Expert names 3 small-cap shares to buy

Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Alto Capital investment advisor Tony Locantro talks about why he loves three ASX shares in particular and his biggest regret in investing.

Cut or keep?

The Motley Fool: You’ve mentioned Radiopharm Theranostics Ltd (ASX: RAD) in the past, but it has now dropped about 40% year-to-date. How do you feel about it now? Would you still buy it?

Tony Locantro: Yeah, it was one of the first to lift its head off the canvas during tax loss selling. It was 60 cents IPO that was poorly supported — fell to a ridiculous low of 13 cents during the last week of tax loss selling. It’s since recovered to 23 cents.

It is in radiopharmaceuticals. They’ve also added brain tumor technology. It has one of the richest pipelines of any ASX by a technology company, with multiple phase one trials for the remainder of this year and multiple trials next year.

I have bought heavily personally. I am currently underwater and really need to see the stock recover. It has been building a world-class management team, but the stock just fell out of favor as the Nasdaq Composite (INDEXNASDAQ: .IXIC) and US biotech indices underwent a significant correction.

So the answer to that is yes, it is still great value, but was even better value a few weeks ago… No change to the fundamental view or my faith in management or the company.

The ASX share for a comfortable night’s sleep

MF: If the market closed tomorrow for four years, which stock would you want to hold?

TL: Proteomics International Laboratories Ltd (ASX: PIQ).

I just think from a biotech, it’s got everything going for it. It’s already had a test that’s proven it’s now a sales exercise. They do have the upcoming pipeline and yeah, that’s the one.

There is another one, but you only want one, don’t you?

MF: By all means, please tell us.

TL: From a mining perspective, I think Aurumin Ltd (ASX: AUN).

That’s a gold company with ex-key personnel from Northern Star Resources Ltd (ASX: NST). They have purchased the sandstone project. It’s about a 794,000 ounce resource.

So they purchased a gold resource. They’re looking to grow through exploration and/or acquisition. The company share price has been punished due to drilling for lithium which failed to deliver significant results, combined with tax loss selling.

I back management to undergo a decent growth profile in those four years. They’re currently undergoing a 15 cent rights issue on a one-for-seven basis with a one-for-one, 25 cent option for existing shareholders.

So I think the company has undergone some issues recently and I think these can be overcome, and I’d certainly back [the] management team to deliver.

And one of the key aspects, I think, with any gold company that’s looking to grow, sometimes you need to set the weakness to look at picking up assets that the majors don’t want, and that’s how Northern Star was built.

[Northern Star] was as***ty one-cent company that went to about $15, but during the time that Northern Star grew, the Australian gold index lost two-thirds of its value.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

TL: Oh, I regret not being more aggressive with selling.

I think once you start seeing multiples, we all get delusions of grandeur and the dopamine levels increase and we think that the stock’s going to continue running. But history has shown that you need to take profits along the way.

You need to work out if your company would be racing in the Golden Slipper or the Melbourne Cup. Once you can classify your company, then you’re going to take profits in better fashion.

But I always have the regret that I should be more assertive, and assertive with my profit taking.

MF: It’s difficult for the human mind to figure out, isn’t it, knowing when to sell? People find buying a lot easier than selling.

TL: Oh, geez, yeah, yeah, yeah. I’ve had stuff that’s gone 10, 20 times, and a lot of clients won’t sell because they think it’s going higher. Then I try to get them to sell, and then… Yeah.

But I guess in my sector of the market, they’re exposed to abnormal gains that you wouldn’t get in more conservative stocks.

Leave a Comment

Your email address will not be published.