1 00:00:03,430 --> 00:00:06,080 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,110 --> 00:00:09,420 Sean Aylmer: Aylmer. We've talked a lot lately about investing in large 3 00:00:09,420 --> 00:00:12,130 Sean Aylmer: caps, the big companies that dominate the local share market, 4 00:00:12,460 --> 00:00:14,920 Sean Aylmer: but there's always plenty of activity in the small caps 5 00:00:14,920 --> 00:00:18,350 Sean Aylmer: too, across the full range of sectors. How do you 6 00:00:18,370 --> 00:00:21,709 Sean Aylmer: go about finding the opportunities, particularly when new COVID strains 7 00:00:21,710 --> 00:00:25,340 Sean Aylmer: and inflationary pressures are hitting markets? We always recommend that 8 00:00:25,340 --> 00:00:27,909 Sean Aylmer: investors get their own advice, but it's also handy to 9 00:00:27,910 --> 00:00:30,330 Sean Aylmer: hear the opinions of experts about where to start your 10 00:00:30,330 --> 00:00:34,430 Sean Aylmer: research. Oscar Oberg is the lead portfolio manager at Wilson 11 00:00:34,479 --> 00:00:36,680 Sean Aylmer: Asset Management, Oscar. Welcome to Fear and Greed. 12 00:00:37,080 --> 00:00:38,250 Oscar Oberg: Yeah. Thanks for having me, Sean 13 00:00:38,850 --> 00:00:42,690 Sean Aylmer: Broadly, what's the outlook for small cap companies as we 14 00:00:42,690 --> 00:00:47,000 Sean Aylmer: head into 2022, particularly considering all the supply chain, disruption 15 00:00:47,000 --> 00:00:49,430 Sean Aylmer: issues, COVID outbreaks, inflation, that type of thing? 16 00:00:49,970 --> 00:00:52,840 Oscar Oberg: Yeah. I think you've nailed it in terms of your 17 00:00:52,840 --> 00:00:55,340 Oscar Oberg: summary. Look, it is a very tough environment for small 18 00:00:55,340 --> 00:00:59,070 Oscar Oberg: cap industrial companies, and you're seeing a squeeze from both 19 00:00:59,070 --> 00:01:02,720 Oscar Oberg: high growth companies and also low growth call it cyclical 20 00:01:02,720 --> 00:01:06,539 Oscar Oberg: companies. And we're seeing since the US Federal Reserve signified 21 00:01:06,540 --> 00:01:10,039 Oscar Oberg: that inflation was no longer in transition with interest rates 22 00:01:10,040 --> 00:01:12,089 Oscar Oberg: set to increase over the medium term, that this has 23 00:01:12,090 --> 00:01:15,860 Oscar Oberg: really hit high valuation sectors such as the technology sector. 24 00:01:16,300 --> 00:01:18,000 Oscar Oberg: But then you also, on the other side, you have 25 00:01:18,030 --> 00:01:21,809 Oscar Oberg: Omicron concerns and also supply chain concerns, which are impacting 26 00:01:21,810 --> 00:01:25,120 Oscar Oberg: more cheaper cyclical companies and sectors such as tourism and 27 00:01:25,120 --> 00:01:28,009 Oscar Oberg: retail. But I guess within this backdrop, we're still very 28 00:01:28,010 --> 00:01:32,399 Oscar Oberg: positive for companies. Particularly those exposed to the Australian economy. We think 29 00:01:32,400 --> 00:01:35,080 Oscar Oberg: the economy's doing very well at the moment. And we are looking 30 00:01:35,080 --> 00:01:37,520 Oscar Oberg: at those companies that have the ability to push through pricing 31 00:01:37,520 --> 00:01:41,530 Oscar Oberg: increases in particular to offset cost pressures. We also think 32 00:01:41,690 --> 00:01:44,220 Oscar Oberg: this Christmas period, for retail in particular will be very, 33 00:01:44,220 --> 00:01:46,869 Oscar Oberg: very strong, and we're also starting to see green shoots 34 00:01:46,870 --> 00:01:49,140 Oscar Oberg: in the tourism sector. And we think this will have 35 00:01:49,140 --> 00:01:51,700 Oscar Oberg: a very strong 2022 and 2023. 