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3 top tips from this small cap fund manager

Fund manager Cyan investment management has produced a remarkable return in the 2016 financial year, delivering a total return to unitholders of 41.4% – compared to the All Ordinaries (Index: AORD) (ASX: XAO) index’s return of just 2%.

Focusing mostly on smaller cap companies with market caps under $1 billion has allowed this fairly new fund manager to thrash the market.  Since inception in July 2014, the Cyan C3G Fund has returned 72.9% against the index’s 4%. Even the Small Industrials Accumulation Index’s 16.8% has been left far behind.

Cyan C3G Fund

Source: Cyan Investment Management

3 companies Cyan’s fund manager Dean Fergie likes are Skydive The Beach Group Ltd (ASX: SKB), Freelancer Ltd (ASX: FLN) and Afterpay Holdings Ltd (ASX: AFY).

Speaking to Fairfax Media, Mr Fergie says Skydive the Beach has been one of the fund’s best performers. The company runs several skydiving operations in both Australia and New Zealand in iconic spots like Byron Bay and New Zealand’s Wanaka (close to the snow fields and Queenstown).

As Mr Fergie says, “There’s massive organic growth in it because of the whole social media side of things. It’s the same reason why people line up for an hour outside a hip cafe for ‘truffled mushrooms with edible flowers on some sort of quinoa toast’ –  they want experiences, and they want stuff they can tell people about.

As for the freelancing website Freelancer, Mr Fergie says the company could ‘easily be a $5 billion company.’

While the company has yet to produce a profit, it also doesn’t lose much money – and probably won’t be long before it does produce its maiden profit.

Another company that Mr Fergie is positive on is Afterpay Holdings. Afterpay allows consumers to buy a product now and pay for it at a later stage – without upfront fees or interest. The company has experienced strong growth, resulting in its share price soaring from its IPO price of $1.00 in May 2016 to $2.60 currently.

The C3G fund also topped up its holdings in baby formula producer Bellamy’s Australia Ltd (ASX: BAL) in June, when the share price fell below $11. It’s currently at $14.13.

 

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Motley Fool writer/analyst Mike King owns shares in Bellamy's Australia. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has a position in Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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