A Guide to Successful Small Cap Investing · market conditions for the reasons mentioned. 4. Simpler to analyse Smaller companies are often simpler to analyse due to the focused nature

TAMIM Australian Equity Small Cap IMA presents:

A Guide to Successful Small Cap Investing

©TAMIM Asset Management 2017 2

The TAMIM Australian Equity Small Cap Individually Managed Account:

The TAMIM Australian Equity Small Cap Individually Managed Account

(IMA) is a portfolio of Australian equities investing long term capital in

the most compelling high quality small and micro-cap

value opportunities.

TAMIM works with some of the most highly regarded micro-cap stock-

pickers in Australia with extensive experience in all aspects of the

industry. The portfolio management team invests in businesses which are

trading at a large discount to their risk adjusted true worth. The IMA provides exposure to

companies listed on the ASX that we believe are under researched, not widely known and

outside the investment universe of many investors, and that offer attractive potential returns.

The investment approach can be summarised as concentrated value-style focusing on

securities outside of the ASX S&P 200 regardless of sector. The TAMIM Australian Equity

Small Cap IMA, seeks businesses where the difference between the share price and assessed

value (intrinsic value) is sufficiently large to afford a sufficient margin of safety to justify the

investment. The TAMIM Australian Equity Small Cap IMA owns a concentrated portfolio of

ASX-listed small and micro-cap companies.


TABLE OF CONTENTS:

1 – Why Small Caps? 4 2 – Our Approach to Value Investing 12 3 – Intrinsic Value Explained 17 4 – Low Liquidity: Friend or Foe? 22 5 – Mitigating Risk in Small Cap Investing 25 6 – The Correlation Beauty of Microcaps 30 7 – Investing in Family Companies 33


PART 1 – Why Small Caps?

SUMMARY: Investing in smaller companies has traditionally been a core strategy to achieving significant

long term wealth generation for high net worth individuals, family offices, entrepreneurs, etc.

And for good reason - we believe there are many compelling reasons to include smaller

companies in all portfolios. In this section we investigate why smaller company investing can

be so lucrative and the core strategies behind successful smaller company investing.

THE EVIDENCE: There seems to be consensual agreement in research circles that smaller companies tend

to out-perform larger companies over the long term. As you would expect the vast

majority of the research in this area has been focused upon the US market so we’ll be

primarily looking at US-based evidence. However, the conclusions remain valid for ASX

investors in our experience.

The chart below shows the

long term returns of the

smallest 30% of listed US

stocks versus the largest

30% over the past 90 years.

The data shows that the

smallest 30% have on

average out-performed the

largest 30% by 2.1%

through this period.


And if we look at the same data and break it down into market cap deciles, the results become

even clearer - the smaller the average market cap, the higher the average out-

performance. The chart below shows (on the right) the top decile largest companies (by size)

versus the top decile smallest companies and compares their performance. Each step towards

the left is one decile lower in the size ratio. The trend is clear:

This data provides compelling evidence that smaller companies offer ripe picking grounds for

out-sized long term returns.

This is consistent with our experience in the portfolio underlying the TAMIM

Australian Equity Small Cap IMA (DMX Capital Partners) which is 72% ahead of the

All Ords after fees since launch 17 months ago (as at 31 August 2016) - this out-

performance reflects the combination of applying a value investing style to a filtered

universe of high quality smaller companies:


WHY SMALLER COMPANIES TEND TO OUT-PERFORM: In our opinion there are a number of compelling reasons why the strategy of investing in

smaller companies tends to out-perform the market over the long term:

1. A less efficient market

One of the great attractions of smaller company investing is that the majority of ASX listed

smaller companies remain below the radar of most investors. Rather than competing with

some 30 analysts who each have a detailed financial model on the company as is often the

case in the larger company universe, there is often no broker coverage of smaller companies.

Beyond the low broker coverage, we often work on companies, which have very few

individual investors following them. This lack of coverage, and resulting lack of analysis,

creates significant room for market inefficiencies in the stock valuation, and also leaves

ample room for smaller company investors to generate an information edge versus the limited

market following. As the market becomes more aware of these initially unknown companies,

the potential for a significant re-rating is high. Eventually brokers start looking at these stocks

as their market caps increase and the cycle of out-performance continues. The data below

shows that small cap funds are far more likely to out-perform than large cap funds reflecting

these significant inefficiencies at this end of the market.

“Wall Street research is focused on under 20% of publicly traded companies, those with market

capitalisations of over $1.5bn. This leaves a large number of companies with scant analyst

coverage. With few investment managers performing in-depth research on small cap firms and the

rest relying on conventional research, an astounding number of small cap companies get

overlooked. Focusing on this larger number of undiscovered companies increases the odds of

uncovering hidden value.” - First Wilshire


2. Better management access

In our experience smaller company management teams are generally more receptive

towards engaging with investors than larger company management teams. The reason

for this is simple: smaller company management teams are generally aiming to improve the

markets’ understanding of their businesses, and often only have to deal with a few investors

who are looking at their businesses. Smaller businesses often continue to be led by the

founders, who are usually very passionate about the company and very keen to tell its story.

However, if you are the CEO of a large cap like Telstra, your time is spread in so many

directions it is simply impossible to build relationships with the 30 analysts following the

company in addition to the many thousands of investors who are exposed to the company.

This dynamic means smaller company investors are often privileged to get to know

management which allows for a deeper understanding of the publicly available

information.

3. Low correlation with the broader market

This is a benefit which is often ignored and misunderstood by the investment

community. Smaller companies tend to do their own thing a lot more than larger

companies reflecting: a) these businesses often have smaller market shares and/or operate in

niche areas and are thus less likely to be affected by macro shifts,

b) smaller companies are often trading at a significant discount to their large cap peers due to

a lack of market awareness - this lack of awareness also protects their stock prices when their

larger cap peers are selling off. The portfolio underlying the TAMIM Australian Equity

Small Cap IMA (DMX Capital Partners) has a correlation (R squared) since launch (in April

2015) 17 months ago of only 17% with the All Ordinaries Index, and we expect it to remain

low looking forward. The portfolio performs particularly strongly on a relative basis in weak

market conditions for the reasons mentioned.

4. Simpler to analyse

Smaller companies are often simpler to analyse due to the focused nature of their

business models. For example, when analysing SDI Ltd (ASX: SDI) investors need to be

aware of the developments in one industry, the dental industry, and only need to model the

company’s geographic segment analysis and the shift from amalgam to non-amalgam

products. The depth of modelling required to understand a small company like SDI is of a

completely different level to the intricate modelling required to understand a large and

complex business like Telstra with its numerous operating divisions. We believe there is less

room for error when working on relatively simple smaller company models.

