2022 Small Cap portfolio of Quality Stocks
Our June 2022 portfolio has returned 36% (Issue 503).
It had 8 small cap stocks. As a portfolio they not only all survived, but the majority thrived. The average return is over 36%, 3 times better than the S&P/ASX All Ords of 12%.
Our Quality Small Cap Portfolio is about picking stocks whose businesses are strong enough to handle any conditions. Not all of them will perform, but as a portfolio, they’ve worked, in fact, they’ve worked very well.
How we're building a new portfolio
Instead of picking a portfolio of just 8 stocks, we’re utilising the principles of diversification and are increasing the portfolio to 11. We are keeping the big performing gold stocks, Evolution Mining (ASX:EVN) and Northern Star Resources (ASX:NST) and will deep dive on those again in a future issue. Suffice to say, it’s not uncommon for a hedge to be your best performer. Northern Star has returned over 100% in 12 months.
These are stocks that are strong enough to cope with any conditions, perennials if you will. We have a number of criteria and one of the keys is the customer base. A strong customer base is essential. Michael Porter’s 5 forces of competition has nothing on our 10 Quality Criteria. The main criteria is of course the price. This is what dictates your return.
How have the ASX stocks performed?
Importantly, the stocks in this report don’t even include our biggest performers over the past 12-18 months, which include the software billing specialist Gentrack (ASX:GTK) and the Singapore telco Tuas (ASX:TUA), both returning over 200%. The med-tech ImpediMed (ASX:IPD) is up 150% and AVA Risk (ASX:AVA) has also returned 120%.
But the bulk of the big performers have come from the resources end, which includes oil and gas stock Karoon Energy (ASX:KAR), which has returned 80%, as well as a raft of lithium and uranium stocks, as well as some of the gold stocks.
Part of the reason is that we have a very good mining analyst in Peter Chilton, but the other reason is that our team has seen many cycles and we have a good knowledge of what makes a quality performer. This is what you get, going Under the Radar.
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