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Holly LaFon
Holly LaFon
Articles (10163)  | Author's Website |

Ask Investor Craig Thrasher Your Investing Question

GuruFocus interviewing outperforming international small-cap expert

January 16, 2019 | About:

Tomorrow, GuruFocus will speak with Craig Thrasher, CFA, a portfolio manager of Kayne Anderson Rudnick Investment Management’s International Small Cap and Emerging Markets Small Cap funds.

Both funds have produced outstanding results and far surpassed their benchmarks. Thrasher helped deliver a 9.03% annualized return in the Emerging Markets Small Cap portfolio since its 2014 inception, versus a 6.18% result in the MSCI Emerging Markets Small Cap index. The International Small Cap portfolio performed even better, with a 16% annualized return since its 2012 inception, beating the 9.34% return in the MSCI ACWI ex. U.S. Small Cap index for the same period.

Thrasher’s area of expertise is small cap stocks, which have the potential to grow and decline faster than large caps, but have outperformed over the long term. Thrasher has outperformed by employing an approach that focuses on the quality of the business. This involves seeking a sustainable competitive advantage, low obsolescence risk, high return on incremental capital, low debt and high free cash flow.

Unlike most small-cap fund managers, Thrasher keeps a relatively concentrated portfolio of 40 to 50 small cap stocks, adding only 10 to 15 new names per year. Typically, he holds stocks for about three to five years, distinguishing him from the shorter-term thinking prevalent in small cap management.

The valuation of his portfolio companies also differs drastically from the overall small cap universe. Companies in the International Small Cap portfolio, for instance, bear five-year returns on equity of 22.9% on average, versus 11.1% for the average company in the MSCI ACQI ex. U.S. Small Cap Index. Further, its companies have total debt/Ebitda of 1.0x versus 5.1x, five-year earnings per share growth of 18.4% versus 12.3%, and a price-earnings ratio of 15.6x versus 18.7x for the index.

As of third quarter-end, that portfolio’s largest country allocation was to Europe, followed by Asia Ex-Japan and North America. At first quarter-end, the Emerging Markets Small Cap portfolio had the highest concentrations in China, South Korea and Indonesia.

Thrasher will also be sharing his thoughts on the dynamic small-cap area of the market at the 2019 GuruFocus Value Conference in Omaha. To submit an investing question us to include in the interview with Thrasher tomorrow, simply post it in the comments section below!

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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