April 30, 2019
A cautionary tale from the “Mini NASDAQ”

We experienced something unusual in 2018, something we only remember occurring on two or three occasions during our time in market. A completely new sector emerged in the Australian small cap market.

The Semiconductor Equipment sector emerged in Australia in mid-2018 with the listing of little known Pivotal Systems (ASX:PVS) closely followed by Revasum (ASX:RVS). These listings provided an opportunity to look at a sector that was globally relevant, but most locally-focused investors knew very little about it. With various structural growth drivers such as the electrification of vehicles, the internet of things and big data, the sector presented very attractive long-term attributes to generate robust returns.

The entire US Semiconductor sector has an aggregate market value of $1.6 trillion, almost 6x larger than the ASX Small Ordinaries Index ($275 billion) and nearly as large as the entire ASX 300 ($1.9 trillion). The US Semiconductor Equipment sector has an aggregate market value of $240 billion. At the time of listing, Pivotal Systems and Revasum had a combined market cap of $450m.

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