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Boutique manager reveals ‘desert island’ small cap bets to back

Boutique manager reveals ‘desert island’ small cap bets to back

The small cap market dropped to a two-year low against large caps in late 2014 but Granahan Investment’s Andrew Beja believes investors must adopt a longer-term focus to overcome such concerns.

Speaking to Citywire Global, Beja said he has created a ‘desert island’ list of small-cap stocks which can provide long-term outperformance.

Beja works alongside Citywire AA-rated small-cap quartet of Gary Hatton, Jane White, Robert Granahan and John Granahan, who co-run the Vanguard US Discoveries mandate.

‘We are looking for these open-ended opportunities,' said Beja, who runs the $185 million US-domiciled Granahan Small Cap Focused fund. 'These are the stocks that can sustain growth for a long-time.'

‘We think of them as ‘desert island’ companies, which means if you sent us to a desert island for five or six or seven years, we would come back and these companies would be worth substantially more than when we left.'

Several stocks which meet Beja's ‘desert island’ criteria have been recently added to the portfolio. He pinpointed semiconductor manufacturer ATMI as an example of a stock the group had followed closely for some time before opting to invest.

‘It is a company we have known for 20 years and earlier this year it was acquired by Entegris. Throughout most of the last 20 years we have owned the stock but not all of it. There have been periods where risk/reward has been unfavourable or negative and we haven’t.’

Another company in a similar field is Concur, which is a 2.9% position in the portfolio. The group specialises in software for travel and entrainment companies.

‘They went public in 1998 and we have known the company and owned the stock for much of that 15 year period but not all of it. Those are good examples and this is further enhanced by Concur getting purchased by SAP in the fourth quarter.’

The Granahan US Focused Growth A USD Acc returned 14.4% between April 2014 and December 2014 in US dollar terms, which compares to a rise of 10.7% by its Citywire benchmark, the Russell 2000 Growth TR, over the same period.

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