36 00:01:51,840 --> 00:01:52,100 Sean Aylmer: Okay. 37 00:01:52,160 --> 00:01:53,840 Oscar Oberg: So a lot of the companies we're looking at have 38 00:01:53,840 --> 00:01:56,590 Oscar Oberg: very good valuations that fit our investment process. So we're 39 00:01:56,590 --> 00:01:58,840 Oscar Oberg: seeing a vast array of opportunities at the moment. 40 00:01:59,290 --> 00:02:02,530 Sean Aylmer: Okay. So let's take retail, for example. There's been a 41 00:02:02,530 --> 00:02:05,020 Sean Aylmer: huge shift, there was a huge shift during the pandemic, 42 00:02:05,020 --> 00:02:07,490 Sean Aylmer: the Temple and Websters kogan. com did very well though 43 00:02:07,490 --> 00:02:10,739 Sean Aylmer: they've now fallen out of favor somewhat with investors. If 44 00:02:10,740 --> 00:02:13,019 Sean Aylmer: I'm an investor, what should I be thinking about when 45 00:02:13,020 --> 00:02:16,950 Sean Aylmer: I'm looking for a retailer outside, West farmers and Woolworths and COLS 46 00:02:17,440 --> 00:02:18,120 Sean Aylmer: and those big guys? 47 00:02:18,580 --> 00:02:20,430 Oscar Oberg: I think in the way we look at it it's very 48 00:02:20,430 --> 00:02:23,510 Oscar Oberg: important to have a distinction between those companies that have been a 49 00:02:23,930 --> 00:02:27,810 Oscar Oberg: COVID beneficiary. And I think, Kogan and Temple and Webster 50 00:02:28,139 --> 00:02:30,190 Oscar Oberg: are two companies that certainly have, I mean, it was just 51 00:02:30,250 --> 00:02:33,190 Oscar Oberg: a huge boom that we saw in e- commerce. But 52 00:02:33,190 --> 00:02:37,500 Oscar Oberg: then there's also other sectors, home wares in particular, some 53 00:02:37,500 --> 00:02:40,590 Oscar Oberg: companies that come to mind are ADAS and Nick Scarley and 54 00:02:40,590 --> 00:02:43,079 Oscar Oberg: just people being at home, spending more on their home. 55 00:02:43,100 --> 00:02:46,410 Oscar Oberg: That's created a huge in home ware spending over the 56 00:02:46,410 --> 00:02:48,510 Oscar Oberg: last two years. So those are the sort of sectors 57 00:02:48,510 --> 00:02:51,350 Oscar Oberg: that we see as sort of the COVID beneficiaries. Now 58 00:02:51,350 --> 00:02:54,660 Oscar Oberg: they're still doing very, very well. Number of those companies have very 59 00:02:54,660 --> 00:02:57,529 Oscar Oberg: strong balance sheets, but in terms of how we invest, 60 00:02:57,530 --> 00:03:00,889 Oscar Oberg: we've shifted across to those companies that will benefit from 61 00:03:00,889 --> 00:03:04,600 Oscar Oberg: a reopening of economies. And yes, there are concerns on Omicron. 62 00:03:04,600 --> 00:03:07,510 Oscar Oberg: But the fact is that the vaccines do appear to 63 00:03:07,510 --> 00:03:11,610 Oscar Oberg: be working and the early signs for Omicron, are suggesting 64 00:03:11,610 --> 00:03:13,320 Oscar Oberg: that it's perhaps a little bit milder than what we 65 00:03:13,320 --> 00:03:15,880 Oscar Oberg: thought. So when we are looking at these companies, at 66 00:03:15,880 --> 00:03:18,520 Oscar Oberg: retail companies, we're looking at those with big store the 67 00:03:18,520 --> 00:03:22,330 Oscar Oberg: networks. And we also think these businesses can also thrive 68 00:03:22,330 --> 00:03:25,720 Oscar Oberg: as sort of shopping malls, in particular struggling. So we 69 00:03:25,720 --> 00:03:28,269 Oscar Oberg: think rents can decline over time. So some companies we're 70 00:03:28,650 --> 00:03:31,480 Oscar Oberg: thinking now, or we are invested in within the portfolio are 71 00:03:31,500 --> 00:03:34,710 Oscar Oberg: premier investments are City Chic and also Lovisa. 