5. Greater upside leverage given their generally lower starting market shares and

lower cost structures

Most smaller companies we work on are aiming to increase their market shares from a

relatively low starting position. Successful market share growth for smaller companies

generally creates significant earnings and valuation upside over the long term. For


example, a company starting with a market share of 1% with the objective of reaching a 5%

market share in a growing market offers enormous growth potential. However, a larger

company which already has a 40% market share will often be aiming to defend its market

share from newcomers with the objective of growing in line with the market. In our

experience the management psychology behind these two very different strategies is often at

two ends of the spectrum. We would prefer to be investing in the aggressor rather than

the defender. In addition, smaller companies, due to being capital constrained, are usually

particularly focused on cost control and adopting a low cost operating structure. As their

revenues grow there is an opportunity for significant operating leverage to drive strong

bottom line growth.

“Smaller companies are often run by their founders or a small group of managers who are

more motivated to increase shareholder value.” - First Wilshire

6. Focused investment cases which often provide direct exposure to a potent

investment theme

As mentioned, smaller companies are generally far simpler business models than their larger

cap peers which are often conglomerates with complex and sometimes contradictory stories.

If you are factoring an investment theme into an investment decision, we believe it is a lot

easier to get clean exposure to most themes in the smaller companies universe. For

example, one investment theme we are aware of is the strong growth ahead for

superannuation funds given Australia’s ageing society and dependence on future fund under

management growth. Fiducian (ASX: FID) provides clean exposure to this theme given the

company’s focused and simple business model. However, a larger cap peer like AMP does

provide exposure to this theme but it is massively diluted by the company’s vast array of

other businesses.

7. A larger investible universe

The maths of smaller company investing is interesting. If we look at the ASX, there are some

2,200 listed companies but most investors tend to regard the ASX100 or the ASX200 as the

definition of the larger company universe. This means 80-90% of the listed universe are

smaller companies. With such a large hunting ground for new ideas we believe the

chances of success for disciplined smaller companies investors are higher.

8. More powerful investment risk management controls

Ultimately having better understanding of a business than the rest of the market is the

strongest and most controllable risk control for any equity investment. As mentioned,

gaining a deeper understanding of publicly available information on smaller companies than

the rest of the market is generally achievable in our experience, and maintaining it requires

consistent work, research, etc. Large cap investors generally don’t have this luxury due to the

large number of competing analysts, and thus tend to control risk by focusing upon the

standard deviations of returns, value at risk, etc. In our experience these risk controls are


often backward-looking and involve far less direct control on the part of the investment

manager. We believe smaller company investors have the clear advantage of being more

in the driver’s seat when controlling stock specific and portfolio risk.


WHAT MAKES A SUCCESFULL SMALL CAP INVESTOR: Given these compelling reasons for long term smaller company out-performance, it seems

natural to ask: what makes a successful small cap investor? Achieving out-sized returns in

this sector are clearly not a given.

We believe there are 4 key attributes required to achieve long term investment success as a

small cap investor:

1. Quality screening

In the 2000+ universe of ASX listed smaller companies we believe the vast majority do not

qualify as high quality businesses. This means the first step to successful smaller company

investing is to filter the high quality businesses into an invest-able bucket. This process takes

many years of disciplined analysis of each business. At TAMIM our Small Cap teams

definition of quality means we are looking for companies with: high quality management,

strong balance sheets, positive cash flows, good visibility around future earnings,

defendable and growing competitive moats, and well defined long term strategies. This

may sound like a simple list but the reality is most companies do not tick all of these

boxes. We believe less than 100 of the 2000+ universe of smaller companies actually

meet our definition of high quality. This may sound surprisingly low but we would suggest

this low hit rate is absolutely essential for the TAMIM Australian Equity Small Cap IMA’s

long term success.

2. A love of in-depth research

In our experience the key to understanding a business well is to “kick the tyres”, and really

become aware of where the cashflows come from, why customers deal with this company,

how management are thinking, etc. It takes a long time to properly understand a business and

we believe this is key to maintaining a long term information edge versus the rest of the

market.

3. Thinking long term

Successful smaller company investing requires a long term investment horizon in our

experience. It is only by thinking about where these businesses will be in 5 years+ that

the investment opportunities become clear. And it is only by remaining invested in these

businesses for 5 years+ that our investors will benefit from our analysis. It takes time to

build a small business into a larger business and it is this process which creates significant

value for investors.


4. A focus on the fundamentals

Most investors who have been exposed to financial markets for many years would agree that

there is a lot of noise in the markets. The media, other investors, etc. will always present

opposing viewpoints, and will look to create stories which sell or support their opinions.

However, in our experience most of this is just noise which is best ignored. Successful

smaller company investing requires an ability to filter the fundamental information

from this noise.

CONCLUSION: The performance of the portfolio underlying the TAMIM Australian Equity Small Cap IMA

since launch is testimony to the attractions of smaller company investing. We believe the

application of a disciplined value investing strategy to a filtered universe of high quality

smaller companies provides a potent combination for long term out-performance. We will

continue to exploit the significant market inefficiencies in the smaller company universe to

our investors’ advantage.

References

http://www.afr.com/markets/equity-markets/two-thirds-of-australian-large-cap-funds-fail-to-

outperform-the-benchmark-20160919-grjafc

http://econompicdata.blogspot.com.au

http://www.firstwilshire.com/firstwilshireway2.html

http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html


PART 2 - Our Approach to Value Investing

SUMMARY:

Value investing requires discipline and an ability to see through the noise so as to buy when

others are fearful. With a good degree of self-awareness and an open mind we strongly

believe it remains a superior investment strategy, and one which can lead to substantial

outperformance. This article addresses key value investing terminology and strategies as an

introduction to this lucrative investment approach.

INTRODUCTION: Key Terminology

The Intelligent Investor by Benjamin Graham remains the value investors’ key reference

work 67 years after it was first published in 1949. Warren Buffett has long been a devotee of

the principles in this book. The majority of value investing terminology we use today came

from this book, such as:

• “Investment operation” - “An investment operation is

one which, upon thorough analysis, promises safety of

principle and an adequate return”.

• “Mr. Market”: Investors should think of the market as

a person, Mr. Market, who is usually reasonable and

offers you a price for your securities close to your

view of fair value, but sometimes Mr. Market becomes

emotional and volatile, and becomes overly optimistic

or pessimistic.

