Small Caps lead in February: Biotech, data centres & Energy One
SGH Opportunities Fund monthly update with Rory Hunter & Sophie Smith
February was a turbulent month for global markets, but small caps delivered strong results. In this episode, Rory Hunter and Sophie Smith break down the volatility, the SGH Opportunities Fund’s performance, and standout companies leading the way in biotech, energy, and infrastructure.
“February was a volatile month with major market corrections, key economic data releases, and significant company results,” says Sophie Smith. “There’s a lot to unpack today with some sector-wide pullbacks, but also some standout performers in reporting season.”
Despite the broader market weakness, our portfolio delivered positive returns. “Pleasingly, our portfolio still delivered a positive gross return, which meant substantial outperformance versus the benchmark,” explains Rory Hunter. “Our one-year rolling returns now sit at 21% above the Small Ordinaries Accumulation Index.”
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Shifting investor focus toward Small Caps
Large-cap earnings remain under pressure, and investor attention is shifting toward small and mid-sized companies.
“For small caps to continue leading large caps, we need to see a downturn in large-cap earnings, which is already emerging,” says Rory. “The latest bank results and iron ore majors like BHP and Rio Tinto are showing signs of weakness. Meanwhile, we’re also looking for more M&A activity and a rebound in IPOs to drive liquidity.”
“The good thing for small-cap investors is we’re starting to see these trends emerge,” adds Sophie.
Key stock highlights from February
Energy One (+30%) reported 14% revenue growth and a 48% jump in EBITDA, benefiting from strong demand for its energy trading software. “This is a company with a strong competitive position in a high-growth market,” says Rory.
Southern Cross (+20%) saw record revenue of $397 million, with data centre projects surging. “The data centre segment is growing exponentially, with a $500 million pipeline of upcoming projects,” notes Sophie.
Helix Pharmaceuticals raised revenue guidance by 55% YoY, driven by strong demand and potential FDA approvals later this year. “This is one of the highest-growth names in the portfolio,” says Rory.
Market outlook – What’s next?
While volatility remains high, March will be a critical month for investors.
“The coming months are shaping up to be pivotal, with the US economy at risk of entering a sharp slowdown,” says Rory. “We’re increasingly concerned that recent economic strength has been heavily reliant on public sector support. If government spending pulls back under Trump’s administration, the private sector will need to step up to sustain growth.”
Despite these risks, small-cap opportunities remain strong, particularly in biotech, infrastructure, and renewable energy.
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Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for “the Fund” mentioned in this recording. Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT).
This update has been prepared by SG Hiscock and Company Limited to provide you with general information only. In preparing this update, we did not take into account the investment objectives, financial situation or particular needs of any particular person and is not investment advice. Neither SG Hiscock and Company Limited, Equity Trustees, nor any of its related parties, their employees or directors provide and warranty the accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance is not an indicator of future performance.
The views in this podcast are those of the contributors at the time of recording.