72 00:03:35,110 --> 00:03:38,530 Sean Aylmer: Okay. And so premier of course, is Smiggles Peter Alexander 73 00:03:38,790 --> 00:03:41,500 Sean Aylmer: dot e, all sorts of companies like that. Okay. So 74 00:03:41,930 --> 00:03:44,750 Sean Aylmer: then you mentioned travel and tourism again, if we go 75 00:03:44,750 --> 00:03:47,640 Sean Aylmer: to the travel companies and we think of the flight centers and the 76 00:03:47,640 --> 00:03:50,910 Sean Aylmer: work jets, and that they've run reasonably hard already. Is 77 00:03:50,910 --> 00:03:52,970 Sean Aylmer: it too late to jump into those sorts of companies? 78 00:03:52,970 --> 00:03:55,281 Sean Aylmer: Or do you think there's more to go? 79 00:03:55,281 --> 00:03:57,410 Oscar Oberg: Well, we think there's more to go and I think it's fair 80 00:03:57,410 --> 00:03:59,270 Oscar Oberg: to say we've had a bet on travel within the 81 00:03:59,270 --> 00:04:01,990 Oscar Oberg: portfolio for at least a year and a half now. 82 00:04:01,990 --> 00:04:05,030 Oscar Oberg: And, I think there was a few sleepless nights of 83 00:04:05,050 --> 00:04:07,470 Oscar Oberg: Wilson asset management over the last two, three weeks when 84 00:04:07,470 --> 00:04:10,940 Oscar Oberg: we heard of the Omicron variant come through. But I 85 00:04:10,940 --> 00:04:14,500 Oscar Oberg: guess, look, there's always opportunities in this sector. And I think, 86 00:04:14,820 --> 00:04:17,430 Oscar Oberg: given the noise and I guess all the information that 87 00:04:17,430 --> 00:04:20,180 Oscar Oberg: we are hearing about COVID, you have periods where the 88 00:04:20,180 --> 00:04:21,510 Oscar Oberg: share prices take off. 89 00:04:21,600 --> 00:04:21,730 Sean Aylmer: Yep. 90 00:04:21,760 --> 00:04:23,400 Oscar Oberg: You know, when people are less concerned, they come up 91 00:04:23,400 --> 00:04:26,890 Oscar Oberg: very quickly to the downside when there's negativity. And certainly 92 00:04:26,890 --> 00:04:29,400 Oscar Oberg: that's what we've seen over the last few weeks. Now, 93 00:04:29,470 --> 00:04:32,630 Oscar Oberg: the reality is we've added to our positions over this 94 00:04:32,630 --> 00:04:35,920 Oscar Oberg: time. So the companies we own are Web jet, Corporate Travel 95 00:04:35,920 --> 00:04:39,070 Oscar Oberg: and Tourism Holdings. And that is our shared belief that 96 00:04:39,140 --> 00:04:42,159 Oscar Oberg: we think that all that money that you've seen invested 97 00:04:42,160 --> 00:04:44,660 Oscar Oberg: in retail over the past sort of year and a 98 00:04:44,660 --> 00:04:48,359 Oscar Oberg: half or so, as COVID started, we'll come back into 99 00:04:48,529 --> 00:04:52,479 Oscar Oberg: the travel sector and in particular international travel over time. So look, 100 00:04:52,480 --> 00:04:54,420 Oscar Oberg: while we are bullish on the retail sector, going into 101 00:04:54,420 --> 00:04:58,730 Oscar Oberg: Christmas, our viewers will probably look to lighten these exposures 102 00:04:58,770 --> 00:05:02,229 Oscar Oberg: into 2022. And certainly we think the tourism sector as 103 00:05:02,230 --> 00:05:04,460 Oscar Oberg: a whole will do very well. And we'll think a 104 00:05:04,460 --> 00:05:08,230 Oscar Oberg: disproportion of a consumer's budget will actually go towards this sector. 