• “Margin of safety” - A key tenet of value investing is

the idea of factoring in a margin of safety to take into

account the fact you may be wrong in your assessment

of fair value. e.g. If you think a stock is worth $10,

with a margin of safety you may be prepared to pay up

to $7 for it. As Mr. Graham explains, “The margin of

safety is the difference between the percentage rate of

the earnings on the stock at the price you pay for it and the rate of interest on bonds,

and that is to absorb unsatisfactory developments”.


OUR APPROACH TO VALUE INVESTING:

At TAMIM Asset Management, we are passionate about value investing within our Small

cap and value teams and believe a disciplined value investing strategy will significantly

outperform the market over the long term. We search for companies where the conservatively

estimated intrinsic value exceeds the share price by a sufficiently large margin that it affords

a margin of safety which maximises the chance of long term outperformance.

Our value investing approach in our small cap team is based upon fourteen investment

beliefs:

1 - Knowledge and expertise are more important than diversification. We believe it is

more important to know a small number of companies intimately than to know very little

about a lot of companies. Risk increase the more diversified you become. As a result, the

TAMIM Australian Equity Small Cap IMA holds only up to 20 high conviction positions we

know extremely well.

2 - The key valuation measure is cash flow, after allowance for the required capital

expenditure to keep the business going over the long term. The intrinsic value will vary

over time as cash-flow certainty and the discount rate change.

3 - We reject the idea that risk is the standard deviation of historic returns, and believe

that risk is the probabilistic assessment of something bad happening (i.e. the distribution

has a single tail and is forward looking).

4 - The share market can wildly mis-price companies relative to their intrinsic value but

over time we believe shares prices will move towards fair value. In the short term, the share

market is effectively a popularity contest, but over the long term share prices will reflect

economic fundamentals. As a result, we are only focused on the long term.

5 - We think of ourselves are part owners of businesses. This helps us understand each

business better and allows us to take the long term view required.

6 - “Mr. Market” should be your friend. Bi-polar “Mr. Market” provides prices every day

– sometimes high and sometimes low. We believe investors should exploit his moods – buy

when he is down and sell when he is high. The TAMIM Australian Equity Small Cap IMA

has a long term investment horizon which allows us to opportunistically profit from these

mood swings.

"Have the courage of your knowledge and experience. If you have formed a conclusion from the

facts and if you know your judgement is sound, act on it- even though others may hesitate or differ.

You are neither right nor wrong because the crowd disagrees with you. You are right because your

data and reasoning are right. Similarly, in the world of securities, courage becomes the supreme

virtue after adequate knowledge and a tested judgment are at hand.” – Benjamin Graham

7 - We will only invest when we have a sufficient margin of safety. This means there

should be a large gap between the intrinsic value and the current share price to allow for any

inaccuracies in the assessment of the intrinsic value.

8 - We believe management should be invested in their businesses to ensure their interests

are aligned with shareholders, and that they treat other shareholders as partners.


9 - Investment opinions should be based upon a considered appraisal of a business/

investment case against all known facts with the expectation that on average a superior return

can be achieved. This contrasts with speculation which is short term and more akin to

gambling.

“By speculating instead of investing you lower your own odds of building wealth and raise

someone else’s” - Jason Zweig

10 - Value investing can be applied to both low and high growth businesses; the key is to

invest when the intrinsic value is well above the current share price.

11 - The distinction between price, book value and intrinsic value: price is the current share

price; the book value is the value of the assets minus liabilities as reported in the accounts;

and the intrinsic value is the true underlying worth of the business.

12 - Macroeconomic factors are very hard to forecast accurately and, given the long term

nature of value investing, frequently of only limited relevance.

"The buyer of bargain issues places particular emphasis on the ability of the investment to

withstand adverse developments.” - Benjamin Graham

13 - Non income producing assets have no value in the value investing framework.

14 - Often family companies perform well because decisions are generally made with a

longer time horizon and higher level of engagement in mind.


VALUE INVESTING EXAMPLES:

1 - Buying stocks with a strong asset backing. e.g. We bought into EZA Corp (ASX:EZA)

when it was trading at a 25% discount to its net cash value. This may seem surprising but is

illustrative of the inefficiencies of the smaller company universe. The stock has since been

suspended from the ASX whilst management decide on an acquisition. When the stock re-

lists, if a sensible acquisition is announced, we believe the stock will move to a premium to

its net cash value which implies significant share appreciation from the acquisition price.

2 - Keeping the portfolio less than fully invested (20% cash on average) in order to keep

our powder dry for a market calamity, or to cover any outflows. This has served us well thus

far as it allows us to profit whilst others are fearful. We expect to out-perform in falling

markets as a result.

3 - Focusing on stocks with a long history of trading so we can effectively analyse and

value the businesses. We do not invest in start-ups; we only invest in well established

businesses.

For example, one of the underlying

fund’s top 5 positions (at June, 2016) is

Fiducian Financial Services (ASX: FID),

a leading fund management and financial

planning group. The company listed in

2000 (and was established in 1996) which provides a significant amount of data to analyse

and thus value the business. As a result, we have high conviction that this is an excellent long

term investment.

4 - Focusing on low PE stocks - The majority of the IMA’s holding are trading on a single

digit PE based upon FY16 earnings which represents a significant discount to the market

average. e.g. Dental supplier, SDI (ASX: SDI), is currently trading at 8x ’16 earnings, which

appears deeply under-valued for a quality

international business with solid growth

prospects. Investing in such low p/e stocks is

a typical deep value investment strategy.

5 - Take a long term investment horizon at the time of investment - Over the past year the

underlying portfolio has only sold 2 of its positions. We do what we say we do in terms of

taking a long term view at the time of investment.

6 - We do not set out to replicate the market in any way; we are aiming for significant

positive absolute returns - We are completely benchmark unaware as we are looking for the

most compelling smaller company opportunities across all sectors. This is how the portfolio

underlying the TAMIM Australian Equity Small Cap IMA out-performed the ASX All Ords

by 31.95% in the year to August 2016. We remain confident regarding future returns.


CONCLUSION:

We view true value investing as one of the most potent sources of investment out-

performance available. While it is a remarkably simple investment style, it requires immense

discipline, patience and dedication. We believe our investors are well placed to benefit.

References:

http://www.finsia.com/news/news-article/2016/04/21/how-short-termism-eats-away-returns


PART 3 – Intrinsic Value Explained

SUMMARY:

Intrinsic value is a core value investing concept which is simple and yet often misunderstood.

