Small-cap specialist Elvest fund beat its benchmark by 150 basis points in February.
Both ASX shares and bonds "sold off sharply" over the month, according to the portfolio managers, which wiped out some of the significant gains from January.
"Sentiment worsened in response to a more hawkish tone set by central banks, including the RBA, suggesting interest rates will remain higher for longer to tame inflation," the Elvest team stated in a memo to clients this week.
Amid the macroeconomic doom and gloom, there were some gems found in reporting season.
"A subset of small caps continue to thrive, and the fund is well positioned to take advantage of any further volatility that may arise in coming months."
The Elvest team revealed three of its ASX shares that affirmed its conviction with impressive market updates:
Revenue up, cash flow up: what more can you ask for
Insurance repairer Johns Lyng Group Ltd (ASX: JLG) is the Elvest fund's third-largest holding, and that faith will continue after a pleasing update.
"Johns Lyng delivered a large revenue and cash flow beat, driven by higher catastrophe (CAT) work resulting from the 2022 flooding events in NSW and VIC," read the Elvest memo.
"Management upgraded FY23 guidance for revenue and EBITDA by 11% and 5.5%, respectively."
Despite all the recent La Nina catastrophe work, the Johns Lyng share price is 21% lower than it was 12 months ago, providing an attractive entry point for investors.
Big second half coming for this software company
Mining software maker RPMGlobal Holdings Ltd (ASX: RUL) presented "a solid first half result", according to the Elvest analysts.
"[RPMGlobal] reiterated FY23 EBITDA guidance of $14.2 million, up 215% on FY22," read the memo.
"RPMGlobal has a large pipeline led by its mobile asset maintenance solution, AMT, which enjoys a dominant market position."
Similar to Johns Lyng, the RPM stock price is about 20% down on a year ago.
The Elvest team claimed that a nice little boost is coming its way for the next financial update.
"As most of RPMGlobal's software is billed after 31 December, cash flow has a strong second half skew."
The tech stock remains Elvest fund's fifth-largest holding.
150% boost in revenue, plus more to come
Helloworld Travel Ltd (ASX: HLO) has broken the hearts of many buy-and-hold investors, with its share price halving over the past five years.
But the travel agent has enjoyed a phenomenal 71% rise so far in 2023.
It's not a surprise for the Elvest team though.
"Helloworld swung into profitability in the first half of FY23 on 150% higher revenues," read the memo.
"There remains significant pent-up demand, especially among older (mortgage-free) travellers, which is Helloworld's primary customer cohort."
The Elvest fund managers noted the company improved its earnings forecast.
"Management upgraded FY23 EBITDA guidance by 25% (at the midpoint), to a range of $28 million to $32 million."