105 00:05:09,250 --> 00:05:11,589 Sean Aylmer: So are you pushing more generally towards services then away 106 00:05:11,589 --> 00:05:12,510 Sean Aylmer: from goods slightly? 107 00:05:13,730 --> 00:05:15,290 Oscar Oberg: Oh, I think the way we look at things that 108 00:05:15,290 --> 00:05:17,880 Oscar Oberg: Wilson Asset Management, I wouldn't say we're looking at services 109 00:05:17,880 --> 00:05:21,060 Oscar Oberg: versus goods or anything like that. It just depends whether it fits our 110 00:05:21,060 --> 00:05:24,200 Oscar Oberg: investment process and we see catalysts to invest. So I 111 00:05:24,200 --> 00:05:27,339 Oscar Oberg: think I wouldn't say we have a preference for either 112 00:05:27,339 --> 00:05:30,330 Oscar Oberg: really. I think the hard thing for those companies manufacturing 113 00:05:30,330 --> 00:05:32,830 Oscar Oberg: goods at the moment is if they don't have pricing 114 00:05:32,830 --> 00:05:37,099 Oscar Oberg: power and a very strong market position, it's very hard 115 00:05:37,100 --> 00:05:39,640 Oscar Oberg: to offset the cost increases that we're seeing. Now that will 116 00:05:39,640 --> 00:05:42,420 Oscar Oberg: come off at some point, but at the moment it's 117 00:05:42,420 --> 00:05:43,470 Oscar Oberg: actually very difficult. 118 00:05:43,970 --> 00:05:45,930 Sean Aylmer: Stay with me, Oscar, we'll be back in a minute. 119 00:05:50,700 --> 00:05:54,230 Sean Aylmer: I'm speaking to Oscar Oberg lead portfolio manager at Wilson 120 00:05:54,270 --> 00:05:57,750 Sean Aylmer: Asset Management. So then what's the outlook for the Telco 121 00:05:57,750 --> 00:06:00,870 Sean Aylmer: and Tech and I'm grouping those two together. So again, 122 00:06:00,930 --> 00:06:04,170 Sean Aylmer: outside the after pays in the Telstras of the world. 123 00:06:04,320 --> 00:06:07,080 Sean Aylmer: So more in the mids, small cap area, is that 124 00:06:07,080 --> 00:06:09,270 Sean Aylmer: an area that you're showing away from somewhat? 125 00:06:10,070 --> 00:06:11,960 Oscar Oberg: No, we have a decent exposure there. We've got a 126 00:06:11,960 --> 00:06:15,250 Oscar Oberg: number of smaller micro cap companies within WAM cap and 127 00:06:15,250 --> 00:06:18,190 Oscar Oberg: also WAM micro cap. And I think what we've seen over the 128 00:06:18,190 --> 00:06:20,529 Oscar Oberg: last few years, we've seen a number of new entrants 129 00:06:20,660 --> 00:06:23,350 Oscar Oberg: that have certainly benefited from the roll out of the 130 00:06:23,350 --> 00:06:25,839 Oscar Oberg: MBN. And also some of the larger players in the 131 00:06:25,839 --> 00:06:29,560 Oscar Oberg: Telco sector, such as Telstra or TPG, being more focused on 132 00:06:29,560 --> 00:06:33,429 Oscar Oberg: mobile and also being restricted from emerges and acquisitions perspective. 133 00:06:33,430 --> 00:06:36,969 Oscar Oberg: So we have share holdings in Super loop also Swoop 134 00:06:37,480 --> 00:06:40,860 Oscar Oberg: and Aussie Broadband. And one of the companies we're most bullish 135 00:06:40,860 --> 00:06:43,980 Oscar Oberg: on would be TPG Singapore, which came out of TPG. 136 00:06:44,220 --> 00:06:46,809 Oscar Oberg: David Teoh to is the founder of TPG is a significant 137 00:06:46,810 --> 00:06:50,560 Oscar Oberg: stake here. And this is basically an emerging player in 138 00:06:50,560 --> 00:06:53,700 Oscar Oberg: the Singapore market, which we think now has around 5% of the 139 00:06:53,700 --> 00:06:56,160 Oscar Oberg: market after only launching two years ago. So that's