In the TAMIM Australian Equity Small Cap IMA we always compare a stock’s intrinsic

value with its current market value when making investment decisions. Our objective is to

invest when intrinsic value is far in excess of the current market value; i.e. when there is a

significant margin of safety.

INTRODUCTION:

We have noticed that the term “intrinsic value” gets used a lot in the investment industry. It

seems to be one of those terms which investment professionals pull out to show that they

know what they are doing. However, we think it is often mis-quoted and misunderstood.

So what is intrinsic value? On a basic level, intrinsic value is the value of a company, stock,

currency or product based upon fundamental analysis and without reference to its market

value.

And what is intrinsic value not? It is not a static value; it changes and evolves over time.

As Warren Buffet wrote to shareholders in his 1994 Berkshire Hathaway letter,

“Intrinsic value is a highly subjective figure that will change both as estimates of future cash

flows are revised and as interest rates move. Despite its fuzziness, however, intrinsic value is

all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.”

So in a simple formula:

Intrinsic value = the present value (discounted by the risk-free rate of return plus an

equity risk premium) of all future cashflows an asset is expected to generate adjusted

for all known risks and uncertainties.


THE TWO DRIVERS OF INTRINSIC VALUE:

1 – Business Fundamentals

All businesses are evolving, ever-changing entities. When valuing a business investors are

simply aiming to capture a snapshot of future cashflows at that point in time, factoring in all

known opportunities and risks. However, this snapshot of future cashflows is likely to change

over time. Diligent value investors must be prepared to test and adjust their cashflows

assumptions over time.

The inherent difficulty here is reliably estimating future cash flows. Judging by the number of

companies that fail to meet their profit guidance numbers, it is difficult enough for company

insiders to accurately forecast their current year earnings. For ‘outsiders’ or analysts to

accurately forecast cashflows for a company 5 or 10 years away, the difficulty is magnified.

At TAMIM we look to overcome this issue by investing in companies with a solid track

record of generating cashflows, and use the historical cash flows to help support our

estimates of the future cash flows. We look for companies where there is good visibility

around the fundamentals of the company, and thus the cash flows the investment will

deliver over time.

For example, one of our core holdings (August, 2016) is Konekt

Limited (ASX: KKT), a provider of workplace health solutions.

When we started buying into the stock, the stock was trading at

less than half its current stock price at 20c. Konekt’s reported

cash flows were increasing, and the outlook for the business was positive. At the time we

believed that the future cash flows of the business supported an intrinsic value far higher than

the market value at around 40c. An intrinsic value of twice the market value for a high

quality business was a compelling investment opportunity in our eyes and we bought a

position in our TAMIM Australian Equity Small Cap IMA portfolios.

The stock has performed strongly over the past year, out-performing the All Ords by around

100%. And of course Konekt has evolved somewhat as a business during this time. The

company has made a number of acquisitions and has been growing at a faster organic rate

than we originally expected. These acquisitions have cemented its market leading position.

Now when we value Konekt’s future cashflows we derive an intrinsic value well above the

current market value, and far

above our original intrinsic value

expectation. At the current share

price of 48c the stock is still

trading on a low p/e of around

12x FY17 earnings, and our

intrinsic value for the stock is

currently 60c. All being well we

expect our intrinsic value for the

stock to continue trending

upwards over time. This is the

beauty of high quality


businesses; over time they create shareholder value. This is why taking a long term

investment view on high quality stocks makes a lot of sense to us.

2 – Interest Rates

Interest rate changes also impact on future cashflow assumptions because the risk free

rate of return is a key input in the discount rate used to derive a present value of future

cashflows. As a result, future cashflows are worth more in a low interest rate environment

than in a high interest rate environment.

With the 10 year US Treasury yield currently at a record low of only 1.4% and Government

interest rates all around the world at similar record lows, global asset valuations have been

pushed upwards in recent years. The competition for yield has intensified as it has become

scarcer.

“Everything is expensive because this thing at the heart of the system has gone to all-time lows,” - Antti Ilmanen.

When adjusting future cashflow assumptions to take into account changing interest rates,

in our opinion it is important to also bear in mind how current and future interest

rates will impact upon future economic growth rates. This is particularly relevant now

because interest rates were much higher over the past 5 years than they are at present.

This means that global economic growth was able to withstand higher interest rates in the

past which reflected higher underlying global economic growth. It would be a mistake

to simply extrapolate the growth most companies have reported over the past 5

years looking forward since interest rates are telling us that future economic growth

will be far lower than past economic growth. And yet, this is exactly what the vast

majority of analysts are currently assuming. The temptation to simply extrapolate is too

strong for most. In our opinion, this makes most analysts’ current DCF assumptions too

high and thus essentially invalid. A well thought out intrinsic value analysis will take

the underlying economic growth rate into consideration.


APPLYING INTRINSIC VALUES TO SMALL CAP INVESTING:

In the TAMIM Australian Equity Small Cap IMA we like to invest in companies where

the intrinsic value is far in excess of the current market value; i.e. when there is a

significant margin of safety – the larger the margin of safety, the lower the risk of

investing in our view.

In small and micro-cap companies we often come across a number of factors that

depress the market price of a company on the stock exchange (e.g. low liquidity, no

broker research, lack of profile in the investment community) but that do NOT

change the intrinsic value of the business. This presents us with unique investment

opportunities where there can be very large differences between the observable ASX

market price and our calculated intrinsic value – and thus a large margin of safety.

For example, Joyce Corporation Limited (ASX: JYC) is a high conviction holding in the

TAMIM Australian Equity Small Cap IMA. Some background on JYC is available on our

website.

Before purchasing the stock, we concluded an in-depth analysis of the business and

concluded it was a growing company trading on very low multiples. We then calculated an

intrinsic value according to our analysis of the risks and opportunities faced by the business.

The intrinsic value was calculated as the sum of:

- JYC’s cash balance;

- JYC’s property holdings;

- The discounted after-tax future cash flows from JYC’s growing operating

businesses.

The sum of these components generated an intrinsic value in excess of $2.20 which was

more than twice our average entry price. We expect this intrinsic value to continue to

increase over time. An opportunity like this is unlikely to be available among larger higher

profile companies.


CONCLUSION:

Intrinsic value in all businesses is a constantly moving target and requires in-depth analysis

of the underlying business. We view it as core to our investment process and will only invest

in a stock when the margin of safety between the intrinsic value and market value is

significant, often above 50%. This is the case for all the stocks in the TAMIM Australian

Equity Small Cap IMA including the examples mentioned, Konekt and Joyce Corporation.

