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Why one top fund manager sees meaningful upside for the Betmakers Technology share price

If you’re interested in small cap shares, then you might want to take a look at the one talked about below.

It is a firm favourite of the Ellerston Australian Micro Cap Fund and it certainly can pay to listen to what this fund manager says.

Over the last 12 months the fund has provided investors with a 15.3% return after fees, which compares to a 2.9% decline by the benchmark S&P/ASX Small Ordinaries Accumulation Index.

This outperformance doesn’t appear to be a fluke either, with the fund returning an average of 16.5% per annum over the last three years. As a comparison, the benchmark index has provided a 7.5% per annum return over the same period.

Which shares does the Ellerston Australian Micro Cap Fund like?

In a recent update, portfolio managers David Keelan and Alexandra Clarke revealed that its portfolio remains skewed towards high-quality shares which they believe can endure a challenging macro environment.

This includes the technology sector and particularly companies with sustainable competitive advantages and structural tailwinds.

One of those is wagering service business Betmakers Technology Group Ltd (ASX: BET). It uses its proprietary technology to provide risk management systems, odds management, and content across a number of sports.

The portfolio managers commented: “The company boasts an exclusive 10- year agreement to manage fixed odds horse racing in New Jersey, and this was recently expanded to include a 5-year agreement to manage fixed odds terminals and kiosks at Monmouth Park racetrack.”

And although the Betmakers share price is up over 200% in 2020, the fund managers still see meaningful upside in the future.

“Fixed odds racing should benefit from a structural migration away from tote betting, a similar narrative to that which has already played out in Australia, and BET is well placed to capitalise on this. The company is on the verge of EBITDA profitability, has an extensive pipeline of opportunities, and we see meaningful upside to the current price,” they concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Scott Phillips.

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