Pallinghurst – back in the good books
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).