Veteran stock pickers Anton Tagliaferro and Simon Conn have reunited to launch Fundamental Investment Management, an Australian small caps fund, this month. The duo, who previously collaborated for nearly three decades at Investors Mutual Limited, are returning to a “back to basics” approach, focusing on fundamental investing in a sharemarket increasingly dominated by quant funds and short-term momentum. The new fund has already established approximately 20 positions and aims to build its portfolio to 40, having secured seed funding.
Tagliaferro and Conn are strong advocates for buying and selling stocks based on a company’s underlying financials, a stark contrast to the algorithms driving modern quantitative investing. They argue that the growing influence of momentum trading has created significant opportunities for fundamental managers to capitalise on share price movements detached from true company valuations. Tagliaferro, a revered value investor, noted to The Australian Financial Review that “there has been a huge disconnect between reality and share prices,” driven by a focus on short-term earnings. While embracing traditional principles, the firm also leverages artificial intelligence to build financial models and track news flow.
Among their initial bullish small-cap bets are radiology company Integral Diagnostics, financial planning network Count Financial, and wealth platform Praemium. Integral Diagnostics is one of Australia’s largest radiology companies, providing essential medical imaging and diagnostic services. Count Financial is a financial planning network that assists clients with wealth management and financial advice. Praemium is a wealth platform that offers technology solutions for financial advisers to manage client investments. The duo sees value in Integral Diagnostics due to its network and the increasing demand for services from an ageing population. For Count Financial, anticipated federal government changes to capital gains tax are expected to boost demand for advice. Praemium, trading at a lower multiple than rivals, presents opportunities for cost efficiencies.
