MEDIA RELEASE: Lead indicators are pointing to a more uncertain and challenging period for broader Australian equities, and while some headwinds will persist, there are opportunities for investors in smaller companies, according to ICE Investors managing director and portfolio manager, Callum Burns.

“Investment markets are undoubtedly in a more uncertain and difficult point in the cycle however this can result in stock opportunities that would not otherwise arise.

“Investors can become too focused on the short-term picture however we focus our attention on the long-term compounders.

“If you can maintain a longer-term view and keep your eye on the price, you can use the conditions to your advantage,” he said.

Mr Burns believes that along with strong balance sheets, pricing power is a critical stock attribute in an uncertain environment, and is on offer in select parts of the small cap sector.

“Pricing power is essential for companies to be able to maintain margins and speaks to the strength of a company’s competitive advantage which is a key driver of their ability to capture market share from competitors. A good example of this is EBOS Pharmaceuticals, which gained market share from competitors during and post COVID.

“When prices are rising, you increase your own to mitigate those cost pressures but the companies that are genuinely differentiated and with loyal customers, they’re faring the best.

“Also, top quality franchises at good prices are more readily available when investors are anxious, so be mindful of the challenges, but equally, be open to an environment that typically creates opportunities,” he said.

The SGH ICE Fund has recently had its highly recommended rating by Lonsec reaffirmed and received a Morningstar Analyst RatingTM of ‘Gold’ (as at 8/10/2022), the latter of which described the fund as having a “superb strategy” and one that “rises as one of our top picks in the Morningstar Category.”

The Morningstar Managed Investment Report read: “SGH ICE is an excellent strategy backed by a strong team and repeatable investment process.

“In the 10 years to August 2022, the strategy has handily beaten both the S&P/ ASX Small Ordinaries and S&P/ ASX 300 indexes on a total return and trailing returns basis.

“It has also outpaced the equity Australia mid/ small-growth category average over the past 10 years, and returns on a risk-adjusted basis are solid. Stock picking has been the main driver of performance.”