I've been rebalancing my portfolio recently, looking to reduce my exposure to the wallets of Australian consumers. Better-than-expected GDP data lit a fire under a number of shares with consumer exposure, but despite being optimistic about the economy I believe there's a fair chance things could get worse before they get better.
That's why I bought Sirtex Medical Limited (ASX: SRX), which the market sold off recently after a weaker-than-expected set of sales results. The thing I like most about Sirtex – in addition to its profitability and defensive product demand – is the ongoing trials of its SIR-Sphere therapy for use in other cancers. Approval to treat multiple cancers isn't guaranteed, but does add 'blue-sky' potential to a rapidly growing biotech company.
The most attractive opportunity available to the company right now lies in this sentence from the recent half-yearly report:
'During the half-year, the Group sold 5,728 doses worldwide representing less than 2% of the addressable market.'
Sirtex has plenty of room to grow to meet demand, and the latest price falls looked like an opportunity to me (I bought at $30). I found it difficult to value Sirtex precisely because much of its 'story' involves growth in the future, but I'm willing to back a growing company with such a small share of the addressable market. Should shares fall from here, I would buy more.
Ironically enough, despite looking to move away from businesses exposed to discretionary spending, I made an opportunistic purchase of Surfstitch Group Ltd (ASX: SRF) at $1.08 when shares were hammered down recently. Very high gross profit margins as well as a strong, rapidly growing commerce platform and the recent addition of content creation businesses looked like an opportunity the market was missing, even though shares still appear priced for significant growth.
Unfortunately subsequent events threw a spanner in the works, with the CEO and founder resigning and reportedly working to take over the company with the backing of private equity.
It's not a good look for a business which listed relatively recently, and although I'm sitting on a profit I admit to a considerable amount of uncertainty regarding my investment. For the time being I will hold my shares while I wait to see who emerges as a replacement CEO, as well as whether a private equity bid eventuates.
