Glennon Capital is run by star stock picker Michael Glennon, who boasts a track record of long term out-performance in the Small Cap space.
The company website notes that since inception in 2010, Glennon Capital Small Companies has produced returns that have outperformed the Small Ordinaries Index (net of fees) by 73%.
Michael is currently undertaking an IPO of a new Listed Investment Company to be called Glennon Small Companies Limited (ASX: GC1). This is the first time the portfolio manager's fund can be invested in by retail investors.
Glennon's investment philosophy is to invest in sensible businesses in sound industries with superior management.
Below, Michael showcases four such small-cap stocks…
Capilano Honey Ltd (ASX: CZZ) With a market capitalisation of $125 million, this stock continues to provide shareholders with sweet returns. After a strong rally the company is still trading on undemanding multiples, P/E and EBITDA multiples remain attractive, whilst an 88% increase in dividends demonstrates confidence from management in earnings maintenance.
Synergies from the acquisition of Chandlers Honey should lift CZZ's supply while a tough two years of weather has constrained total domestic supply and impacted competitors. Additionally, Australia remains the only country in the world yet to be affected by Varroa Mite which destroys bee colonies. Global demand for honey constantly exceeds supply. Bee colonies are disappearing in the US and Europe, pure honey is becoming a valuable commodity.
The price of honey in the US is rising more than 6% annually, and the market globally is expected to hit $12 billion by the end 2015.
FSA Group Ltd (ASX: FSA) FSA is the holding company for Fox Symes, which is the largest provider of debt consolidation solutions to individuals and businesses in Australia.
With a market cap of $173m and a dividend yield of 4.7%, this small financial services firm is steadily advancing their debt administration, consumer and business lending segments.
On 13 July FSA boosted its market leading position in debt arrangement from 45% (FY14) to 48% in FY15. FSA has also been able to expand bottom line growth through lower impairment losses, which has been a necessity in a low interest rate environment.
On a peer comparison basis, FSA also looks attractive. FY15 P/E of 10.9x, 3yr EPS CAGR of 21%, ROE of 22% and a dividend yield of 4.7% indicate signs of out-performance compared to peers. As a long term investment we think there is a long way to go for this company.
Sirtex Medical Limited (ASX: SRX) Sirtex has been in the Glennon Capital portfolio for some time now. It's a biotech company that has a treatment for cancer in the liver, but the technology also has the potential to be used for different areas other than the liver.
We think it has some world beating technology, similar to CSL and Cochlear. Shares in Sirtex have rallied since their recent fall and have now recovered from their eight-month lows and it is now trading at $30.17 and at a market cap of $1.7 billion. The recovery followed the complete release of the SIRFLOX study in America to a crowd of 3,000 biomedical professionals which outlined the positive impact of their liver cancer treatment.
In March when the Sirtex share price more than halved, we believed that this was due to an overreaction to negative news. Sirtex also posted 22% sales growth for the 10 months to April and given the potential for their products to become more internationally scalable we believe this stock can continue to outperform.
IPH Ltd (ASX: IPH) IPH is the holding company for the Spruson & Furguson Intellectual Property business. The stock reached a high of $5.00 back in June and its current market cap is $796m.
We believe this company is well run and has great management, an enviable position in the market, and a blue-chip client base that will position it well for long term growth through Australia, NZ and Asia.
The market is fragmented and IPH is the first listed company in this space in Australia. That should allow it to execute acquisitions and further enhance growth. The prospects are bright for this company and while in the short term the shares fully reflect the current levels of business, as a long term investment we think that the future is bright for this company.
