for pets.

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Speaker 3: It's been selling out. But I think the thing that

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Speaker 3: why I like a particular point in time and I've

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Speaker 3: bought some stock today is because what is happening. The

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Speaker 3: biggest story is iOS Apple. People are moving off when

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Speaker 3: you buy when you purchase on an app away from

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Speaker 3: that and Life three sixty is making this pet tracking

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Speaker 3: device available for people who sign up to memberships on

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Speaker 3: their website. We haven't seen this before. They are now

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Speaker 3: promoting people on the website. This saves some thirty percent upfront.

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Speaker 3: Think about the platform they know the dog owners, they

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Speaker 3: know the cat owners. They can now save thirty percent

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Speaker 3: by directing to them to buy this I think a

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Speaker 3: cost my the estimates around forty to fifty dollars. They

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Speaker 3: around forty dollars US. They can sign people up for

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Speaker 3: one hundred and eighty dollars membership and they're actually saving

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Speaker 3: saving money on that thirty percent that they're not having

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Speaker 3: to pay to Apple in year one and then fifteen

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Speaker 3: percent thereafter. So I think the market's going to really

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Speaker 3: love that when they work this out. And the next

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Speaker 3: thing they're rolling out is agecare, so people with an

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Speaker 3: elderly parent, they're going to have a device so they

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Speaker 3: can be able to keep track. This is an industry

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Speaker 3: that charges huge fees for this. It's using the technology

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Speaker 3: off PET, and if they show the platform works to

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Speaker 3: those eighty million users for PET, everyone's just going to

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Speaker 3: roll forward and say what about age Care? So still

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Speaker 3: really like Life three sixty, even though now it's not

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Speaker 3: trading on four time sales when I said it before

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Speaker 3: it's trading on something like twelve thirteen.

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Speaker 2: I still like that one.

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Speaker 1: Okay, next one, So Light three sixties number one, And

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Speaker 1: notwithstanding the evaluation.

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Speaker 2: I wouldn't say it's my number one. No, maybe I

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Speaker 2: will say it's my number one.

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Speaker 3: It's you brought it up in the conversation before, so

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Speaker 3: I start to talk about it, and I was buying

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Speaker 3: it today, so let's call it up there.

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Speaker 2: So up there, No, it's certainly up there. Another one though, sure.

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Speaker 3: Bravura is for people who don't know administer wealth. The

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Speaker 3: big wealth advisors in the UK, a huge proportion of

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Speaker 3: them used Bravura for their administration software. Now this company

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Speaker 3: is it's got some very very sticky software right and

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Speaker 3: in the words of some people who run the business

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Speaker 3: who have come from one hundred billion dollar software company,

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Speaker 3: we have never seen software that is so mission critical

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Speaker 3: of what Brevua has. You cannot operate these huge UK

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Speaker 3: wealth managing bnage businesses like a b n y Melon

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Speaker 3: cannot operate. It's very hard to switch off these things.

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Speaker 3: This company, I think, Constellation Software is now really running

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Speaker 3: the people, the family office of Constellation Software is now

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Speaker 3: really running this business. Dexter, who's on the border Constellation Software,

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Speaker 3: is very actively involved and he's one of the founding

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Speaker 3: sort of executives of the business. The market's looking at

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Speaker 3: it at margins now I think sort of guiding to

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Speaker 3: twenty three percent. I think they go a lot higher

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Speaker 3: than this. They'll keep doing taking costs out. But what

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Speaker 3: nobody's talking about is I think they're going to do

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Speaker 3: some M and A because that's what Constellation Software does.

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Speaker 3: If you have mission critical software that sits at the

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Speaker 3: heart of these huge wealth managers, then there's all this

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Speaker 3: other software that links into it, and they will be able.

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Speaker 3: This is what Constellation Software does. You buy the good

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Speaker 3: ones and it's already linked into your software. Now you

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Speaker 3: have even higher switching costs, and you've got more to

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Speaker 3: sell to your customers, and you can probably take some

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Speaker 3: costs out and run them a bit better. I think

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Speaker 3: this is twelve, eighteen, twenty four months away, but that

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Speaker 3: will when that happens, and that's the Constellation Software playbook.

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Speaker 2: I think the market would get it. We'll get excited again.

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Speaker 1: Okay, we're almost out of time, but one more so.

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Speaker 1: We've got Life three sixty Revera solutions.

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Speaker 3: The third one, okay, i'll say baby bunting. We've done

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Speaker 3: very well out of this one recently. It's come off

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Speaker 3: Baby bunting for anyone who's got a child you go

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Speaker 3: there and you buy your bram and all those sort

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Speaker 3: of things, but it really had a tired format. The

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Speaker 3: new CEO has come in and revamped the format, and

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Speaker 3: I say to the people watching this, go and actually

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Speaker 3: walk in to like Marrabanong Jeps Cross the new format

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Speaker 3: of these stores.

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Speaker 2: It's phenomenal.

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Speaker 3: They've disclosed what sort of sales they're doing. It's a

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Speaker 3: huge uplift. And if they can continue to roll out

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Speaker 3: with getting this lift up, with each lift, with each store,

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Speaker 3: we're all going to do very well. And that multiple

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Speaker 3: comes right down in a couple of years to low low,

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Speaker 3: sort of double digit style multiple, and I think that

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Speaker 3: they can surpass the margin expectations of the market.

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Speaker 1: Fantastic very quickly. Is there anything steering clear of obviously

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Speaker 1: those three are very different, so you're obviously picking stocks,

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Speaker 1: But are there any areas that you just don't think

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Speaker 1: you want to go near at the moment?

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Speaker 3: Well, the area is I don't go nearer ones that

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Speaker 3: I don't understand, So like technology, Like when I say technology,

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Speaker 3: sort of things that you know, I've got a huge

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Speaker 3: amount of expectations that are difficult to understand and you

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Speaker 3: won't ever know I'm just not even I've I'm sure

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Speaker 3: you understand Sean.

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Speaker 2: Like and you'll have it as well. And everyone. It's

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Speaker 2: like risk return and time.

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Speaker 3: The amount of time it will take me to work

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Speaker 3: out if drone shields are buy or not.

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Speaker 2: It's not. It's just so much time. I can't do that.

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Speaker 2: So you know what is it? Warren Buffett.

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Speaker 3: I'd rather step over one foot bars than leap over,

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Speaker 3: than try to leap over a ten foot whole sort

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Speaker 3: of thing.

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Speaker 2: That's what I'm trying to do.

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Speaker 3: The easy steps, So expiration companies, biotechs, those things. We

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Speaker 3: don't look at things with very very lofty expectations that

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Speaker 3: I'll find it difficult to see them deliver into.

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Speaker 1: Andrew, thank you for talking to Fear and Greed.

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Speaker 2: Thank you very much for having michean.

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Speaker 1: That was Andrew Mitchell from OH Fear Asset Management. That's

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Speaker 1: op H I r O Fear Asset Management. Worth a

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Speaker 1: look at the website. Remember this is general information only

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Speaker 1: in your If you're going to invest, get professional advice

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Speaker 1: Taylor to your circumstances before making decisions. If you've got

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Speaker 1: something you'd like to know, then send through your questions

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Speaker 1: on LinkedIn Instagram, Facebook, or at Fearingreed dot com dot au.

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Speaker 1: I'm sure all, Matt, this is Fearing Greed Q and

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Speaker 1: DA