probably 140 00:06:56,160 --> 00:07:00,560 Oscar Oberg: our largest in the Telco space,. On the tech side, 141 00:07:00,560 --> 00:07:03,770 Oscar Oberg: I mean, look, it's gone from the hottest trade in 142 00:07:03,770 --> 00:07:05,940 Oscar Oberg: small caps over the last two or three years to quickly 143 00:07:05,940 --> 00:07:09,289 Oscar Oberg: becoming probably the most unloved trade in the last few 144 00:07:09,290 --> 00:07:12,560 Oscar Oberg: weeks, given what we've seen with inflation in particular in 145 00:07:12,570 --> 00:07:15,780 Oscar Oberg: the US. But again, similar to retail, we've really focused 146 00:07:15,780 --> 00:07:18,520 Oscar Oberg: on those tech companies. They're going to benefit from a re- opening 147 00:07:18,520 --> 00:07:21,120 Oscar Oberg: of economy. So our largest holding within the fund is 148 00:07:21,120 --> 00:07:25,580 Oscar Oberg: Life 360, which is effectively an application for, for parents to 149 00:07:25,580 --> 00:07:27,040 Oscar Oberg: monitor their children. 150 00:07:27,120 --> 00:07:29,690 Sean Aylmer: How do you think I keep an eye on my kids, Oscar? 151 00:07:31,090 --> 00:07:32,100 Oscar Oberg: That's good to hear. You're a user. 152 00:07:32,230 --> 00:07:37,420 Sean Aylmer: I am. So we've got retail, Telcos, Tech. We've discussed, 153 00:07:37,420 --> 00:07:40,300 Sean Aylmer: travel and tourism. What other sectors that you like or dislike? 154 00:07:40,960 --> 00:07:44,660 Oscar Oberg: Yeah, we've got a significant bet on the construction sector 155 00:07:45,140 --> 00:07:48,170 Oscar Oberg: within the fund. So there's two elements there. Those companies 156 00:07:48,170 --> 00:07:51,110 Oscar Oberg: exposed to infrastructure spending, and also those exposed to building 157 00:07:51,110 --> 00:07:54,140 Oscar Oberg: materials. It's been a tough sector for both these over 158 00:07:54,140 --> 00:07:56,960 Oscar Oberg: the last, call it year and a half. Both sectors 159 00:07:56,960 --> 00:07:59,660 Oscar Oberg: have been hit hard by COVID lockdowns, but on the 160 00:07:59,660 --> 00:08:02,020 Oscar Oberg: construction side, we really like Mars Group. It's the biggest 161 00:08:02,020 --> 00:08:06,120 Oscar Oberg: position in the portfolio, which is effectively a construction company 162 00:08:06,120 --> 00:08:09,910 Oscar Oberg: focused in regional New South Wales. We also have holdings 163 00:08:09,910 --> 00:08:14,040 Oscar Oberg: in Adelaide Brighton and on the building materials side, also 164 00:08:14,040 --> 00:08:17,790 Oscar Oberg: Brickworks and Fletcher building. In terms of the sectors that we 165 00:08:17,790 --> 00:08:21,780 Oscar Oberg: have minimal exposure to, I think, we mentioned tech before. 166 00:08:21,960 --> 00:08:24,440 Oscar Oberg: We have a very small exposure to the technology sector 167 00:08:24,680 --> 00:08:28,570 Oscar Oberg: as I said, so largely exposed to those reopening players. 168 00:08:28,570 --> 00:08:30,760 Oscar Oberg: And I think on the retail side, while we are 169 00:08:30,760 --> 00:08:34,319 Oscar Oberg: bullish on retail, I wouldn't say we've got the traditional 170 00:08:34,320 --> 00:08:37,130 Oscar Oberg: retailers as such within the portfolio. A lot of the 171 00:08:37,130 --> 00:08:39,930 Oscar Oberg: retail companies that we have are exposed to a re- 172 00:08:40,080 --> 00:08:43,660 Oscar Oberg: opening. So very stock specific there. So I guess the beauty about 173 00:08:44,110 --> 00:08:47,890 Oscar Oberg: Wilson Asset Management is we do look at a