When creating my 2021 Bargain Shares Portfolio I adopted a dual approach to stock selection. My aim was to identify below the radar undervalued small and micro-cap companies priced below their intrinsic value, while also taking the macro-economic environment into account to play specific sector and country themes.
My motley crew of 10 small-caps has produced a total return (TR) of 23.2 per cent to date (29.2 per cent against magazine prices) using the opening offer prices on 5 February 2021. By comparison, FTSE Aim All-Share and FTSE All-Share indices have produced TRs of 3.3 per cent and 15.8 per cent, respectively.
The outperformance partly reflects gains on investment companies which extended the portfolio’s international exposure. The top-performer is Vietnam Holding (VNH: 336p), a closed-end fund that holds a concentrated portfolio of mid to small-cap companies to play secular growth trends in Vietnam. The fund has delivered 64 per cent net asset value (NAV) growth in 2021. Despite outperforming the Vietnam All-Share index by 15-percentage points, the shares currently trade 13.5 per cent below NAV of 388.5p, an attractive discount given that investment manager Dynam Capital is targeting 20 per cent EPS growth next year on what is still a modestly rated portfolio.