A well-known value investor, Simon Mawhinney of Allan Gray, was interviewed by Fairfax media recently for his top picks in Australia's small-cap investing space.
Here are 3 he tipped to readers:
Mineral Deposits Limited (ASX: MDL)
Mineral Deposits is a vertically integrated mining outfit that mines titanium dioxide (among other things) in Senegal and ships these to Norway for refining and sale to local customers. It's fallen on hard times recently, is loss-making, and carries a lot of debt. However, there are signs of improvement in both pricing and operating efficiency.
Capral Limited (ASX: CAA)
Capral is a tiny aluminium manufacturer that is thought by some in the market to be facing a long decline due to cheaper Chinese competition, and a possible slow-down in the building boom. However, Mr Mawhinney pointed out that the company trades at 5x earnings (the ASX average is ~16x) and has 1/3rd of its market capitalisation in cash.
Here, There, and Everywhere (ASX: HTE)
Readers may be more familiar with Here + There's old name of APN Outdoor Group (ASX: APO). This company provides outdoor, radio, and digital advertising and shares have been hotly traded since the company launched on the ASX. Here + There has been gradually reshaping its operations and it's thought the company could have a strong future.
One takeaway for readers is that Allan Gray is quite contrarian and willing to be uncomfortable when they invest. As consistent out-performers since inception, its funds are happy to own shares with higher amounts of debt and taking a longer time-frame than other investors, especially at times when the market hates a given industry. This can make it tough on the shareholder who is not mentally prepared for what can occasionally be a hard slog in these types of investments.
