Investment manager Perpetual Limited (ASX: PPT) has a long and proud history of building long-term wealth for investors in its funds.
A recent report in The Sydney Morning Herald highlighted three of the top stock picks by Nathan Parkin, the portfolio manager of Perpetual's Wholesale Ethical SRI Fund. The SRI fund has provided investors with a total return of nearly 14% per annum for the last decade – an impressive achievement. Notably, while the portfolio includes a number of large-cap blue chip stocks as well, the small-cap positions have regularly contributed to the fund's outperformance.
Here are the three small-cap stocks which Parkin singled out:
Reckon Limited (ASX: RKN) is a listed software company which provides personal financial and accounting solutions. The company has recently undergone a structural change and is also facing increased competition from new cloud-based entrant XERO FPO NZ (ASX: XRO). Despite some headwinds the stock trades on a forward price-to-earnings ratio of just 13.4 and a forward fully franked yield of 4.2%.
Freedom Foods Group Ltd (ASX: FNP) has been one of the best performing smaller companies on the ASX over the past year. Compared with a gain of 14% from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), Freedom Foods has surged 82%. The firm manufactures allergen free foods, providing investors with exposure to a niche market. Freedom is also expanding into the USA which has the potential to offer significant growth opportunities.
Bega Cheese Ltd (ASX: BGA) was in many ways a winner even though it lost out in the bidding war for its rival Warrnambool Cheese & Butter Factory. Bega's significant stake in Warrnambool delivered a tidy profit to shareholders last year. The stock has delivered a gain of 92.5% over the past 12 months, however with a strong outlook for dairy demand in China and the rest of Asia there could be plenty of growth ahead for the firm still.
