If you subscribe to the theory that small-cap ASX shares are due for a massive resurgence in 2023, there's just one question to ask.
Which stocks to buy?
Fortunately, the team at Celeste Funds Management this week explained why they love three of their holdings for the long run, despite mixed recent performance.
'Strong' update belying the share price tumble
Insurance services provider PSC Insurance Group Ltd (ASX: PSI) saw its share price plunge 5.2% over January.
That puzzled Celeste analysts, who thought a late December operational update was "strong".
"Trading in 1H23 was ahead of budget with underlying EBITDA growth of 18% to 20% on the prior corresponding period," stated Celeste's memo to clients.
"Given strong 1H23 performance, the full year result is expected to come in at the top-end of the guidance range."
Last May, PSC announced that it was entering into a joint venture with AUB Group Ltd (ASX: AUB) for the retail business of UK brand Tysers.
Unfortunately, that still hasn't got off the ground, due to delays with regulatory approvals from British authorities.
That may have had a bearing on PSC's share price, but Celeste analysts insisted "both companies remain committed".
"On a global macro level, the January reinsurance renewals should underpin further hardening of insurance premiums and provide a solid tailwind for broker earnings growth."
The PSC share price is up 1.94% compared to a year ago, while paying out a 2.5% dividend yield.
Big sale could return capital to investors
The HT&E Ltd (ASX: HT1) stock price went the opposite way last month, rising a spectacular 16.1%.
The Celeste team attributed this to its jettison of a peripheral business.
"Early in the month, the company announced it had signed a binding agreement to sell its 25% interest in CPaaS business Soprano to Potentia Capital for $66.3 million cash," read the memo.
"The sale price implies an 8.8x multiple on FY22 EBITDA and comes after a previous non-binding agreement to sell the stake to Link Mobility Group AS (OSE: LINK) was terminated in September 2021."
The sale means shareholders of the media company could benefit, either directly or indirectly.
"The disposal of the non-core asset likely moves HT&E to a net cash position providing capital flexibility to both continue to invest in the core radio business and potentially return capital to shareholders."
Despite the great start to 2023, HT&E shares have still plunged more than 44% over the past 12 months.
Portfolio grows 10% in six months
Litigation finance provider Omni Bridgeway Ltd (ASX: OBL) enjoyed an 11.6% boost in its stock price in January.
According to Celeste Funds analysts, the company reported a "strong" December quarter that took the total estimated portfolio value up to $29.8 billion.
That's 10% higher than what it was on 30 June.
"There remains $228 million of indicative opportunities in the investment pipeline, which, if converted, would make up an additional 41% of the FY23 commitments goal."
The Celeste team also noted how a particular investment was offloaded during the quarter.
"The secondary market continues to prove useful in accelerating cash returns."
Omni Bridgeway is also growing overseas.
"The business expanded its geographic footprints in Europe and the US, which should further the diversification of the portfolio and maintain OBL's global competitive advantage."
The Omni Bridgeway share price is up almost 9% over the past year.