number 174 00:08:47,890 --> 00:08:50,660 Oscar Oberg: of sectors in industrial. So I wouldn't say we're sort 175 00:08:50,660 --> 00:08:52,850 Oscar Oberg: of wedded to one or the other at this point 176 00:08:52,850 --> 00:08:53,319 Oscar Oberg: in time. 177 00:08:53,890 --> 00:08:56,950 Sean Aylmer: Oscar, how do you keep across all the companies? And 178 00:08:56,950 --> 00:08:59,490 Sean Aylmer: this is a serious question because you've just reeled off 179 00:08:59,520 --> 00:09:01,890 Sean Aylmer: a number of companies. Many of which many listeners wouldn't 180 00:09:02,020 --> 00:09:04,550 Sean Aylmer: even have heard of. In fact, you mentioned the Mars, 181 00:09:04,550 --> 00:09:06,750 Sean Aylmer: the Regional Building Group in New South Wales, which I 182 00:09:06,750 --> 00:09:08,550 Sean Aylmer: have never heard of to be honest, how do you 183 00:09:08,550 --> 00:09:11,300 Sean Aylmer: keep across all these smaller opportunities? 184 00:09:11,950 --> 00:09:15,270 Oscar Oberg: Look, one of my first bosses in the industry, actually, 185 00:09:15,630 --> 00:09:18,530 Oscar Oberg: I remember when I first started said every night he 186 00:09:18,790 --> 00:09:21,640 Oscar Oberg: would always look at the ASX announcements that were done 187 00:09:21,640 --> 00:09:22,949 Oscar Oberg: across all companies every time. 188 00:09:22,950 --> 00:09:22,970 Sean Aylmer: Yeah. 189 00:09:23,650 --> 00:09:25,670 Oscar Oberg: As he went home at sort of like six o'clock 190 00:09:25,670 --> 00:09:28,840 Oscar Oberg: or five or six o'clock after work. And I do that every 191 00:09:28,840 --> 00:09:32,980 Oscar Oberg: day. It's funny, sometimes you pick up on a company 192 00:09:33,059 --> 00:09:35,530 Oscar Oberg: out of nowhere. I'll give an example was a City Chic. 193 00:09:35,660 --> 00:09:35,809 Sean Aylmer: Yeah. 194 00:09:35,809 --> 00:09:39,240 Oscar Oberg: That pregnancy within specialty fashion group, which was a poor 195 00:09:39,410 --> 00:09:42,820 Oscar Oberg: performing company for some time. And I remember looking sort 196 00:09:42,820 --> 00:09:45,459 Oscar Oberg: of after market, they announced a restructure of the business. 197 00:09:45,600 --> 00:09:47,300 Oscar Oberg: We did a little bit of work on it realized 198 00:09:47,300 --> 00:09:49,040 Oscar Oberg: that City Chic was the jewel on the crown. I 199 00:09:49,040 --> 00:09:51,580 Oscar Oberg: think we were lucky enough to buy that stock at sort 200 00:09:51,580 --> 00:09:55,110 Oscar Oberg: of around 20, 25 cents. And today it's well north of $5. 201 00:09:55,110 --> 00:09:58,670 Oscar Oberg: So yeah, I think you can find gems, but I 202 00:09:58,670 --> 00:10:01,210 Oscar Oberg: think the most important thing is you stick to a process and that's 203 00:10:01,210 --> 00:10:02,969 Oscar Oberg: certainly what we do at Wilson Asset Management. 204 00:10:03,360 --> 00:10:05,510 Sean Aylmer: Oscar, thank you very much for talking to Fear and Greed. 205 00:10:05,910 --> 00:10:07,070 Oscar Oberg: No problems, good to chat. 206 00:10:07,240 --> 00:10:10,590 Sean Aylmer: That was Oscar Oberg lead portfolio manager at Wilson Asset 207 00:10:10,590 --> 00:10:13,150 Sean Aylmer: Management. This is the Fear and Greed daily interview. Join 208 00:10:13,150 --> 00:10:15,679 Sean Aylmer: me every morning for the full Fear and Greed podcast. 209 00:10:15,920 --> 00:10:18,150 Sean Aylmer: With all the business news you need to know. I'm 210 00:10:18,150 --> 00:10:19,610 Sean Aylmer: Sean Aylmer, enjoy your day.