We believe our investors will benefit over the long term.

References:

http://www.investopedia.com/terms/i/intrinsicvalue.asp

http://blogs.wsj.com/moneybeat/2016/06/17/everything-is-more-expensive-than-it-looks/


PART 4 – Low Liquidity: Friend or Foe?

SUMMARY:

Smaller companies generally trade with lower liquidity than larger companies reflecting their

smaller market following and large founder stakes. Contrary to popular opinion we view

lower liquidity as core to the smaller company investment opportunity since smaller

companies only trade at low liquidity levels when they are under-researched and

undiscovered, and their valuations generally reflect this. This creates significant opportunities

for investors who are prepared to find the high quality smaller companies trading at a

significant discount to intrinsic fair value.

THE IMPACT OF LOW LIQUIDITY:

Smaller companies are generally perceived to be higher risk investments than larger

companies, largely due to the higher liquidity risk prevalent amongst smaller companies.

These smaller companies often remain tightly held by a founding family and/or lack the

institutional interest and ownership required to generate a sufficient level of stock liquidity.

The market is generally biased against higher liquidity risk because no one wants to be stuck

in a poor investment they can’t sell. However, as with most aspects of investing, we believe

the reality is far from this simple. We view low liquidity as a double-edged sword which can

also create opportunity.

The market believes what the market believes. We have learnt to respect the market but at the

same time understand that the market is not always right. Quite the contrary, the market can

be incredibly inefficient, particularly at the smaller company end of the market where

investors tend to be less informed. The effect of the market’s perception that higher liquidity

risk makes smaller companies riskier than larger companies, is that many retail and

institutional investors either stay away from illiquid stocks altogether, or are only happy to

buy an illiquid stock at a much lower price than they would pay for an equivalent liquid

stock. As a result, many smaller illiquid companies trade at much larger discounts to their

intrinsic value to reflect this perceived risk. In many cases, the discount can be extreme.

“Lack of market liquidity can sometimes be of benefit to small-cap investors who already own

shares. If large numbers of buyers suddenly seek to buy a less liquid stock, this can drive up the price further than in the case of a more liquid market.” - Investopedia.

We would go so far as to say that low liquidity is core to successful smaller companies

investing. Our objective is to find undiscovered gems and to buy them when they are under-

valued and illiquid, and before they are properly researched and understood by the market.

Once they become liquid, these stocks will generally trade at significantly higher levels. The

journey from illiquidity to liquidity is synonymous with the journey from undervalued to fair

value and thus should be celebrated by experienced smaller company investors.


EXAMPLE: FIDUCIAN GROUP LIMITED (ASX: FID):

Fiducian, a leading fund manager and financial planning

operator, remains one of our core holdings. We view the

company as one of the highest quality micro caps on the ASX

due to its excellent management team, clear growth strategy,

strong competitive advantages and enviable track record of recent earnings growth.

Fiducian’s earnings are expected to continue growing at double digit rates over the medium

term and yet the stock is currently trading at only 11x FY16 underlying earnings and on a 5%

fully franked dividend yield. This may seem strikingly cheap to large cap investors but this

reflects the smaller company investment opportunity.

Recent trading in Fiducian provides an interesting insight into smaller company liquidity. As

the chart below shows, the stock fell from $2.70 in January to $1.98 at the end of April. At

$1.98, the stock was trading at only 9x FY16 earnings and on a fully franked yield of over

6% despite the company’s high quality business model, strong first half result and excellent

growth prospects. While the volatile equity markets of early 2016 no doubt impacted

sentiment towards Fiducian, the share price fall was accentuated by the stock’s low liquidity.

If this was a large cap reporting excellent results it is very unlikely the stock would have

fallen so dramatically.

In our minds this spelt

opportunity so we bought more

Fiducian stock into weakness at

around the $2 mark. We viewed

the selloff as a great opportunity

to top up our shareholding in a

high quality business on a very

low valuation. Low liquidity

once again presented a

compelling opportunity which

aligned with our disciplined

value investing style and we

were able to take advantage.

CONCLUSION: The reality is that liquidity risk can either play to your advantage or disadvantage as an

investor. We believe many investors are missing a trick by viewing all smaller companies as

riskier than larger companies. The fact that so many people view liquidity risk as a

disadvantage provides an explanation as to why smaller companies often trade at such low

valuations and therefore are attractive investment propositions.

In our opinion, the key to using liquidity risk to your advantage is to ensure you are investing

in under-valued, high quality smaller companies where you have an information advantage.

This is clearly easier to do in the smaller companies universe than amongst large caps where

you may be competing with 20+ highly intelligent analysts who have followed the stocks for


many years. When investing in smaller companies there may be no analysts at all following

the stock so it is a far less competitive investment environment.

However, successful smaller company investing does require a disciplined filtering process

since there are numerous listed smaller companies which will never reach profitability or a

credible business model. We focus only on high quality companies which for us means

having a diversified customer base, strong competitive advantages, a sensible growth

strategy, a strong track record of earnings growth and good visibility around future earnings

growth, and importantly, capable management who we are confident can execute on their

growth initiatives. While illiquidity can offer great value buying opportunities, we do not

want to be holding an illiquid company forever. Therefore, it is important that the investment

has a clear pathway to growing earnings or growing its market capitalisation in order to

attract a broader range of investor interest in the company. Fiducian is a great example of the

type of company we will invest in, and one that we expect will attract greater broker and

investor interest as it grows.

We are confident that applying a disciplined value investing strategy to this select universe of

smaller companies will lead to significant long term outperformance. We will continue to use

smaller company illiquidity to our clients’ advantage.

References:

http://www.investopedia.com/ask/answers/032615/how-do-risks-large-cap-stocks-differ-

risks-small-cap-stocks.asp

http://www.moneycrashers.com/small-micro-cap-stock-investing-definition-benefits-risks/

http://www.stern.nyu.edu/sites/default/files/assets/documents/con_043253.pdf


PART 5 – Mitigating Risk in Small Cap Investing SUMMARY: The portfolio underlying the TAMIM Australian Equity Small Cap IMA's 75% out-

performance of the All Ords after fees since launch 18 months ago has been achieved by

investing in high quality, small, growing businesses trading at a significant discount to fair

value. In the interests of lifting the hood on the engine for the benefit of investors, we have

taken the opportunity to compile an analysis of the portfolio's risk profile by looking at the

portfolio's composition based upon stage in the business cycle, debt profile, fund cash levels

and industry exposures. We believe the results emphatically show the TAMIM Australian

Equity Small Cap IMA and underlying portfolio's performance has been achieved with a

relatively low risk profile, and both remain well positioned looking forward for the same

reasons.

