Pallinghurst – back in the good books

Finweek English Edition - - COMPANIES & INVESTMENTS -

Suc­cess­ful in­vest­ing, es­pe­cially in small caps, does not in­volve pick­ing the tops of heated themes, such as 1997 IPO boom, 2000 tech boom and, more re­cently, the con­struc­tion boom. Buy­ing the sur­vivors on cheap fun­da­men­tals af­ter the crash of a theme has, in fact, proved worth-

while (an ex­am­ple would be Datatec, which could be bought at close to book value af­ter the crash of the IT bub­ble, which painted all IT stocks with the same brush, re­gard­less of qual­ity). This has hap­pened con­sis­tently and was ev­i­dent in the con­struc­tion sec­tor bust, where good-qual­ity con­struc­tion-re­lat- ed busi­nesses, trad­ing be­low long-term aver­age book val­ues, were sold down in­dis­crim­i­nately, along with the en­tire sec­tor down­grade.

The same could now hold true for the re­sources sec­tor (un­for­tu­nately, this is a small por­tion of the broader small-cap in­dex).

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