Spatium seeks to ‘capitalise on herd mentality’
Spatium Capital is aiming to take an alternative to small-cap investing by “capitalising on fear and herd mentality” invest in out of favour companies.
The boutique firm, which ran the Spatium Small Companies fund, said it tended to trade stocks between 30 to 45 days in order to have the “shortest holding period possible” and had an equally-weighted portfolio.
This was in sharp contrast to other funds which tended to have a long-term investment outlook with low turnover where stocks were held for years.
Jesse Moors, co-founder at Spatium with Nicholas Quinn, said: “We are looking for companies that have momentary falls out of favour such as exit of a CEO, missed earnings forecast or an ETF rebalancing, where we believe they are over-sold due to fear in the market.
“We are looking for companies that are falling into that herd mentality where investors hate it, SMSFs hate it, ETFs hate it. People aren’t doing their own research anymore, they have lost their way and are following price movements, people don’t want to lose more than a certain amount so they become forced sellers.”
During COVID-19, turnover had got even higher as the fund had taken opportunity of the volatility and uncertainty caused by the pandemic with average turnover being 27 days while holdings rose to 53.
“We were fully invested during the crash and out of the crash so when the market rise then we did as well. We dug in, there were some late nights but we stuck to our investment strategy of seeking companies that are struggling.”
Over three years to 1 July, 2021, the fund returned 17% versus returns by the ASX Small Ordinaries benchmark of 5.8% with less risk than the market.
“Now we have a three-year performance track record, hopefully people who were sceptical before will have dissipated. We want to turn naysayers into supporters,” Moors said.
AUTHOR
Laura Dew
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