TAMIM Australian Equity Small Cap IMA's Risk Analysis: (October, 2016)

Firstly, it is worth highlighting the key characteristics of the companies within the TAMIM

Australian Equity Small Cap IMA's investable universe of micro/small cap companies listed

on the ASX:

These numbers may be sobering for some: a massive 81% of ASX-listed micro caps

(market cap below $100m) are currently loss-making and 90% don’t pay a

dividend. The smaller companies’ universe is clearly dominated by unprofitable, non-

dividend paying companies with a strong weighting towards the resource and technology

companies – companies that we consider to be at the higher end of the risk spectrum.

The challenge for the TAMIM Australian Equity Small Cap IMA is to find, research and

ultimately invest in the relatively small number of small and micro-cap stocks which have

lower risk profiles. In our opinion, companies which are profitable with good visibility

around future earnings growth, and which also have strong balance sheets, offer a

significant opportunity for long term out-performance, particularly when you invest

whilst broader market awareness of these businesses is low or non-existent.


As a result, despite the fact that the ASX small and micro-cap universe is dominated by high

risk, unprofitable companies, the TAMIM Australian Equity Small Cap IMA portfolio has

been constructed such that these risks have been substantially mitigated.

The following 4 analyses of portfolio risk should provide valuable insight into the TAMIM

Australian Equity Small Cap Individually Managed Account from a risk perspective:

1 - Cash Weighting

Why? Cash weighting is a clear portfolio risk input – a higher cash weighting indicates lower

risk and vice versa.

Observations: The TAMIM Australian Equity Small Cap Individually Managed Account will

generally carry a higher cash weighting than most funds reflecting our deep-held belief that

our clients will benefit if we are positioned to take advantage of future periods of stock price

volatility. There will be periods when “Mr Market” becomes overly emotional and will offer

our high conviction holdings at significant discounts to our opinion of fair value. We want to

be ready for this periods of volatility ahead of time. As a result, the IMA currently

(October, 2016) has a cash weighting of 22%. In terms of assessing the portfolio’s risk, this

relatively large cash weighting provides a risk buffer but we would argue this high cash

weighting is more important to generate performance upside than as a risk control.

Selecting the right stocks is a far more efficient risk control in our experience.

2 - Portfolio Categorised By Company Life Cycle

Why? We have divided the underlying portfolio into a number of categories to reflect where

each business is in the company life cycle, which in turn gives a guide (albeit subjective)

regarding the portfolio's risk profile at a stock level. The life cycle categories we have used

are:

1. Cash,

2. Dividend paying, growing profits,

3. Asset play,

4. Profitable, not dividend paying,

5. Loss-making, emerging, fully funded, and

6. Loss-making, emerging, not fully funded.

The risk profile of these different types of investments starts at very low (Cash) and

incrementally increases to very high (Loss-making, emerging, not fully funded). While

simplistic, we believe a company that has committed to paying dividends and which has high

visibility around future earnings can be classified as the most mature on the company life

cycle scale, and among the lowest risk of listed equity investments. Conversely, a loss

making, early stage business without sufficient funds to execute on its strategic initiatives is

among the highest risk of listed equity investments.


TAMIM Australian Equity Small Cap IMA model – By Stage In The Business Cycle Profile:

Observations: With 61.6% of the underlying portfolio invested in dividend paying

companies which are growing their earnings and 22.4% in cash, 84.0% of the portfolio

can be categorised as low risk. Given our strategy is to invest in high quality businesses

which are under-valued, it is pleasing to see that the data confirms we are doing what we say

we are doing. The 61.6% exposure to companies which are paying dividends on the back of a

growing earnings base, and which have been purchased at low earnings multiples, is the

portfolio's core engine. These are the types of businesses we aim to get to know better than

the market, and this in depth stock knowledge is core to our risk control. We are always

questioning our assumptions and understanding of these businesses to ensure our conviction

levels are warranted.

The portfolio has 5% invested in asset based opportunities. These are businesses which we

also view as relatively low risk since we believe the value of their assets is significantly

higher than the current market cap. Having said that, asset plays often don’t have the benefit

of consistently positive earnings news-flow and are often dependent upon one large pay-off

asset sale scenario. These stocks are arguably higher risk than the earnings growth, dividend

payers as a result.

The underlying portfolio also has 11% invested in companies that are profitable but are not

yet paying dividends. We expect a significant portion of this 11% to migrate across to

become dividend paying in the coming year or so at which time the portfolio's risk profile

will further decrease.

The underlying portfolio has no exposure to loss-making companies whether they be

funded or unfunded. This implies the fund is actively avoiding the 81% of the sub

$100m market cap universe which is currently loss-making and thus arguably higher

risk. We believe this shows that the portfolio remains conservatively positioned in

companies at the low risk end of the spectrum and will remain so looking forward.


3 - Portfolio Categorised By Debt Profile

Why? In our opinion a company’s balance sheet is a key input when assessing risk.

Companies with strong balance sheets carry far lower financial risk profiles than companies

with weak balance sheets. The reason is clear: debt-holders rank ahead of equity holders in

the event of financial distress; so the larger the queue of debt-holders, the less likely equity

holders will receive their funds in a worst case scenario. In addition, less debt means greater

financial flexibility and less exposure to interest rate cycles.

TAMIM Australian Equity Small Cap IMA model – By Debt Profile:

Observations: 48% of the underlying portfolio is invested in stocks with net cash surpluses

which is consistent with our objective of investing in high quality companies with strong

balance sheets. These companies carry far lower financial risk than highly geared companies.

30% of the underlying portfolio is invested in stocks with modest gearing levels.

And 22% of the portfolio is in cash as mentioned above.

The underlying portfolio has no positions in highly leveraged businesses. We view the

portfolio's overall financial risk as low and far lower than the broader smaller

companies’ universe.

4 - Portfolio Exposure By Industry Exposure


Why? We believe looking at a fund’s sector weightings is another worthwhile way to make

sense of any industry related risks which may only become clear from a top-down

perspective.

TAMIM Australian Equity Small Cap IMA model – By Industry:

Observations: The portfolio’s sector exposures are: Healthcare 24%, Cash 22%,

Financials 21%, Consumer 10%, Property Services 8%, Manufacturing 6%,

Investment 5% and Technology 6%.

We view this as a well-diversified portfolio with a tilt towards defensive businesses.

