Oscar Oberg: Small caps are primed to rally, and it doesn’t happen without these stocks
A year ago I sat down with Oscar Oberg, lead portfolio manager at Wilson Asset Management. His thesis then was that small caps were beaten down and due some mean reversion. Alas, small caps haven’t done much since then, with the Small Ords returning 3.91%. Yet Oscar’s thesis also remains unchanged. In fact, it’s gotten stronger! Not only is he positioning for a rebound in smalls and microcaps, he’s doing it with overweight exposure to consumer discretionary, a sector that has been tarred and feathered by today’s macroeconomic landscape of high inflation and high rates. As Oscar puts it, “there’s no mean reversion without consumer discretionary.” In today’s episode, Oscar lays out this thesis and the companies that make it up. He also discusses: the relationship between the tech rally and small caps; generating return with short-term tactical trades; and how he deals with low liquidity, and the primed aged care stock under takeover. Note: This episode was recorded on Tuesday July 20, 2023. Timestamps0:00 - START1:50 - When will small caps bottom?4:30 - No small cap rally without consumer discretionary6:30 - Profit taking7:30 - Why large cap tech matters to small caps10:14 - 30-40% rally is not out of the question14:30 - Harvey Norman's (ASX: HVN) property backstop16:00 - Wearing the volatility17:00 - Industrials20:20 - Going tactical24:15 - Mermaid Marine26:30 - Body language matters27:30 - City Chic (ASX: CCX) was a mistake29:20 - Managing liquidity in small caps32:45 - Takeover target34:50 - Balance sheets look good36:55 - Going public too early40:25 - The classifieds company for the bottom drawer