--- title: "Livewire Buy Hold Sell: Small-caps under pressure" description: Ben Rundle from NAOS Asset Management shares his views on whether there is some light at the end of the tunnel for small caps. --- ##### [Subscribe to NAOS NEWS & Insights](https://www.naos.com.au/subscribe) [![](https://assets.website-files.com/5b3d7f5582ecae7f1e026ce2/60be9de099c2716fb2efb4a7_naos.svg) ![](https://assets.website-files.com/5b3d7f5582ecae7f1e026ce2/640666256ede5e8ae8e33da0_B-Corp-Logo-Black-RGB.png)](https://blog.naos.com.au/) [Home](https://www.naos.com.au) About [About NAOS](https://www.naos.com.au/about-our-firm) [Our Team](https://www.naos.com.au/about-our-firm#people) [Why invest with NAOS](https://www.naos.com.au/about-our-firm#why-invest) [Our Investment Beliefs](https://www.naos.com.au/about-our-firm#beliefs) [Our Investment Process](https://www.naos.com.au/about-our-firm#how-we-invest) Listed Investment Companies [NCC: NAOS Emerging Opportunities Company Limited](https://www.naos.com.au/ncc-naos-emerging-opportunities-company-limited) [NSC: NAOS Small Cap Opportunities Company Limited](https://www.naos.com.au/nsc-naos-small-cap-opportunities-company-limited) [NAC: NAOS Ex-50 Opportunities Company Limited](https://www.naos.com.au/nac-naos-ex50-opportunities-company-limited) [Our Listed Investment Companies](https://www.naos.com.au/our-lics-compare-our-lics) [How to Invest](https://www.naos.com.au/our-lics-compare-our-lics#how-to-invest) Private Opportunities [NAOS Private Opportunities Fund](https://www.naos.com.au/npof-naos-private-opportunities-fund) [NAOS Ideas Network](https://www.naos.com.au/naos-ideas-network) E.S.G. 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After a sustained period of outperformance, the Small Ords have now underperformed the ASX 50 by 9.67% since the beginning of October. Of the five stocks discussed in this episode of Buy Hold Sell, only A2 Milk has been spared the pain, while Retail Food Group, Aconex, Altium and Speedcast, are all down over the same period. Interestingly, these companies all featured heavily in Livewire’s 2017 reader picks. So has this period of underperformance created an opportunity? We ask Ben Rundle from NAOS Asset Management and Chris Stott from Wilson Asset Management to share their views and to see if there is some light at the end of the tunnel for small caps. Buy Hold Sell: Small-caps under pressure - Buy Hold Sell | Livewire **Retail Food Group (RFG)** Rundle: It's **sell** for me. Their core franchise business has been struggling, but Retail Food Group has been making more from them. I think that's unsustainable and the chickens will come home to roost. It's a sell. Stott: **Hold** for us, James. 13 times P/E growing at 20%. Good cash flow business. Hold for now. **Aconex (ACX)** Stott: Still a **sell**. The P/E still looks ridiculously high at 50 to 60 times, post the downgrade. In the sin bin for a good six months. Sell. Rundle: I think it's a **sell** as well. The key thing with Aconex is the fact that they're not showing any operating leverage, and that's why these software businesses get a premium multiple. I think it will continue to de-rate. **Sell**. **Altium (ALU)** Rundle: It's a **hold**. It's a good business. Cashflow is pretty good, or it's getting better at least. But the whole market loves it, and I just don't like that on such a premium multiple. So, hold for me. Stott: **Sell**. Again, it's expensive and when you hear it's a market darling that worries us. We get paranoid, so sell. **A2Milk Company (A2M)** Stott: **Buy**. A2 have worked out the right channels to China. The Bellamy’s news is certainly not a negative for A2. They have the right channels into China, and they have nailed those by upgrading in the last few months. So, buy. Rundle: That's a **hold** for me. Still quite a ritzy multiple. I'm just worried about their margins in the infant formula business if Bellamys does start to heavily discount which we're seeing early signs of. So, hold. **Speedcast International (SDA)** Rundle: I think that one's a **buy**. They acquired a business that’s highly leveraged to energy at probably the right time in the cycle, and the market's not really giving them the benefit of the doubt for that. I think it's still cheap enough to buy it. Stott: **Hold**. Good business. Good management team. We get worried about companies making large transformational acquisitions like Harris CapRock. We're watching for the integration of that over the next few months. Hold for now. [Buy Hold Sell: Small-caps under pressure](https://www.livewiremarkets.com/wires/34357) ###### [Articles of Interest](https://blog.naos.com.au/news-media/topic/articles-of-interest) [NAOS in the News](https://blog.naos.com.au/news-media/topic/naos-in-the-news) ###### Share this post ### Comments ##### NAOS Asset Management ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c362d2f81c4_location-icon-white.svg) Level 34, 25 Martin Place Sydney NSW 2000 ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c121c2f81c8_mail-icon-white.svg) [enquiries@naos.com.au](mailto:enquiries@naos.com.au?subject=NAOS%20Website%20Contact) ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359ce0f62f81c9_phone-icon-white.svg) +61 2 9002 1576 ##### Our Listed Investment Companies [ASX: NCC - NAOS Emerging Oportunities Company Limited](http://www.naos.com.au/ncc-naos-emerging-opportunities-company-limited) [ASX: NSC - NAOS Small Cap Opportunities Company Limited](http://www.naos.com.au/nsc-naos-small-cap-opportunities-company-limited) [ASX: NAC - NAOS Ex-50 Opportunities Company Limited](http://www.naos.com.au/nac-naos-ex50-opportunities-company-limited) [NAOS Private Opportunities Fund](https://www.naos.com.au/npof-naos-private-opportunities-fund) [Listed Investment Companies](http://www.naos.com.au/our-lics-compare-our-lics) [Share Registry](https://boardroomlimited.com.au/) [Corporate Governance](http://www.naos.com.au/corporate-governance) ##### More Links [Privacy Policy](http://www.naos.com.au/privacy-policy) [Terms & Conditions](http://www.naos.com.au/terms-conditions) ##### Follow NAOS [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5b3d7f5582ecae7e51026d27_twitter-icon-white.svg)](https://twitter.com/naosassetmgmt) [![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c11092f818c_facebook-icon-white.svg)](https://www.facebook.com/NAOSAssetManagement) [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5b3d7f5582ecae133c026dca_Group%20261.svg)](https://www.linkedin.com/company/naos-asset-management) [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5bf6115a4ae34255e68089e1_Asset%201Chart4.svg)](https://www.instagram.com/naos_asset_management/) Join our investment community. 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