It is worth noting that within each sector the stocks are generally quite different from one

another so it is sometimes misleading to generalise based upon sector classifications. For

example, Reverse Corp (ASX:REF) is classified as an Investment company whereas in reality

the company is building its position in the online contact lens market which is ultimately a

healthcare related activity.

CONCLUSION: The TAMIM Australian Equity Small Cap IMA’s risk profile is arguably lower than many

may assume reflecting the underlying fund’s focus on high quality businesses with strong

balance sheets, as well as our disciplined value investing approach. The portfolio remains

very heavily weighted to high quality businesses which are growing their earnings and paying

dividends, yet are trading on low multiples and often with net cash surpluses and excellent

management. We believe these conservative investment foundations put the portfolio in good

stead to continue its track record looking forward.


PART 6 – The Correlation Beauty of Microcaps

SUMMARY:

We are often asked why micro cap funds tend to trade at such low correlations to the broader

market. With market correlations as low as 0.1 (or less), some micro cap funds could be

questioned regarding potential correlation data errors. However, the correlation data does not

lie. In our experience, market inefficiencies are widespread in the micro cap universe

reflecting low analyst research coverage, which in turn reflects the low commissions on offer

for trading in these relatively illiquid stocks. Correlations this low mean the vast majority of

stock movements in the micro cap universe are explained by stock specific factors rather than

market movements. This is great news from a micro cap investors’ perspective. It means you

can do the research on smaller companies knowing that if your investment case is correct, the

stock price is likely to move dramatically in your favour as new information is digested and

new investors are attracted to the stock. As long as you have an information advantage, the

risk- reward equation is decidedly in your favour.

INTRODUCTION: The quest for high returns with minimal correlation to the broader equity market leads many

investors to ask us why micro cap funds tend to trade at very low correlations to the broader

market. Equity investors are often heavily weighted towards the larger listed companies

where market correlations are generally on the high side, with most long only, large cap

funds having market correlations of between 0.5 and 1.0. When these same investors see

market correlations of under 0.1 for select Australian micro cap funds, they often wonder if

the data is correct. It is.

What does correlation data mean?

Many industry professionals tend to look at the R squared of the relationship between two

sets of data - in this case the performance of an investment fund and the performance of the

All Ords. The R squared number gives you the explanatory power of the relationship between

the two variables. For example, a large cap fund with a correlation (R squared) of 0.9 with

the All Ords means that the fund generally tracks the broader market up and down – 90% of

that fund’s historical performance can be explained by movements in the All Ords. Equally, a

micro cap fund with a correlation (R squared) of 0.1 with the All Ords means that the fund

performs independently of what the broader market is doing – only 10% of that fund’s

historical performance can be explained by All Ords movements. The reason so many

investors focus on correlation data is to gain an understanding of their exposure to equity

market movements, a key piece of information, particularly in volatile or falling markets. In

our experience, fund investors’ generally like to see good performance combined with low

market correlation.


Low Analyst Coverage

Micro cap investing is a very different game from investing in large cap companies. In our

experience, market inefficiencies are widespread in the micro cap universe reflecting very

low analyst coverage, which in turn reflects the low commissions on offer for trading in these

relatively illiquid stocks:

As a result, we often meet with the management teams of fascinating, high quality micro cap

companies which the market is currently largely ignoring. In many cases there are no analysts

at all following these stocks. In our minds this spells opportunity.

This brings us to the correlation data. As the table below shows, the correlation of (global)

micro caps with the broader (relevant country) equity markets is far lower for micro caps than

it is for small caps or mid caps. The relationship between market cap and market efficiency is

clear. And interestingly, the data show there has been an increase in the correlation of micro

caps with the broader market over the past 20 years, albeit from a very low base. Small and

mid cap correlations have been more stable throughout this period.

Stock Specific Factors

Correlations this low mean the vast majority of stock movements in the micro cap universe

can be explained by stock specific factors rather than market movements. This is great news

from a micro cap investors’ perspective. It means you can do the research on smaller


companies knowing that if your investment case is correct, the stock price is likely to move

dramatically in your favour as new information is digested and new investors are attracted to

the stock.

A recent example of this information advantage at play was seen in Intecq Limited

(ASX:ITQ), a micro cap gaming systems supplier which recently reported a half yearly result

well ahead of market expectations. The stock has since rallied by some 60%. When so few

people are watching, stock price movements following positive news-flow in illiquid, under-

followed companies can be significant. The picture is very different in the world of larger

company investing where there may be 10-20 or more analysts following a company. With

this level of scrutiny all the information released by the company will have been analysed

intensively by many intelligent and qualified analysts. The chances of this many analysts

missing something of real importance is far lower, and thus the market is far more likely to

be efficient at pricing in all the relevant information. This leaves larger companies more

exposed to market movements as the primary driver of stock performance.

The portfolio underlying the TAMIM Australian Equity Small Cap IMA (DMX Capital

Partners) has a correlation since launch (in April 2015) 17 months ago of only 0.17 with the

All Ordinaries Index (17% of performance to date can be explained by All Ords movements).

We expect it to remain on the low side since we focus on investing in cheap, undiscovered

stocks. Over the long term it seems prudent to assume that more investors will become

interested in micro cap investing given the superior risk-reward dynamic on offer at present.

However, it will be many decades before the considerable information advantage available to

micro cap investors is significantly eroded. In the meantime, we will continue to enjoy the

opportunities on offer.


PART 7 – Investing in Family Companies

SUMMARY: Investing in family owned and run companies has been a lucrative strategy at TAMIM. In

this article we investigate why family companies on average tend to out-perform over the

long term.

INTRODUCTION:

In our experience there is no one magic formula which guarantees out-performance in every

scenario. However, over many years of working as a professional investor you notice clear

similarities and trends which generally hold true. One of these themes is that the share price

performance of family companies often seems to out-perform the broader market. And when

we had a look at the empirical evidence it emphatically supported our long-held belief….

“Founding families, kept in check

by an independent board, tend to exert a positive influence on

companies, particularly when the

founder remains actively involved in setting strategic direction.

Family-controlled groups are more inclined to have a long-

term perspective, a strong

corporate culture and conservative financial

management, all attributes conducive to long-term share

outperformance.”

- Financial Times,

1/12/13

“When we looked across business cycles from 1997 to 2009, we found that the average

long-term financial performance was higher for family businesses than for non-family

businesses in every country we examined.”

