Lennox buys stake in HUB24
Lennox Capital Partners has initiated a position in platform HUB24 in both its Australian Small Companies and Microcap funds, taking advantage of the company’s share price fall.
The firm, run by Liam Donohue and James Dougherty, said it had a mid-range position in the portfolio administration company and could increase this in in the future.
Shares in HUB24 fell sharply during March, falling 42% from the start of the year to its bottom on 16 March. As of 04 June, the firm’s shares had returned 0.9% since the start of 2020.
Donohue said the company was attractive due to the ongoing move in assets away from the Big Four platforms such as AMP and Commonwealth Bank towards independent players such as HUB24.
“We already liked the company but had not been able to justify the valuation but the market decline meant there was an opportunity,” said Donohue.
“HUB24 has a tailwind from the huge amount of money on platforms which is growing in line with the growth in superannuation by around 5%-6% per annum. There has been a real shift in sentiment away from the encumbents since the Royal Commission which is historically where the money had flowed.
“Today we are seeing that money go to the independent providers and this is accelerating.”
Share price performance of HUB24 versus ASX 200 since start of the year to 03 June
The manager said the volatility in recent weeks had “been scary” but that it had presented opportunities to top up existing holdings and that small and micro-cap companies had a positive future over a three-year time horizon.
“There was a high level of turbulence, the volatility was unlike anything we have seen before, it was nothing like the Global Financial Crisis. The situation has been rapidly evolving and it has been a testing period.
“The short-term machinations are not the be all and end all but you do have to keep an eye on them.
“We are very positive for the businesses we hold. Once we get through COVID-19, there are so many opportunities over the next three years for these companies to grow and generate earnings. But it’s anyone’s guess what will happen in the next six months.”
According to FE Analytics, the Lennox Australian Microcap fund returned 0.7% over one year to 29 May, 2020 versus losses by the Australian small/mid cap sector of 0.4% while the Australian Small Companies fund lost 10.3%.
Performance of Lennox Australian Microcap fund and Australian Small Companies fund versus Australian small/mid cap sector over one year to 29 May, 2020
AUTHOR
Laura Dew
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