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The Montgomery Small Companies Fund has had a cracking few months


The Montgomery Small Companies Fund has had a cracking few months

In this week’s video insight I joined David Buckland to dive into the recent performance of the Montgomery Small Companies Fund. As the reporting season concludes, the Fund has delivered 11.19 per cent for the three months to 31 August. This is an outperformance of 8.97 per cent compared to its benchmark the S&P/ ASX Small Ordinaries Accumulation Index. The outperformance can be attributed to several key stocks in the Fund’s portfolio, particularly Megaport (ASX:MP1), Audinate (ASX:AD8), and Aussie Broadband (ASX:ABB), all of which have exhibited strong growth and management excellence.



Hello. I’m David Buckland, and welcome to this week’s video insight.

Well, the reporting seasons just come to an end, and Gary Rolo, who portfolio manager of the Montgomery Small Companies Fund definitely has a smile on his dial. For those that don’t know, the Montgomery Small Companies Fund in the three months to the end of August has put on well over eleven percent whilst the benchmark, the small ordinaries accumulation index has put on only about 2 percent. So Gary, you’ve had about nine percent outperformance in three months, And obviously some of those stocks have done some fantastic heavy lifting over the reporting season.


Thanks, David. Well, over the course of the last few months, we’ve seen portfolio performance driven by a broad-based return in our portfolio. You know, for instance, two thirds of the portfolio have beaten the market by over fifteen percent in that period.

Now, there have been some significant stop that have done some heavy lifting for us. I’d call out our approach to the growth sectors and the consumer sectors as the areas where the portfolio has really won through, but three stocks in particular that call out would be, mega port, automate and Aussie Broadband, those stocks all have, one series of, characteristics in common, and that’s that their valuations were cheap for the growth that they offered. And the stock market has really began to appreciate that as a result of the results those companies posted through the reporting season.


And what why don’t we just go into a little bit of detail on those three stocks, Gary?


Sure. Well, mega port story has been, around recovering confidence, investor confidence in management’s ability to deliver growth. The first phase of that is to right size the business and its cost base for the opportunity that it sees in the near term. That job’s been done over the course of the last two or three months. And as a result, we’ve seen significant earnings upgrades for that stock.

And we’ve seen a significant rerate from evaluation point of view. The second stock that’s done some heavy lifting is another stock in the portfolio. It’s called Audinate.

Audinate, a play on, let’s call it a structural growth in our portfolio. And that stock’s been one where we’ve seen strong growth come through as a result of good operational performance and price rises in the portfolio, but at the same time, the company has managed its cost structure very well. And the management team has articulated a good growth outlook whilst at the same time managing costs. So, the stock market is cheering that one on.

This third stock I call out is Aussie Broadband. They are a broadband service provider here in Australia. And that’s quite simply just an underappreciated growth story. And the management team have managed costs well.

And at the same time, have shown good growth characteristics. So, a very similar theme, managed costs well, delivered the growth, and the stock market was w was willing to rerate the stocks.


Excellent, Gary. Well, there you have it, ladies and gentlemen, three stocks, Megaport, Audinate, and Aussie Broadband that have all contributed to this wonderful performance experienced by the Montgomery small companies fund over the recent three months.

And as I mentioned, they’ve put on about eleven odd percent and the market, benchmark at the same time was put on only about two percent. So Gary, I know you’re coming up for your four year anniversary here in a in a couple of weeks time. And, it’s been a very, very exciting ride in in in the recent several weeks. Well done.


Gary Rollo is the Portfolio Manager of the Montgomery Small Companies Fund. Gary joined Montgomery in August 2019 after spending three years at MHOR Asset Management in Sydney as a Founder and Portfolio Manager. Prior to this, Gary was a Portfolio Manager at Renaissance Asset Manager in Sydney for six years. Before moving to Australia, Gary spent five years in London running Morgan Stanley’s Technology Sector Equity Research Team, as well as two years covering technology companies for JP Morgan.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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