- Harvard Business Review


WHY FAMILY COMPANIES TEND TO OUT-PERFORM:

“A CEO of a family-controlled firm may have financial incentives similar to those of chief

executives of nonfamily firms, but the familial obligation he or she feels will lead to very different

strategic choices. Executives of family businesses often invest with a 10- or 20-year horizon,

concentrating on what they can do now to benefit the next generation. They also tend to manage

their downside more than their upside, in contrast with most CEOs, who try to make their mark through outperformance.”


In our opinion, there are a number of clear reasons why family companies tend to out-

perform over the long term:

1. Family companies view each dollar as their own and are thus focused upon controlling

costs throughout the economic cycle.

“We do not spend more than we earn.” - Harvard Business Review, CEO interview

2. The same applies to capex budgets; family companies tend to be focused upon return

on investment and thus generate higher than average returns on investment over the long

term.

3. Family companies tend to like cash and dislike debt. By taking a very long term view

on their business and thinking about future generations’ wealth, these management teams

tend to be financially conservative which generally serves shareholders well over the long

term. It is very common to see family companies carry net cash surpluses on their balance

sheets.

4. Family companies tend to prioritise organic growth over acquisitive growth which

reduces the risk of large value destructive acquisitions.

“We don’t like big acquisitions—they represent too much integration risk, you may get the timing

wrong and invest just before a downturn, and more importantly, you may alter the culture and fabric of the corporation.”

- Harvard Business Review, CEO interview

5. Family companies think about long term, through the cycle returns which means they are

often involved in defensive, diversified business models, and are thus less exposed to

economic fluctuations.

6. Family companies tend to look after their staff and thus retain them far better than

competitors over the long term. By treating their employees like individuals rather than

numbers family companies offer significant non-monetary benefits for employees. It is

common to see family companies invest significantly in their employees through training

which highlights to employees that they are highly valued members of the team.

“Interestingly, family businesses generally don’t rely on financial incentives to increase retention.

Instead, they focus on creating a culture of commitment and purpose, avoiding layoffs during

downturns, promoting from within, and investing in people.”



7. Family companies tend to have good track records of international expansion. This is

consistent with their preference for long term, organic growth; they are happy to start small in

new markets and to gradually build new geographic revenues step by step. This is a very

different approach to the large value-destructive acquisitions often attempted by non-family

management teams.

AND THE CHALLENGES OF INVESTING IN FAMILY COMPANIES: Being a minority shareholder in a family run company is however not without its challenges:

1. The founding family often exerts strong inter-generational management control. For

example, Westfield Corporation, 55 years after it was founded by Frank Lowy, continues to

be led by Frank’s sons, Steven and Peter. Rightly or wrongly there can be a perception of

nepotism in family companies - that family members are in these management positions due

to their surname rather than their ability.

2. Family companies are often also associated with a large number of related party

transactions – whether that be the leasing of properties owned by family members,

supply/purchase agreements with other family companies, and/or consultancy agreements

with certain family members. There can be a perception that the controlling family is

favoured in these transactions at the expense of non-family shareholders.

A strong board with genuinely independent directors is important to ensure that the

position of minority shareholders is appropriately considered. The combination of a

strong independent board and an experienced, driven family management team can

represent a powerful investment proposition.

AN EXAMPLE WITHIN THE TAMIM AUSTRALIAN EQUITY SMALL CAP IMA: We recently wrote about SDI (ASX: SDI) in

our emerging global leader series, and this is a

great example of a family company which is

well placed to out-perform by virtue of ticking

many of the above-mentioned family company

attributes:

- The company had been run by its founder Jeffrey Cheetham for some 40 years, whilst his

daughter Samantha Cheetham has been working as the Sales and Marketing Director in

recent years. Jeffrey retired on 30th June 2016 with Samantha taking over the CEO role. This

multi-year succession plan and CEO training path is common amongst family businesses and

often makes for a smooth transition between the family ranks.


“SDI commenced operations in Jeffrey Cheetham’s garage, producing amalgam fillings

and selling the products direct to dentists. By 1975, the company had operations in New

Zealand, United States and Greece.”

- The Cheetham family have a 43% stake in the business

- SDI has a very strong balance sheet with almost no debt (3% gearing) and fully owns its

large manufacturing facility in Melbourne

- SDI is cautious when it comes to making acquisitions and has a track record of focusing

upon organic growth. There have been no large equity raisings or share issues that would

otherwise dilute the holding of the Cheetham family.

- SDI is involved in a relatively defensive market, dental products, where margins are high

and costs are well controlled.

- SDI has a strong track record of international expansion and in our opinion is an emerging

global leader in its market.

SDI is a well run, growing family-run company with strong fundamentals and attractive

valuation metrics, however its seven person board is very much controlled by Cheetham

family members and directors that are close to the company and/or family. Our view is

that there is an opportunity for SDI to become an even more compelling investment

through the appointment of strong, independent directors.

CONCLUSION:

Investing in family companies aligns with our strategy of investing in long term

overachieving companies which are largely unknown in the broader market. There are

compelling reasons why family companies tend to out-perform and we expect to see similar

out-performance on average looking forward.

References:

http://www.bain.com/publications/articles/founder-led-companies-outperform-the-rest-heres-

why-hbr.aspx

http://dmxcorporation.com.au/Investment_approach.html

https://www.ft.com/content/cd98f8a4-5756-11e3-b615-00144feabdc0

https://hbr.org/2012/11/what-you-can-learn-from-family-business


Disclaimer:

The information provided should not be considered financial or investment advice and is general information intended only

for wholesale clients (as defined in the Corporations Act). The information presented does not take into account the

investment objectives, financial situation and advisory needs of any particular person nor does the information provided

constitute investment advice. Under no circumstances should investments be based solely on the information herein. You

should seek personal financial advice before making any financial or investment decisions. The value of an investment may

rise or fall with the changes in the market. Past performance is no guarantee of future returns. Investment returns are not

guaranteed as all investments carry risk. This statement relates to any claims made regarding past performance of any

TAMIM (or associated companies) products. TAMIM does not guarantee the accuracy of any information in this booklet,

including information provided by third parties. Information can change without notice and TAMIM will endeavour to

update this booklet as soon as practicable after changes. TAMIM Funds Management Pty Limited and CTSP Funds

Management Pty Ltd trading as TAMIM Asset Management and its related entities do not accept responsibility for any

inaccuracy or any actions taken in reliance upon this advice. All information provided in this booklet is correct at the time of

writing and is subject to change due to changes in legislation. Please contact TAMIM if you wish to confirm the currency of

any information in the booklet.

Documents

A Guide to Successful Small Cap Investing · market conditions for the reasons mentioned. 4. Simpler to analyse Smaller companies are often simpler to analyse due to the focused nature