NAOS Investment: Investing in Australian Small Caps

NAOS Asset Management is an Australian investment manager specializing in listed Australian small-cap companies. Founded in 2009, NAOS focuses on identifying and investing in businesses they believe are undervalued and possess long-term growth potential. Their investment philosophy centers around a fundamental, bottom-up approach, emphasizing in-depth research and due diligence.

Investment Approach

NAOS distinguishes itself with a concentrated portfolio approach, typically holding a relatively small number of investments compared to broader market indices. This allows them to focus their expertise and resources on a select group of companies they deeply understand. Key elements of their investment process include:

• Fundamental Analysis: NAOS conducts thorough financial statement analysis, industry research, and management team assessments. They seek businesses with strong balance sheets, sustainable competitive advantages, and skilled leadership.
• Valuation Focus: Identifying undervalued companies is central to their strategy. They use various valuation methodologies to determine a fair intrinsic value and look for opportunities where the market price deviates significantly.
• Engagement with Management: NAOS actively engages with the management teams of their portfolio companies. This allows them to gain valuable insights into the business, understand its challenges and opportunities, and provide constructive feedback.
• Long-Term Perspective: NAOS adopts a long-term investment horizon, believing that patience and a disciplined approach are crucial for generating superior returns. They are not focused on short-term market fluctuations.

Investment Products

NAOS offers several listed investment companies (LICs) that provide investors with access to their small-cap investment strategies. These include:

• NAOS Emerging Opportunities Company Limited (NCC): Focuses on emerging growth companies with market capitalizations typically below $500 million.
• NAOS Small Cap Opportunities Company Limited (NSC): Invests in established small-cap companies with market capitalizations generally between $100 million and $500 million.
• NAOS Ex-50 Opportunities Company Limited (NAC): Concentrates on companies outside the S&P/ASX 50 index, providing exposure to a broader range of smaller businesses.

Performance and Considerations

Like any investment strategy, NAOS’s performance can fluctuate. Small-cap investing, in general, can be more volatile than investing in larger, more established companies. The focused portfolio approach also means that performance can be more dependent on the success of a smaller number of individual investments.

Investors considering NAOS should carefully review the product disclosure statements (PDS) for each LIC, understand the investment objectives and risks, and consider their own individual investment goals and risk tolerance. It is advisable to seek independent financial advice before making any investment decisions.

In conclusion, NAOS Investment Management offers a specialized approach to investing in Australian small-cap companies. Their fundamental, bottom-up research, valuation focus, and engagement with management teams are key differentiators. However, it’s essential for potential investors to understand the risks associated with small-cap investing and the concentrated portfolio approach before investing.