Global small caps podcast: Cambridge

May 25, 2020

Greg Dean, portfolio manager of the Cambridge Global Smaller Companies Fund, recently took some time away from analysing global small-cap stocks to share his views on the sector.

Greg was recently quoted in a Bloomberg article: “If you can convince yourself to move down cap but not lower your quality bar, I think you’re able to look at a bigger pod.”

The podcast covers

  • Some of the views expressed in the
  • The changing risk profile of the market
  • How to find conviction in the small-cap sector when the future is so uncertain

How do you find conviction in the small-cap space when you are not even sure what the future brings?

  • You need to embrace uncertainty; our job is to make decisions with incomplete information
  • Attempting to rely on false precision can feel comfortable and end up costing you more money in the long run
  • Through this period, we have done a good job avoiding the businesses that are certain to be impaired and not chasing companies who are clearly seeing a benefit
  • Think of a bell curve diagram, we have eliminated those tails; we are narrowing the spectrum on uncertainty
  • We have stocks in the fund that are benefiting but we did not buy them for that reason
  • For example: Zoom Communication – you need to understand how much longer this strong short period of time will be persistent into the future

What are some of the key takeaways and messages you are hearing from companies?

  • Challenging March, opportunistic April
  • Seeing mean reversion through this period
  • Q1 results were in most cases stronger than what people expected (speaking specifically of companies Cambridge follows)
  • Common theme from management: they were prepared and had playbooks ready to preserve value
  • For example, Great Canadian Q1 came out stronger than expected. Walked investors through what it would look like if they were to be closed for the entire quarter. Company has demonstrated resilience.
  • The common theme: businesses with adverse outcomes priced in, people are realizing it is not going to be as bad as expected. On the other hand, businesses expected to have large benefits are not doing well (e.g. Ambu).
  • Mean reversion now that earnings season has shed more light

Is there anything you would like to share with clients?

  • Just came off a very strong period in April for both the fund and the small-cap space
  • Never as good as you look when times are great, never as bad as you look when they are tough
  • 2019 Q3 was one of the most challenging in my career, but through this year navigating this difficult market we are super pleased with our ability to protect capital and capitalize on April
  • Concentrated portfolio with high active share – you can meaningfully underperform or outperform in a short period of time. Meaningful to see the cumulative performance over 3 -5 year time periods.
  • Day to day performance can be grey, but it’s very black and white in the long term
  • Sticking to what we say we are going to do pays off over the long run

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Categories: Insights



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