Emerging company equities: Where to look for hidden gems

Investec Wealth & Investment has taken a unique approach to investing in emerging companies, focusing on small and midcaps to uncover hidden gems in the market. Barry Shamley, the manager of the Dynamic Equity Fund, shared insights on the fund's strategy and performance in a recent interview with CNBC Africa. Shamley highlighted the fund's significant exposure to small and midcaps, currently at around 70%, with the remaining balance divided between large and mid-cap companies. Despite the challenges of investing in smaller companies, Shamley emphasized the importance of backing experienced management teams who prioritize return on capital and have a track record of delivering on promises. The fund has reaped the rewards of this approach, achieving impressive returns of over 60% last year and 5-6% year-to-date. One of the key areas where the fund has found value is in investment holding companies, which have been trading at attractive discounts to book value due to pessimistic market sentiment towards South Africa. Another success story for the fund has been Montalk, a company specializing in extracting gas from waste dumps in the US, tapping into the growing demand for renewable energy. Despite criticisms around new listings and potential investor pushback, Shamley remains cautious and prefers to invest in established companies with a proven track record. He stressed the importance of thorough research and staying informed to identify investment opportunities in the small and midcap space. Looking ahead, Shamley believes that South African small and midcap companies offer great value compared to their offshore counterparts, with the potential for significant growth if the commodity cycle remains favorable. With a focus on unearthing hidden gems and backing solid management teams, Investec Wealth & Investment's Dynamic Equity Fund continues to outperform in the emerging company equities market.