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Liontrust's Tonge: my three big micro cap success stories

Matthew Tonge reveals his three biggest success stories in his micro cap fund, and three current holdings he believes could emulate them.

Three winners, three to watch

Matthew Tonge (pictured) who manages the Liontrust UK Micro Cap alongside Citywire AAA-rated trio Anthony Cross and Julian Fosh, and Victoria Stevens shed some light on the fund's biggest success stories. He also picks out three firms to watch in 2017.

Liontrust Asset Management launched the micro cap fund for Cross in 2016. In the last year up to the end of July the fund has returned 29.2%, which is just shy of the 30.7% average achieved by its peers.

Three winners, three to watch

Matthew Tonge (pictured) who manages the Liontrust UK Micro Cap alongside Citywire AAA-rated trio Anthony Cross and Julian Fosh, and Victoria Stevens shed some light on the fund's biggest success stories. He also picks out three firms to watch in 2017.

Liontrust Asset Management launched the micro cap fund for Cross in 2016. In the last year up to the end of July the fund has returned 29.2%, which is just shy of the 30.7% average achieved by its peers.

Outgrowing the fund

‘Part-and-parcel of running a dedicated micro cap investment vehicle is the knowledge that some of the most successful stock picks will naturally outgrow this market cap space,' Tonge explains

So far in 2017 three companies have exited the UK Micro Cap fund on the back of their strong rise.

Keywords Studios

‘Keywords Studios, a provider of outsourced art, localisation and testing services to the video games industry, marked the Fund’s first sale of a position since its launch in March 2016.

‘The stock delivered an impressive return of over 150% from initial purchase, reflecting buoyant trading in 2016, as organic growth was complemented by bolt-on acquisitions.

‘After its market cap topped £250 million, we completed its sale from the fund in January 2017.’

Next Fifteen Communications

‘Digital PR and marketing specialist Next Fifteen Communications exited the portfolio in May 2017, having also exceeded the Fund’s market cap ceiling.

‘Its share price appreciation, over 90% since initial purchase, mirrored its impressive growth in revenue and earnings; in the 12 months to 31 January 2017, the company achieved over 50% annual growth in profit before tax.’

YouGov

‘Market research and data analytics group YouGov followed in the footsteps of Keywords Studios and Next Fifteen in June 2017.

‘Its share price rose over 100% following a string of upbeat statements during 2016, as robust underlying trends were boosted by a positive currency translation effect following the fall in the pound in the wake of the Brexit vote.

‘Interim results in March 2017 beat market expectations with revenue up 24% and adjusted pre-tax profit rising 33%.’

Ones to watch

Here Tonge talks about three current important holdings in the fund

Attraqt Group

‘Software company Attraqt Group possess all three of the key intangible assets we look for as part of the Economic Advantage investment process: intellectual property, strong distribution networks and recurring revenues.

‘Attraqt provides site search, visual merchandising and personalised product recommendation software to online retailers such as Boohoo, Superdry and TK Maxx.

‘It has intellectual property in the software code and sells its products on a monthly recurring SaaS subscription basis, meaning around 90% of revenues are recurring. Additionally, it enjoys an embedded distribution network strength as customers come to rely increasingly on the product to drive improved conversion of ‘clicks’ to sales.’

Surgical Innovations

‘Surgical Innovations specialises in designing, developing and manufacturing devices for use in minimally invasive abdominal surgery’

‘It possesses strong intellectual property as several of its products are patent protected and furthermore have regulatory approval to be used in surgery.

‘In addition, most of its revenue currently comes from sales of consumables, meaning it has high repeat (if not contracted recurring) income. Finally, the company recently acquired its sole UK distributor, so now has full control of its route to market.’

Inspired Energy

‘Inspired Energy is a consultancy firm which specialises in energy procurement and management for industrial and commercial clients.

‘The company is successfully pursuing an acquisitive growth strategy which the fund was able to help finance through its participation in a June 2017 placing. This raised £9m for the purchase of Horizon Energy Group, further extending Inspired Energy’s footprint in Ireland.

‘In order to provide its energy procurement services, the company has developed an excellent distribution network with its customers, while it also has a level of recurring income due to long contract cycles; both attributes are core Economic Advantage strengths.’

Related Fund Managers

Julian Fosh
Julian Fosh
11/48 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 75.80%
Victoria Stevens
Victoria Stevens
43/60 in Equity - UK Smaller Companies (Performance over 1 year) Average Total Return: 27.21%
Matthew Tonge
Matthew Tonge
44/60 in Equity - UK Smaller Companies (Performance over 1 year) Average Total Return: 27.21%
Anthony Cross
Anthony Cross
12/48 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 75.80%
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